Tag Archives: taxes

Some Thoughts on the Ryan-Murray Budget Deal

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Americans for Prosperity President Tim Phillips has this one:

This budget compromise is not just bad policy, it is bad politics.  The American people remember hard-won bipartisan spending limits set by the sequester, and are not pleased to see their conservative representatives so easily go back on their word to rein in government over-spending.

The deal does, after all, increase spending to a skosh over $1 trillion (just about halfway to the Democrats’ spending call of $1.058 trillion from the current spending of $0.967 trillion), while increasing, slightly, defense spending (rather than the more draconian cut the sequester had scheduled for 2014) and increasing, slightly, discretionary spending—all paid for with spending cuts and fees elsewhere, with chump change left over for a net deficit reduction.  Yes, yes, this is a current increase in spending paid for with future cuts and fees.  See below.

American Conservative Union Chairman Al Cardenas has one, too:

The solution is not to walk away from progress and add over $60 billion in spending over the next two years.  We are not impressed by the cost cutting gimmicks and urge members of Congress to tell the budget conference to get back to work[.]

What’s your plan, guys on which the conference committee should “get back to work?”  With what votes, particularly in the Senate, do you claim your alternative (you do have something more intelligent than just “No,” yes?) can pass?

Certainly, there’s much to dislike in this compromise, but it’s good enough for the next year (albeit it covers the next two).  More importantly, blocking it is tactically stupid: it moves the focus in an election year to Republican intransigence, whether that’s a fair perception or not.

I have one, also.  Take the deal, lose the distraction.  Keep the election year focus on the failed Obamacare, on the anti-business Dodd-Frank, on the Democrats’ tax and spend demands, on the Democrats’ blowup of the Senate (picking any two (so long as one is Obamacare) in order to have that focus).  Win elections, then do the budgets that are necessary, repeal Obamacare (you do have a replacement plan ready to proffer, yes?), eliminate the CFPB, and so on with the votes to do so actually present in the House and in the Senate.

Quit being chuckleheads.  Quit being the Party of Stupid.

Farm Subsidies and False Premises

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Negotiators [on a proposed milk price support bill] are…working out how farm subsidies should be restructured in the absence of a traditional subsidy called direct payments, which are paid to farmer regardless of crop price or crop yield.  Both chambers’ bills would eliminate this $5 billion annual subsidy in response to critics who say it pays farmers not to farm.  But they have argued over how to replace those payments, with major farm groups squabbling over whether subsidies should kick in based on crop prices or farmer revenue, and how to count the acreage on which the subsidies are based.

Unfortunately for our pocketbooks, those negotiators are operating from a false premise: that the subsidies need to be revised in any way.  The only ones who benefit from these subsidies in any large way are the large agribusinesses and the “farm state” politicians supported by them.  Mom and pop farms?  Not so much.  On top of that, though, us food eaters are materially harmed by the subsidies through the artificially inflated prices we have to pay for food that those subsidies create.  And the poor among us are harmed the most by those inflated prices.  Additionally, us taxpayers are harmed a second—and third—time by having to pay for those subsidies that are driving our prices up and by having to pay for the food stamps that are used to mitigate for the poor those artificially inflated prices.

No.  The subsidies need to be done away with: “replace” them altogether through a bill that eliminates all of the farm subsidies, which ding us for $25 billion annually.  That seed then lets the much larger $80 billion/yr food stamp program to be drastically reduced, if not eliminated altogether, since most of those remaining who truly need help would generally be within the resources of their local communities and states.

Another Failure of Modern Liberalism

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Illinois has a deeply bankrupt pension system—it’s in the hole by $100 billion: a state is in the hole by $100 billion, not a nation—a pension system that’s the worst off in the country.

Their solution?  A bill just passed that in total is claimed to save $160 billion over 30 years and fully fund the systems by 2044.  That’s a bit over $5 billion a year on that $100 billion arrearage.  And it naively, if not cynically, assumes that future state legislatures won’t change the thing for all of those 30 years.

Some specifics, with my comments: the bill

  • pushes back the retirement age for workers ages 45 and younger, on a sliding scale

Why a scale?  20 years to a nominal retirement at 65 is plenty of time for workers to adjust plans.

  • replaces annual 3% cost-of-living increases for retirees with a system that provides the increases on a portion of benefits, based on seniority

Why freeze the COL?  If there’s to be one, why not tie it to inflation?  Today’s inflation is in the neighborhood of 2%-2.5%. Larger COLs aren’t necessary.

  • gives some workers the option of freezing their pension and starting a 401(k)-style defined contribution plan

Why only some?  Why not move them all to 401(k) type plans?  The private sector recognized the usefulness of such plans decades ago, and they make the workers more responsible for their own futures, instead of having government usurp that responsibility.

  • has workers contributing 1% less to their own retirement

So workers will become even less responsible for their own futures than they were.  Oh, wait—those plans….

Don’t expect this to have any effect on Illinois’ failed system other than to allow it to get worse.

A Thought on some Taxes

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Romain Hatchuel, Square Advisors LLC Managing Partner, has an excellent op-ed in The Wall Street Journal, but I want to comment on one small part of it:

In his November investment commentary for bond giant Pimco, [billionaire investor Bill] Gross asks the “Scrooge McDucks of the world” to accept higher personal income taxes and to stop expecting capital to be taxed at lower rates than labor.

Gross is right, partly.  The use of tax code to effect social engineering does not achieve the goals of the “engineering” effort, but it does effect coarse distortions in a free market.  These distortions range from slanting business decisions toward (or away from) debt according to the differential ways in which debt interest and capital gains are taxed; they impact individual investment decisions according to the way debt interest, capital gains, or dividends are taxed; they even distort the price (and so availability) of housing according to the way in which mortgage debt interest is taxed.

Capital should not be taxed at a lower rate than labor.  Businesses should not be assessed tax at all—the ones who actually pay those business taxes, after all, are the final customers—us—as that tax bill-as-cost-center gets figured into the prices charged.  Nor should there be deductions, credits, etc on individual income, with or without variation according to the source or amount of income.

Contra Gross, though, a single, low flat rate that every individual pays on the total of that individual’s income would achieve a market neutral tax that would impose the minimum of distortion on the market even from the tax’s existence (a 10% rate that everyone with an income pays even would represent a significant increase in total revenue to the Federal government).

Wealth Redistribution, Industrial Style

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…additionally, with industry as helpless victim, a taxpayer bailout.  It’s an Obama two-fer: spreading the money around and bailing out an industry.

Built in to Obamacare, it turns out, is another form of wealth redistribution.  In order to guarantee every insurance company a profit (as opposed to, more properly, engendering an economic environment within which every insurance company has an opportunity for a profit), Obamacare has embedded in it something called a “risk corridor.”  Here’s Power Line‘s description of what this corridor is:

The risk corridor program, by its design, is basically a risk sharing program among insurance companies, administered by the government.  Companies that make out better than expected provide funds for companies that make out worse.

Wealth redistribution on an industrial scale.  But wait—there’s more:

If essentially all insurance companies make out much worse than expected, as may well be the case, the risk corridor concept won’t work as intended.  It will work only if reinvented to force taxpayers to subsidize the industry.

The Obama bailout.