Tag Archives: taxes

Thoughts on European Inflation and Tax Policy

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Michael Heise, Chief Economist at Allianz SE, had some in his op-ed in The Wall Street Journal, but I want to focus on just a couple, for the mindset implied as he—and Europe’s politicians—address inflation and tax policy.

They [tax and ultralow-interest rate policies] encourage risk taking among investors searching for yield, potentially leading to malinvestment. They affect the distribution of income and wealth between the less affluent, who are most affected by low returns on bank deposits, and the wealthier, who tend to benefit most from rising share prices. Finally, perhaps most important, ultralow interest rates discourage savings for retirement and slow down the growth of existing pension assets.

“Ultralow rates encourage risk taking.” Yeah? And? That’s a business decision; no government need be—no government should be—involved in that. A free market will do a far better, far more efficient, with far prompter sanction application job of regulating risk taking businesses.

“Affect the distribution of income and wealth.” Yeah? And? To the extent such distributions can ever be bad, a free market is the best way to raise the prosperity of the least, and if the wealthy get wealthier, so what? The poor still are less poor. No government mandates or regulations can hope to match the prosperity creation that is freedom in the market.

“Ultralow interest rates discourage savings for….” This is true, and the ECB’s decision to artificially depress interest rates is negligently harmful to the poor, the retired, and those trying to save for retirement. Further, ECB and sovereign nation interferences in the market for debt instruments is purely political, and so it’s wholly unpredictable (who can tell when a politician will decide it’s in his interest to do something different?). That unpredictability seriously damages the ability of anyone to save for their future.

Tax policy shouldn’t be used for social engineering; optimally, it should be used only to fund basic government. The free market is a better place—more efficient, and faster acting—than government from which to regulate interest rates and risk. Even in social democrat Europe.

All Right Now

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…or nothing at all, ever. That’s the attitude of the Democratic Party in today’s Congress and of the farther right of the Republican Party in today’s Congress. It’s enough to paralyze Congress and keep it from doing much of anything—and to hand Congress back to the Democrats, which may explain some of their attitude.

I’ve argued before that gridlock isn’t, of necessity, a bad thing, but there are a few things Congress does need to accomplish.

A short, partial list includes

  • funding the legitimate tasks of government, those enumerated in Art I, Sect 8 of our Constitution
  • reforming taxes, which would have the side effect of paring back—significantly—an IRS that thinks it’s outside (not merely above) the law
  • reforming immigration
  • privatizing Social Security and Medicare, and getting rid of the Federal contributions to Medicaid

But none of this can be—nor should it be (Obamacare, anyone? Dodd-Frank?)—done all at once. Easy steps, compromises, that bring us incrementally into that reduced government place we should occupy—and will ultimately get us there.

But to get there, we need to take steps, one after another, not hold out for single leaps that cannot occur.

Questions Republicans Should Be Asking

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Homeland Security Secretary Jeh Johnson testified before the House Homeland Security Committee earlier in the week on, among other things, the subject of immigration. Johnson, by the way, also is a fully licensed and accredited lawyer as well as a politically appointed politician.

A reader wrote to Power Line with some questions for Johnson and others. [emphasis added]

So Jeh says with a smug knowing wink-and-nod “just go to any restaurant here is DC” to see illegal aliens working “under the table.” So is he saying that the employers in DC fill jobs now with illegal aliens? That he knows and the employers know that they are openly, brazenly breaking our immigration and labor laws? So why isn’t he for enforcing our democratically enacted laws? Isn’t he sworn to do so? Isn’t he an attorney? Why isn’t he advocating against the state of affairs that he implies obtains? Why is he advocating open non-feasance of his duty to enforce the laws?

It’s especially rich when he talks about their “coming out of the shadows and STARTING to pay taxes”. Got that? He knows that there are thousands of illegal immigrants and their employers—let’s not forget these scofflaws—who are not paying taxes! OK…so why isn’t he going after them?….for criminal tax evasion?….instead they’re explicitly offering something way beyond amnesty of tax evasion—and a deal that American citizens normally would never get.

Usually a tax amnesty is the government’s waiving the assessed fines, penalties and interest accrued from failure to pay taxes in full and on time—but you still have to pay the actual taxes owed. So the illegal immigrants who have not paid taxes—payroll taxes, most likely since their incomes are low—not only get a tax “amnesty”, i.e., forbearance of fines, interest and penalties—they get outright forgiveness of the actual taxes owed! It is a better deal than any citizen would get if guilty of evading income or payroll taxes. Furthermore it is outright forgiveness for the EMPLOYER’s share of arrears payroll taxes as well…even IF they knowingly hired illegals and failed to pay taxes, it’s outright forgiven.

Republicans should be asking President Barack Obama, Johnson, Democrats generally, and quite a few of their own these questions loudly: in House—and Senate, starting in January—hearings; in townhalls and neighborhoods, especially the rural and poorer ones where unemployment is high and endemic; in newspaper, radio, and television interviews; in letters to the editor.

There are lots of ways to encourage immigration into our country, and we should; we benefit greatly from that immigration. The present way isn’t one of them; on the contrary, it’s highly destructive of our nation.

 

h/t Power Line

Economic Viability of Wind Energy

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Tim Phillips, in The Wall Street Journal, quoted Christopher Flavin, of the Worldwatch Institute, as saying in 1984,

Tax credits have been essential to the economic viability of wind farms so far, but will not be needed within a few years.

It’s been a few years. It’s been 30 years’ worth of “few.”

In all, wind energy “generators” get $56.29 per MW-Hr in Federal subsidies. To put that in perspective, natural gas gets $0.64, and nuclear power $3.14.

These guys are free-loading off you and me, and it’s time to put a stop to it. They need to stand or fall in the free market: if their technology is ready for prime time, they’ll have no trouble. If their technology isn’t—after 30 years—they’ve had enough of our prop-up money.

Cut off the subsidies—or more accurately, do not renew them (they expired in 2013) with finality. While the new Congress is about it, it should cut off those natural gas subsidies (those for oil, too, even though they’re similarly just walking around money) and the nuclear energy subsidies, also.

The free market is a much better watchdog for energy production than the Federal government ever can hope to be, no matter how honest or diligent those bureaucrats and regulators might be.

The Taxpayer and Union Pensions

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Here’s the state of the Pension Benefit Guaranty Corporation, a Federal government entity set up to insure union-negotiated pension plans.

Overall, the PBGC has total assets of $90 billion and total liabilities of $152 billion.

The multiemployer subset of that, the section of the PBGC that “guarantees” union-sponsored pension plans to which groups of companies belong, has total assets of $1.8 billion and total liabilities of $44 billion.

The single employer subset, the PBGC section that “guarantees” the pensions of individual companies, has total assets of $88 billion and total liabilities of $107 billion.

The reason for this is that what are being insured are not just any old pension plans, but defined benefit pensions in particular. Recall that these are the plans that guarantee a pensioner a set amount of money every month for life, regardless of how much money the pension plan actually has in it. Somebody has to make up the difference and make the payments, or the plan goes bust, and the pensioner gets nothing. With the PBGC, that guarantor is you and I: us taxpayers.

Of course, the PBGC proclaims that it has never taken a penny of taxpayer money, and that’s true. But the PBGC has never been in worse shape, either, and it’s deteriorating rapidly. Last year, the PBGC was in the hole only $36 billion, compared to this year’s $63 billion pit.

The PBGC also proudly proclaims its mission is to

encourage the continuation and maintenance of private-sector defined benefit plans.

Fine. Congress, as part of the budget bill it will pass next winter, should cut us taxpayers out of this corporation altogether. Congress should spin off the PBGC into a wholly private sector insurance corporation with no ties to the Federal government at all. Let the new company prosper or fail entirely on the private sector merits of encouraging and insuring private-sector defined benefit plans.