Tag Archives: political parties

The Party of Stupid on the Right

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A group of young conservatives, dubbed “reformicons,” are making inroads among Republican presidential candidates by arguing the party’s traditional reliance on broad-based tax cuts…isn’t enough to cure middle-class woes.
Instead, they are calling for crafting subsidies, tax credits, and other public-policy tools based on conservative philosophies and tastes to help the unemployed and other struggling middle-income households.

And

“For the past 10 years, our biggest issue was whether the top tax rate was 35% or 39.5%. I don’t care anymore,” said Michael Strain, 33 years old and an economist at the American Enterprise Institute think tank. One of his ideas gaining fans on the right: let employers pay some workers less than the minimum wage as an inducement to hire them and use the federal tax code to bump up salaries.

Leaving aside the abject surrender inherent in that “I don’t care” bleat, Strain’s small point—letting employers pay below-minimum wage rates under certain circumstances—is better achieved by curbing yet another government interference in the market, by getting rid of the minimum wage altogether.

Bob Davis’ article in The Wall Street Journal goes on in this vein, but you get the idea.

The larger point, though, is that these reformicons’ ideas are foolish. Using the tax code for social engineering or for favoring some Americans—which can come only at the expense of other Americans—is an inefficient and immoral use of people’s money. Even when it favors those Americans whom Republicans and Conservatives favor.

Government interference in the free market only inhibits the market, only caps what used to be equal opportunity, only reduces prosperity to the lowest common denominator rather than increasing the general prosperity by elevating the lowest common denominator.

These reformicons’ policies, worse, will only exacerbate the byzantine structure of our tax code and make it even harder to get to a single, low tax rate that every citizen pays; a rate based on all income, regardless of source and devoid of special treatment based on that income’s source; a rate devoid of gerrymandering with tax credits here, subsidies there, loopholes over there. A fair tax rate.

Return of the Excess Profits Tax

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Excess profits taxes are taxes on profits that government decides for itself is too much. They were first tried in the US by individual states during our Civil War. They went national under Progressive governments during WWI and WWII and were not repealed until after WWII. Another Democratic administration revived them for the Korean War, and that one disappeared at the end of 1953—over 60 years ago.

Now another Progressive President, Barack Obama, wants to revive it, and without even war as justification: he just wants the money because he Knows Better the use of that money than do those companies that actually earned it. Under his 2016 Budget Proposal, Obama insists that companies

would be subject to a 14% tax on up to $2 trillion of overseas earnings they have already accumulated[.]

Obama claims he wants “more revenue” from our multinationals in order to help pay for infrastructure—you remember, all those shovel ready jobs he joked about not being so shovel ready after all.

Companies accumulate profits—earnings—for a number of reasons: saving for economic disaster or industry downturn, planned very expensive capital expansion, planned very expensive R&D, planned…whatever. They also simply hold onto funds during economic or regulatory climates that make it infeasible to spend the money.

The reasons, though, are none of the government’s business. Government has no place dictating to a private company what its purpose is in accumulating and retaining earnings. This impropriety plainly includes saying to a business, “You have too much cash on hand. Give it up.”

Here’s an alternative, albeit one inconceivable to Democrats: get more revenue from our multinationals, and get more revenue from our domestic companies and from us citizens, by cutting tax rates, reducing regulation, generally getting government out of our way. The resulting growing economic activity will generate lots more total revenue for government. Especially when tax reform makes it useful for companies to bring home the trillions of dollars they’re holding overseas.

They’re still holding all those trillions, after all, because there are no viable projects there, either, on which to spend the money.

Middle Class

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While we’re on the subject of President Barack Obama’s alleged concern for the middle class of Americans (OK, only Obama makes the allegation with any seriousness, but work with me here), Investor’s Business Daily has another take on the Obama Recovery.

The graph below is a good summary of that take:ObamaEconomicChallenge

The Obama recovery is worse than four years behind Obama’s promised schedule. It hasn’t caught up. It hasn’t caught up with the Reagan Recovery, with his “failed” Reaganomics. It hasn’t even caught up with the average of the recession recoveries we’ve been through since WWII, a period of some 70 years, 3+ generations of Americans.

As IBD put it,

[T]he growth gap between Obama’s economic policies and Reagan’s is now $2.4 trillion in lost GDP and a stunning 14.4 million in lost jobs [the bracket in the lower figure of the graph is a typo].

Finally, as IBD summed up the situation (more or less)

[W]e [need] someone in the White House who understands what it takes to produce real, sustained economic growth, and not just “underlying” suggestions of it.

Death Taxes

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Or, as President Barack Obama likes to call them, “trust fund taxes.” Either way, it’s another Progressive attempt to steal the gains of one family—now with its parent safely dead—to transfer them to another group of “families” of whom Obama approves.

As the graph below demonstrates, this latest wealth “redistribution” grab by Obama would represent, if it’s passed, a 36% increase to a world-beating 68% of a family’s hard-earned accumulated prosperity.InternationalDeathTaxRates

Not even the famously social-tax heaven of the UK confiscates that much of a family’s wealth on the death, nor do the social democracy nations of France, Belgium, Spain, Finland, Norway, etc. Russia and the People’s Republic of China have no death taxes at all.

Here’s the deal:

Under current law, when a parent or grandparent dies, the increase in the valuation of his or her asset from when it was originally purchased is not taxed.

This is to offset the effects of the estate tax.

But

Obama’s plan would tax estates and impose the regular capital gains tax on inherited assets—a business, property, or stocks.

That business, far from being a Buffet’s holdings in Berkshire Hathaway, or a Gate’s holdings in Microsoft, is typically the family’s only asset: a mom and pop business that mom and/or pop have spent a lifetime building, with little to no outside cash available with which to pay the Obama vig. They’d have to sell the business; they’d have to sell their children’s future to pay up. That property usually is the family home, which the family finally was able to afford in the late afternoon of the deceased parent’s life. Those stocks…. No trust funds here.

But, no worries. Obama and his Democrat Party Know Better. Their money, temporarily reposing in our hands for a few years, will be well used. Obama says so.

Unemployment and Unemployment “Benefits”

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From the Abstract of the Naitonal Bureau of Economic Research’s just-released paper, The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle? by Marcus Hagedorn, Iourii Manovskii, and Kurt Mitman [emphasis added]:

We measure the effect of unemployment benefit duration on employment. We exploit the variation induced by the decision of Congress in December 2013 not to reauthorize the unprecedented benefit extensions introduced during the Great Recession. Federal benefit extensions that ranged from 0 to 47 weeks across US states at the beginning of December 2013 were abruptly cut to zero. To achieve identification we use the fact that this policy change was exogenous to cross-sectional differences across US states and we exploit a policy discontinuity at state borders. We find that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.0161 log points. In levels, 1.8 million additional jobs were created in 2014 due to the benefit cut. Almost 1 million of these jobs were filled by workers from out of the labor force who would not have participated in the labor market had benefit extensions been reauthorized.

If you want more of something, you subsidize it. The Democrats, since the Panic of 2008, have demanded ever more unemployment benefits, and it was only over their objections that the repeated extensions were halted and unemployment benefits stopped.

Hmm….