Tag Archives: taxes

Another Reason

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…to stop sending Federal funds to any institution in the California University system.

The University of California hid a stash of $175 million in secret funds while its leaders requested more money from the state, an audit released on Tuesday said.

The University of California system is run by Janet Napolitano, the former Secretary of the Department of Homeland Security.  And the same Napolitano who decided returning American veterans could be terrorist material: her history of dishonesty is a long one.

The San Francisco Chronicle reported that the audit found that the secret fund ballooned due to UC Office of the President overestimating how much is needed to run the school system that includes 10 campuses in the state.

And

The audit found that over the course of four years, the UC’s central bureaucracy amassed more than $175 million in reserve funds by spending significantly less than it budgeted for and asking for increases in future funding based on its previous years’ over-estimated budgets rather than its actual expenditures.

There’s more.

[A] top staff member in Napolitano’s office improperly screened confidential surveys that were sent to each campus. [California State Auditor Elaine] Howle said answers that were critical of Napolitano’s office were deleted or changed before being sent to auditors.

Of course, Napolitano denies everything.

Never mind her denials.  Just stop sending Federal funds—the taxes paid by the good citizens of New York, of Illinois, of Texas, of…—to the California university system.  Let California deal with its own schools in its own way without the largesse of the rest of the nation.

The Congressman Misunderstands

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What he misunderstands, though is a very expensive thing to misunderstand: basic economics.  Congressman Joe Crowley (D, NY), Vice Chairman of the House Democratic Caucus and member of the House Ways and Means Committee said in an interview with PJMedia‘s Nicholas Ballasy that he’s willing to “experiment” with a VAT in the US, “what effect that will have.”  And

PJM: … A traditional VAT tax that works in other countries or that other countries have, at least, do you think that could work in the United States?
CROWLEY: Well, it’s been something that we haven’t necessarily gone to in terms of—sales tax, for instance, is typically a states’ issue, you know, states have used that nominally in terms of tax purposes in terms of the impact. A VAT would be usurping that, taking for the federal government as opposed to state, and I think we’re open to talking about that and seeing what effect that will have because I do think that bringing our overall [corporate tax] rate down does make us more competitive, a more attractive place.  …   So I don’t think we have to go to 12% or to 20% per se; getting that right down is what we’re attempting to do and doing it in a way which is the least invasive or hurtful to the average working man in this country.

First, there’s a hint there: that “States’ issue” bit.  Other countries that use a VAT (which taxes an item sold at every stage of its production—at every stage at which value—as defined by the taxing government—is added to the product in production—so that by the time the end user buys the item is paying mostly tax value and not product value) are not federal republics like the US is, where the States in the federation are on an equal plain, at least nominally, with the central government in most national domestic areas, like taxing.

Second, it does no good to an economy to lower tax rates in just one area while other tax rates are increased in other areas (vis., the imposition of a VAT) to make up for it.  Total, overall taxes must be lowered, all tax rates must be reduced.  It’s the increased retention of money in the hands of citizens who work and who own businesses—shareholders—that spur economies, not the transfer of that revenue to government for spending.

Third, it’s not at all least evasive or unhurtful to force the average working man to pay a VAT-inflated price for everything he wants to buy or must buy.

Then this tidbit:

PJM: We’ll see. It’s going to be a quite a debate.
CROWLEY: It will be. There is a reason why neither healthcare nor tax reform was suggested by Democrats after the election as things we could work on right away—it was infrastructure. We did that for a reason—for some reason, that seems to have been lost on everyone.

Yewbetcha.  The Progressive-Democratic Party standard plan: get spending locked in first, then see about taxing to pay for it.

Spending Our Tax Dollars

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The table below is constructed from the table and data provided by Laura Saunders in her piece in Friday’s Wall Street Journal.  It shows how $100 in our tax monies paid to the Federal government were spent on a range of government purposes.

Item 2016
Social Security $23.61
Medicare $15.26
National defense $15.24
Medicaid $9.55
Interest $6.25
Other spending $4.94
Veterans $4.58
Civilian federal retirement $2.57
Transportation $2.39
Refundable credits* $2.21
Education $2.08
Food stamps $1.89
Supplemental Security Income $1.53
Justice $1.48
Housing assistance $1.27
Foreign aid and international affairs $1.14
Affordable Care Act subsidies $1.09
Natural resource protection $1.01
Unemployment insurance $0.86
Child nutrition $0.60
Other health† $0.36
National Park Service $0.08
National Endowment for the Arts and National Endowment for the Humanities $0.01
Congressional salaries $0.00
                                                            Total: $100.00

Notice some things (I’m going to ignore some things, too, but this is my post on my blog; I get to do that). The bulk of the Federal social safety net—Social Security, Medicare, and Medicaid—comprises in its aggregate nearly half of those hundred dollars.  Yet these are the most easily and directly privatisable, and as a matter of personal responsibility and individual freedom, they should be.  Each State should take care of its own poor: New Yorkers shouldn’t be paying any part of Illinois’ Medicaid costs in this arena, for instance.  Each individual should be paying toward his own future retirement and retired medical costs (and/or the retirement and medical costs of his own parents, if he—not the Feds—wishes) and not for the current retirement and medical costs of complete strangers.

There are far better uses to which the Federal government should be putting those $48+.  One such is plussing up another major component of the Federal social safety net: National defense (OK, I’m not using the standard definition of social safety net here, but I suggest that absent an effective national defense establishment, in very short order there won’t be any social to be kept safe).  National defense currently takes up only a bit over 15% of that C-note, and it certainly could use some increases in order to fund more troops, more and better equipment, and much more rapid and broad R&D.

Then there’s that Interest cut.  Those $6+ dollars are the interest on the national debt, a debt that continues to grow, courtesy of another datum Saunders provided.  It takes an additional $15.24 beyond that Benjamin to cover the Federal budget deficit that’s growing our debt.  A significant fraction of those $48+ could be sent toward the debt’s principle as well as those interest payments—which are only going to get larger as the underlying interest rates go up now that the Federal Reserve Bank (finally) is easing up on its artificially depressed interest rates.

One minor side note: congressional salaries aren’t actually zero; they’re just a good approximation of zero on this scale.  But you already knew that.

Social Security Trust Fund Investing in the Stock Market

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The Wall Street Journal held one of its aperiodic debates last Sunday, this time on whether the Social Security Trust Fund should be allowed to invest in stocks.  One debater argued that such investing would reduce the need for dependence on benefit cuts or tax increases; the other claimed that government should stay out of the market.

It’s certainly true that investing in the stock market could produce better returns than the Trust Fund’s current requirement to invest wholly in (unmarketable) Federal debt instruments.

Stocks are riskier than bonds, so shifting some Social Security assets from low-risk, low-return Treasury bonds to high-risk, high-expected-return stocks would expose the program to greater financial risk. This risk, however, has to be balanced against the likelihood of a larger trust fund and thereby less need for benefit cuts or tax increases to shore it up down the road. Economists also make a theoretical argument that the plan would especially benefit the young—who haven’t yet accumulated much financial wealth—by enabling them to invest in high-yielding financial assets without direct exposure to market risk.

The problem with this, though, is that a realized loss risk in those stock investments would negatively impact everyone so invested: every person with a present or future claim on the Trust Fund were Social Security to take such a chance, rather than only those individuals who make the choice for themselves.  I’m one of those confident in the long-term profitability of stock investing, but that’s my choice.  No one else should be dragooned into the outcomes of my choice were I to turn out wrong and wind up eating cat food inside my cardboard box under a bridge abutment.

[N]o one wants the Social Security trust fund to control the stock market. Even if the entire trust fund was plowed into stocks, it would account for only a fraction of the market.

This is disingenuous.  It’s the government doing the investing; of course, it will move to protect its investment with laws attempting to bar losses, laws attempting to dictate the kinds of risks companies in the market should be permitted to take, laws demanding taxpayers make the Trust Fund whole from market downturns, laws….  Politics cannot be divorced from the Trust Fund’s investments or the outcomes of those investments.  Especially since, as is currently the case, so much of the Trust Fund’s contents finds its way into the general treasury through “borrowing.”  All for the welfare of our seniors, of course.

Better to duck the question altogether, and make an even more radical change to our retirement safety net: privatize Social Security, as I’ve suggested before.  Let individuals invest their monies (including those, if any, by law earmarked) for their own future retirement in the stock market—if they wish—and be responsible for their own outcomes only and not, as taxpayers, for the government’s, and so everyone else’s, outcomes also.

Democrats and Tax Reform

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They’re plainly not interested in real tax reform, and so they’ll move to block all attempts to achieve reform that would benefit all Americans and so our economy.  This is illustrated by Senator Ben Cardin’s (D, MD) position on the matter.

Tax reform’s got to be responsible and it’s got to be progressive[.]

Pick one; these are mutually exclusive goals.  Punishing particular Democrat-disfavored groups of Americans for their success is the height of irresponsibility in a taxing venue.

On the other hand, a responsible tax reform package would lower corporate tax rates sharply enroute to an eventual elimination of corporate taxes, lower income taxes to the neighborhood of 10%-15% on all income, regardless of type or source, and eliminate most or all subsidies, credits, transfers, and other loopholes—which would have little value to the beneficiary of such distortions anyway at the lower rates.

Here’s the IRS’ (Internal Revenue Bureau then) Form 1040 from 1913, the first year of an income tax exaction after ratification of the 16th Amendment.  Not quite a post card, but it’s still pretty simple, and it’s the level of complexity we could expect for the form necessary to collect income taxes after a responsible tax reform today.

Until Democrats agree to stop using our tax code for their social engineering goals, though, don’t expect any serious effort toward bipartisanship to originate from them.