Tag Archives: taxes

A State Runs a Budget Deficit

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Louisiana, run by Progressive-Democrats since Bobby Jindall was term-limited out of office, is facing a $1.5 billion deficit as “temporary” tax increases implemented earlier begin to expire.  Jay Dardenne, the center-left Republican Commissioner of Administration, Louisiana governor John Bel Edwards’ chief budget officer, says that “devastating” spending cuts would be necessary absent a renewal of the tax increases or enactment of other tax increases.

Devastating: among those are additional reductions in higher education. This is misleading from a State official whose State already objects to school choice and to successful voucher schools in the K-12 range—because they take money away from badly failing public schools.  Except they don’t.  The State funds the public schools on a per-student basis, but when a student leaves for a voucher school, he takes less than his full allotment of funds with him, leaving the “losing” public school fiscally net better off.

It’s misleading, too, because higher education has an inflated tuition and fee structure supported by all that government funding (the Feds are contributors to this inflation with their own money transfers to the higher ed institutions), leaving those students fiscally net worse off.

Other areas facing spending reductions are tear-jerker “child-welfare” programs and “other” state agencies.  Never mind that these facilities waste the funds allocated with their high bureaucratic overhead and middle-man frictions.  And in the case of welfare (not just child), through uncertain enforcement.

No, the only ones truly facing serious spending reductions are the lobbyists and the Progressive-Democrats’ (and too many Republicans’) cronies.

It’s past time for a $1.5 billion reduction in State spending.  Louisiana needs to leave the money in the citizens’ hands, and it needs to stop competing with the private sector in providing goods and services and in acquiring resources for its own (unnecessary) functioning.

Law Be Damned

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The city of Seattle passed a law earlier this year that levied an income tax on the city’s wealthiest—all in the name of equality of outcome and so…fairness.

It turns out that tax was contrary to the State’s law, which said that only the State can levy an income tax and, explicitly, cities cannot.  The question also was raised regarding whether the Seattle law was even contrary to the State’s constitution—illegitimate—as well as illegal, but the judge avoided the constitutional question.

King County Superior Court Judge John Ruhl ruled in a Wednesday that Seattle did not have the authority to impose the tax because state law prohibits tax on net income.

Seattle’s City Attorney Pete Holmes and Mayor Tim Burgess demurred.

We are also living in a time of extreme income inequality that corrodes our social compact and causes many to wonder whether wealthy individuals are paying their fair share[.]

Because their goal is worthy, so the law should be disregarded.  And

Councilmember Kshama Sawant told Fox News in July that the need for the tax is “crystal clear.”

Again, goals, but let’s skip the inconvenience of law or of adjusting particular ones.

It just doesn’t matter what the law requires.  Never mind, either, that the State’s voters have repeatedly defeated such a tax on State referendums.  The Left demand to do what they want, when they want it, because that’s all that’s…just.

As an aside, it should be noted that Holmes and Burgess, in demanding the rich pay their fair share, carefully decline to say explicitly what level of wealth constitutes “the wealthy,” although the level is implied by the erstwhile tax’s threshold, and they carefully decline to say what that “fair share” would be: what per centage of the city’s taxes should be paid by “the wealthy,” especially in comparison with what the “fair share” of the city’s taxes paid by the various levels of the non-wealthy would be.

Soros Puts His Money in a Tax Shelter

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And Stephen Moore’s knickers are in a twist.

Congress is still scrambling to find ways to pay for its tax cut, so perhaps it should pay closer attention to last month’s news that George Soros had transferred $18 billion of his fortune to a private charity that he controls. There it will be sheltered from the Internal Revenue Service forever. This may be the single biggest tax dodge in US history, yet no one on the right or left seems to have raised an eyebrow.

How is it a tax dodge, exactly, to take legal steps to protect one’s assets from the taxman?  Why would anyone “on the right” object to a man moving to hang on to more of his money?

I don’t question these billionaires’ right to do with their money as they wish. I’m simply arguing that Congress shouldn’t let the rich and politically powerful use private foundations to escape taxation.

This is disingenuous. Private foundations are a completely legal way in which to shelter funds and to escape taxation.  I applaud Soros’ effort to keep his money, even as I decry his politics.  Had I billions of dollars—or even thousands—I’d try to protect it from the Revenooers, too.  Government doesn’t need as much of my money as it tries to claim; as long as it’s legal, there’s nothing wrong with keeping out of the Feds’ paws.

What Congress should be doing is finding ways to allow those of us with less money than Soros, or even less than the 20% or 30% or 50%, shelter more of our money, too.  One way to do that would be via a single low, flat income tax rate applied to all income regardless of source by a tax code devoid of carve-outs, deductions, credits, froo-froo.  Failing that, the tax reform plan on offer from the House and possibly (subject to the whims of three or four Republican Senators’ egos) on offer from the Senate would be a good start.

Missing the Point

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In a Letter to the Editor last Thursday, one letter writer had this to say about a Wall Street Journal op-ed, The Great Progressive Tax Escape:

[T]he problem of interstate tax competition, like the continuing bids to draw Amazon to pick a favorable second headquarters, isn’t strictly speaking a problem of high progressive taxes, as your editorial asserts. Better to view it the other way, as a problem of low-tax jurisdictions using these devices to compete in a way that erodes the tax bases of other states. That is exactly what is happening globally as well, when Ireland, Panama, Malta, etc. make rock-bottom offers to global companies to do business there. Developed states and countries cannot run governments at the discounted prices offered by these tax havens….

And yet these States and countries—developed all—do run their governments at “discounted” prices.  The resulting economic activity is how they can afford these additional “discounts.”

The plain fact is high-tax governments do not need the tax rates they have—as demonstrated by the fact that the “winning” States already have low rates and high enough revenue to pay for what those governments have been hired to do.  And they do so despite the plethora of special interest give-backs that so heavily populate even these States’ tax codes.  The high-tax States and the high-tax countries would do well to learn from these examples, and instead of whining about losing an entirely fair competition, reformed their tax codes.  Ireland—and Luxembourg, which the letter writer omitted to mention—have some of the lowest tax rates in the world, and their people are prospering.

A related and equally plain fact is that with low, flat tax rates there’d be no need to compete on who can offer the biggest tax breaks.  Such breaks have considerably less value coming on a base rate of, say, 10%, than they have at usurious rates like 35%.  Further, the base rates, applicable to all and already low, would allow businesses to locate themselves on the basis of sound business and not at all on who’s offering the most goodies.

More on Tax Reform

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The House passed yesterday, 227-205, its version of tax reform, and the next milestone is in the Senate.  The Wall Street Journal is referencing some special interests who are expressing misgivings about it.

Both the House and Senate bills would cut the corporate tax rate to 20% from 35%. If that overall tax rate decreases, tax credits and deductions become less valuable.

Well, of course.  Credits and deductions get their value from how much they reduce taxes for the government-favored groups of Americans for whom those credits and deductions are targeted.  With lower overall tax rates, those credits and deductions have less tax value—as any graduate of 3rd grade arithmetic can see.

That alone would mean that nearly 300,000 fewer low-income units will be produced over 10 years, according to an analysis by Novogradac & Co, an accounting firm specializing in real estate.

That’s the claim of a special interest group. It’s also not entirely true. With the elimination of real estate-related credits and deductions, housing—and rental—prices would no longer be elevated to absorb for the realtor’s benefit those bennies.

The same logic applies to other bennies on the chopping block: preferential tax treatment for bonds used by developers to build “affordable” housing and private activity bonds, which fund hospitals, roads, nursing homes, and charter schools—and sports stadiums and other froo-froo.  These things, too, would no longer have their prices elevated to absorb for the developer’s benefit the monetary value of the bennies.

On top of that, the reduced value of deductions and credits under the plan just passed in one house and on offer in the other is a non sequitur.  Our tax code should not be used for social engineering, least of all in accordance with the personal imperatives of 535+1 politicians in DC.  The—our—tax code should be limited to funding our government; social engineering should be left to We the People in our local communities.