Tag Archives: jobs

Tax Failures

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The Foundry is offering a list of tax increases that went into effect with the start of the year, the fiscal cliff fiasco notwithstanding.  Here are some of them, and the Obama attack on jobs embodied in them is…interesting.

Payroll tax: increase in the Social Security portion of the payroll tax from 4.2% to 6.2% for workers.  This hits all Americans earning a paycheck—not just the “wealthy.”  For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”

I have trouble with this.  Conservatives do themselves no good to tout this as a tax increase.  This is, in fact, merely the expiration of a payroll tax reduction that was purely temporary from the start, and advertised and passed as temporary.  Worse, this tax holiday was nothing but vote pandering while defunding an already failing Social Security System.

Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).

Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.

Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).

Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.

These directly attack jobs and job creation.  With active disincentives on investments, these will, inevitably, fall.  With reduced investing, there is less capital available for business’ R&D, which represents new products in production, which represents new—and more—jobs in the producing.  With reduced investing, there is less capital available for business expansion, and such expansion translates directly into jobs.

Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.

Another payroll tax hike: 0.9% increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).

The increase in the death tax makes it harder for small business owners to pass on to their heirs their businesses.  This hits particularly hard businesses whose value is largely tied up in physical assets, like small manufacturers and small farmers.  These folks will be faced with an increasing likelihood of having to sell their businesses, or major components of them—things they’ve spent a lifetime building up—in order to pay the death vig.  These sales/downsizings represent existing jobs that will go away with the sale/downsize.

That last payroll tax increase also will hit the small business owner especially hard.  It just got more expensive to hire additional labor or to keep existing labor.  Moreover, there’s significant opportunity cost: that 0.9% tax represents money that now cannot be committed to R&D (already expensive for small businesses) in an effort to stay competitive; or committed to improved marketing in an effort to maintain/grow market share; or committed to payroll in the form of a new hire, pay raises, bonuses; or….

 

h/t The Spirit of Enterprise

Some Miscellaneous Tidbits on Our Economy

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Update: And here’s the actual post [sigh]:

The Wall Street Journal a short time ago printed an updated graph that’s been around for a while; here it is:

That same article pointed out that we currently have 4.2 million fewer employed than we had four years ago—that’s the strength of the failed recovery under President Barack Obama’s policies.  Somebody else also talked (here, here, and here) about where we’d be today were this administration’s policies focused more on employment and economic recovery and less on naked redistribution and outcome equalization.

A rule of thumb, as the WSJ also notes, says that unemployment generally falls by a half per centage point for every per centage point of growth above the long-run trend.  Note, though, the graph above.  We’re not even getting back to our trend, much less getting above it.   Which emphasizes the effect of our shrinking labor force as more and more Americans continue to give up hope of changing their situation and finding an actual job.

Now, the Federal Reserve Bank has cut its long-term growth forecasts: in early 2011, they put the long-term US growth rate at 2.5% to 2.8%.  Now they’re expecting a trivial 2.3% to 2.5%–which is not going to get us back to the long-run trend, much less above it so we can start bringing down our true unemployment rate and actually get Americans back into the labor force and back to work.

Excuses

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During the Great Depression, in an effort to help farmers, the FDR administration got legislation passed that put a floor under the prices farmers could collect for their produce.  At roughly the same time, in order to help out the working man in a time of enormous unemployment (ranging from nearly 16% to over 25%), FDR got legislation passed that put a floor under the prices a man could charge for his work.  With this combination of artificially inflated food prices and a unemployment exacerbated by artificially inflated labor prices, it became exceedingly difficult for Americans to buy food for their families.

The FDR administration “cured” this, not by removing their harmful pricing controls, but by inventing and issuing food stamps—subsidies for purchasing food.

Fast forward to the present, and look at Oregon.  In an era of government mandates for fuel efficiency in our cars (not all of which originated in Oregon, to be sure), governments are seeing falling tax revenue from decreasing private sector fuel purchases.  In Oregon, in particular, though, folks are buying fuel-efficient automobiles, with some vehicles getting over 55 mpg.  The Oregon state government is looking at “curing” this, not by stimulating its economy tax and spending reductions, but instead at creating a new tax.

Beaver State lawmakers, in their upcoming session, are expected to consider legislation that would impose a charge on vehicles that get at least 55 miles per gallon of gasoline, in an effort to make up for lost gas-tax revenue[.]

After 2015, owners of these high-efficiency vehicles would either have to pay an undetermined per-mile tax calculated by GPS technology, or some alternative flat rate option.

Hmm….

Any excuse to grow government, it seems, is a good excuse to grow government.

Another Fiscal Cliff

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From Fox News:

[A] potential strike by thousands of dock workers from Boston to Houston threatens to shock the economy as early as this weekend.  …it could cost billions, citing estimates that a 10-day port lockout in 2002 cost $1 billion a day—and caused a major backlog in shipments.

[The present] port strike would affect more than the East and Gulf coasts, where all these ports are located.  It could choke supply chains across the country.  Groups ranging from the automobile industry to the National Retail Federation to the US Chamber of Commerce to the Cheese Importers Association of America are warning of dire consequences.

The primary beef?  Management wants to cap the current container fee royalties, rather than letting them continue to rise according to International Longshoremen’s Association schedules.

It’s important to note that those royalty fees are little more than featherbedding on the docks.  As The United States Maritime Alliance, Ltd (USMX), notes,

[C]ontainer royalties were established in 1960 as a way to protect members of the International Longshoremen’s Association, AFL-CIO (ILA) in New York from job losses created by containerization and its introduction of automated cargo.

Because shippers are job welfare programs for the ILA, after all.  Keep those buggy whip workers employed, no matter the costs to Americans.  Never mind that there aren’t any buggy whip workers anymore, anyway.

[O]nly 136 of the 3,281 ILA workers at the Port of New York and New Jersey today were working at the port in 1968….

The Port of New York and New Jersey was the original and only port at which the ILA was active during the transition to container shipping.  The rest of the ports up and down the east and Gulf coasts through Florida began life with containerized cargo.

Moreover, containerization has been beneficial to labor.  ILA workers at ports like Savannah, Charleston, and the rest saw their job opportunities grow specifically because of containerization.

On top of this, the royalty payments don’t all make it into the pockets of the ones being featherbedded.  Ten per cent—which ran to $21 million in 2011—were raked off the top by the workers’ union management, as the union’s vig.

In the end, the union doesn’t care about the economic damage done by the strike they’re threatening, nor do they care that their strike has so little economic purpose.  This isn’t even about protecting a featherbedding perk—USMX is willing to keep paying the “royalty;” they just want an upper bound on a payment that has nothing to do with the work being done.

No, this is about union power and the unions’ decision to use extortionate-type actions to maintain/increase it.  It’s a legal version of the violence they threatened in Wisconsin and Michigan, and of the dishonesty shown by the Wisconsin Teachers’ Union a year ago.

Update: Michelle Malkin provides one:

A deal has been struck that for now averts a strike by 14,500 longshoremen at major ports on the East Coast and Gulf of Mexico, including PortMiami and Port Everglades.

A federal mediator announced Friday that an expired contract for workers in the International Association of Longshoremen would be extended for another 30 days while negotiations continue.

“Why Conservatives Should Support a Carbon Tax”

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Hmm….

The Social Science Research Network is carrying a paper of that title by Shi-Ling Hsu, of Florida State University’s College of Law, and Yoram Bauman, of Sightline Institute.  (The link takes you to the paper’s abstract, but the full paper is easily downloadable.)

The paper’s opening paragraph pretty much says it all:

Why should conservatives support a carbon tax? There are two answers. First, a carbon tax would reform the American economy in a positive way, even if there were no such thing as human-caused climate change. If a carbon tax can be used to reduce other taxes, or if a carbon tax is a new source of revenues for deficit reduction instead of raising other taxes, the net economic benefits of such a swap are likely to be positive even if there are no environmental benefits. Second, the alternative to a carbon tax is less efficient: federal command-and-control regulation of greenhouse gas emissions under the Clean Air Act. The Supreme Court has held that the EPA must regulate greenhouse gas emissions under the Clean Air Act, and this requirement will not be legislatively repealed unless it is replaced by something comprehensive, like a carbon tax.

Where to begin?

“Used to reduce other taxes?”  Fat chance.  “[N]ew source of revenues?”  But that’s a tax increase, and tax increases have not been shown to be beneficial to any economy, much less ours.  “[F]or deficit reduction?” This  works from the false premise that spending currently is at an entirely appropriate level; reductions in spending sufficient to eliminate altogether the deficit  compared with current revenues are unneeded.

It’s certainly plausible that alternatives to a carbon tax might be less efficient, but this idea proceeds from the false premise that Federal intervention in, Federal control over any part of, our national economy is in any way appropriate.  The fact is that taxation (or subsidization) for social engineering purposes simply distorts the market: taxation produces less of the thing taxed—in this case, less energy (and reduced manufacturing of parts made from carbon fiber, but that’s for another post).  Since energy is at the foundation of our economy—and of our lives—that means prices will go up, substantially, and those at the bottom of the totem pole will have their lives damaged, perhaps severely, by not being able to afford such basics as energy for heating their homes, fuel for their transportation to work, even medical costs, as doctors and hospitals will be forced to increase their charges to cover their own increased energy costs.

Moreover, the premise of relative efficiency is itself far from established.  One has only to look at how well it’s working in Europe and how effectively nations whose economies don’t have such a thing compete with nations which do saddle their economies with this sea anchor (not that I’m mixing metaphors, or anything).

The attitude is defeatist, also.  The most efficient position would be to eliminate the Clean Air Act.  As the authors note, this will be hard to do, but hard means possible.  Modifying the CAA to eliminate CO2 from the list of pollutants would eliminate the need for a carbon tax.  This would be less efficient, but it may be politically more doable in the near term.

It’s also important to avoid carbon taxes because, taking the present paper as an example, what carbon is to be taxed is left carefully unspecified.  Hsu and Bauman do hint at it with their references to carbon dioxide, as though this gas ought to be taken seriously.  Aside from the fact that CO2 is a trailing indicator, though, confirming an increase in the health of the planet from increasing life exhaling more CO2, its impact as a greenhouse contributor is not at all established.

Despite this, the reason for the authors’ preference for a carbon (dioxide) tax is made plain here:

A carbon tax represents the lightest, smallest government touch possible in promoting technologies and measures to reduce greenhouse gas emissions.

And [emphasis in the original]

Fundamentally, what an economy facing the 21st century must do is to sort industries, top to bottom, by the marginal value their carbon dioxide emissions provide to society.

Since the need “to reduce greenhouse gas emissions,” generally, and CO2 as pollutant, particularly, are little more than Progressive tropes with no basis in science, there’s no social engineering need to tax carbon.

Nor is there a practical way.  What CO2 should be taxed?  From what industries?  Are the CO2 (and methane—a potentially very powerful greenhouse gas) emissions of cattle ranchers, and dairy and hog farmers, for instance, to be included?  If not, what distinguishes that CO2 from any other CO2?  Not even the isotopes of the carbon and oxygen differ.

How will the battery-operated cars—hybrids and pure battery-powered—be taxed for their CO2 emissions?  Think these “green” cars don’t have a significant carbon footprint?  Think about the source of the energy that (repeatedly) charges their batteries.  Most modern cars (“green” ones included) also have significant carbon fiber in the materials from which they’re constructed.  How will the CO2 emissions from an accident-related fire be assessed?

Finally, note that I’m eliding here any discussion of the authors’ false premise that government should be in the business of structuring a free market at all.

And so on.

In fine, no Conservative case for supporting a carbon tax has yet been offered.