The Case Against the IRS and the “Progressive” Income Tax

December 16, 2014

Phineas Fahrquar:

Tax reform along the lines of some sort of flat tax or a national sales tax, along with reduction in the size of government, would go a long way towards generating prosperity here again. It would also make statist heads explode — a win-win situation!

Originally posted on International Liberty:

Genuine tax reform would be the second-best fiscal policy reform to boost economic growth.*

With a simple and fair tax system, we could get rid of high tax rates that penalize productive behavior. We could eliminate the double taxation that discourages saving and investment. And we could wipe out the rat’s nest of deductions, credits, exemptions, preferences, exclusions, and other loopholes that bribe people into making economically unwise decisions.

When pushing for tax reform, I normally cite the flat tax, but there are many roads that lead to Rome. I’ve also pointed out that other tax reform plans have similar attributes. Here’s what I wrote, for instance, when comparing the flat tax and national sales tax.

In simple terms, a national sales tax (such as the Fair Tax) is like a flat tax but with a different collection point.the two plans are different…

View original 1,238 more words


Theater of the Absurd: taxes force Spanish theater to sell porn to stay open

December 5, 2014

“Detrás de la puerta verde?”

Here’s another wonderful example of the ridiculous situations created when a bloated, unsustainable social welfare state forces politicians to tax anything and everything they can think of in order to feed the beast. In this case, a Spanish theater that presents the plays of Spain’s “Shakespeare” has to sell pornography to reduce its crippling tax burden:

Crippled by colossal tax rates and falling ticket sales, the Spanish cultural sector is taking creative action to cut its tax bill, including one theatre which has changed its main business to pornography to avoid having to pay high taxes.

The tax charged on cultural performances in Spain has shot up from eight to twenty-one percent since 2011 as the government attempts to balance the books, and has drawn a broader range of products into the local VAT-like ‘sales tax’. Some have noted the uneven application of the new higher taxes, which have hit high culture but not erotica and magazines.

Theatre director Karina Garantivá said: “It’s scandalous when cultural heritage is being taxed at 21 percent and porn at only at 4 percent. Something is wrong”. Her company, which performs works by the “Spanish Shakespeare” Pedro Calderón de la Barca has decided to circumvent the new, punitive taxes by registering as a distributor of pornographic magazines – and is offering free performances.

Punters buying €16 worth of hardcore-swingers magazine Gente Libre from the company receive a ‘free’ ticket to a performance of the highly regarded 17th century comic drama El Mágico Prodigioso.

Garantivá said the law as it stands made theatres feel as if they were “in a straitjacket, suffocated”, and that “We want people to ask what kind of a society makes this kind of decision. That they compare pornography and Calderón … and reach their own conclusions”.

A tax on “cultural performances?” That might make even gentry liberals here howl in outrage.

Ms. Garantivá asks the right question in the above highlight, but I have to wonder if someone raised in Spain’s all-encompassing social welfare system could easily come to the right answer? The problem is welfare statism itself, which spends far more than it can afford and faces continual pressure to spend even more to support an aging population, while dealing with a declining birth rate. The government’s increasing tax demands thus fall on a shrinking tax base, taking more per person. It’s a recipe for economic stagnation at best and collapse at worst. It’s a growing problem confronting much of Europe, but the people most burdened by the taxes often shriek the loudest at any effort to cut taxes and benefits to more rational levels. And we’re not all that far behind.

Meanwhile, you also have to wonder about politicians who tax “Shakespeare” more than smut.


The Overwhelming Case against Capital Gains Taxation

November 2, 2014

Phineas Fahrquar:

How we shoot ourselves in the foot through the punitive taxation of capital gains. In the end, it hurts working people.

Originally posted on International Liberty:

According to the bean counters at Ernst and Young, the United States has one of the highest capital gains tax rates in the world.

But if you don’t trust the numbers from a big accounting firm, then you can peruse a study from the pro-tax Organization for Economic Cooperation and Development that reaches the same conclusion.

But does this really matter? Is the United States harmed by having a high tax rate?

The Wall Street Journal certainly makes a compelling case that high tax rates on capital gains are self-destructive.

And this remarkable chart shows that workers are victimized when there is less investment.

Let’s add to all this evidence.

Jason Clemens, Charles Lammam, and Matthew Lo have produced a thorough study for the Fraser Institute about the economic impact of capital gains taxation.

A capital gain (or loss) generally refers to the price of an asset when it is…

View original 857 more words


Canada Shows How to Eliminate the Tax Bias against Saving

October 24, 2014

Phineas Fahrquar:

This will drive lefties who like to point to Canada’s health system as a model for the US crazy, but they’re much more free market-oriented than we are these days in other areas, and they treat savings in a more intelligent fashion. There are some very good ideas in here we should emulate, as well as looking at the Australian and Chilean national pension models as a replacement for the failing Social Security.

Originally posted on International Liberty:

Since all economic theories – even Marxism and socialism – recognize that capital formation is a key to long-run growth, higher wages, and improved living standards, it obviously doesn’t make sense to penalize saving and investment.

Yet that’s exactly what happens because of double taxation in the United States, as can be seen by this rather sobering flowchart.

So how can we fix the problem? The best answer, particularly in the long run, is to shrink the burden of government spending so that there’s no pressure for punitive tax policies.

Good reform is also possible in the medium run. Policy makers could implement a big bang version of tax reform, replacing the corrupt internal revenue code with a simple and fair flat tax. That automatically would eliminate the tax bias against saving and investment since one of the key principles of the flat tax is that income…

View original 1,120 more words


In a stunning reversal, the Australian Labor Party bails out on the ‘carbon tax’

October 11, 2014

Phineas Fahrquar:

This is big: the major Center-Left party in Australia has just forsaken a key element of Mankind’s penance for sins against the Earth in the Church of Anthropogenic Global Warming. Al Gore will no be pleased.

Originally posted on Watts Up With That?:

Australian Political Opposition Leader Bill Shorten has today stunned observers by reversing his position on a carbon tax – ruling out any future reinstatement of a carbon tax.

According to The Sydney Morning Herald;

“We will not have a carbon tax, the Australian people have spoken and Labor is not going to go back to that,” Mr Shorten told reporters in Sydney on Saturday.

http://www.smh.com.au/federal-politics/political-news/bill-shorten-says-labor-wants-to-tackle-carbon-pollution-but-rules-out-return-of-carbon-tax-20141011-114nmp.html

Despite turning his back on a carbon tax, the Labor Opposition Leader continues to back the introduction of a “market based mechanism” for tackling “carbon pollution”.

One of the core platforms of the current Abbott government, which helped propel him to electoral victory last year, was the promised abolition of the deeply unpopular carbon tax.

Until recently, Labor advocated reinstating a carbon tax, pending the negotiation of a market based pricing mechanism, but they now appear to be backing away from carbon pricing, however tentatively…

View original 76 more words


The Punitive Economic Cost of Class-Warfare Taxation

September 1, 2014

Phineas Fahrquar:

More evidence (from Europe!) that high tax rates harm economic growth and general prosperity. Barack Obama, take note.

Originally posted on International Liberty:

I’ve already shared a bunch of data and evidence on the importance of low tax rates.

A review of the academic evidence by the Tax Foundation found overwhelming support for the notion that lower tax rates are good for growth.

An economist from Cornell found lower tax rates boost GDP.

Other economists found lower tax rates boost job creation, savings, and output.

Even economists at the Paris-based OECD have determined that high tax rates undermine economic performance.

And it’s become apparent, with even the New York Times taking notice, that high tax rates drive away high-achieving people.

We’re going to augment this list with some additional evidence.

In a study published by a German think tank, three economists from the University of Copenhagen in Denmark look at the impact of high marginal tax rates on Danish economic performance.

Here’s what they…

View original 1,306 more words


Boom: #Obamacare architect upholds #Halbig decision

July 25, 2014
"Obamacare has arrived"

“The end of Obamacare?”

I normally use that graphic as a metaphor for the needlessly disruptive, even harmful effects the Affordable Care Act is having on the American health care system and the millions who rely on it. But the First Circuit Court of Appeals ruling in Halbig v. Burwell (formerly Halbig v. Sebelius) turned the ACA into its own flaming wreck by holding that purchasers of insurance on the federal exchange were ineligible for subsidies, meaning those buyers would be forced to pay the full cost of their new, needlessly more expensive O-care plans.

Oops.

Some background: When the writers of Obamacare were designing this anti-constitutional monstrosity of a law, it was decided that states would be able to set up their own exchanges, with the federal exchange serving as the “insurance mall” for those that didn’t. To encourage states to create exchanges, it was written into the bill that subsidies for insurance purchases would only be available to those who bought their policies via an exchange “established by the State.” The idea was that pressure from purchasers who wanted those subsidies would force even conservative governors and legislatures to “opt in” to the system.

Trouble was for Obamacare fans, it didn’t work out that way.

Only 14 states set up their own exchanges (and some of those have been such disasters that their states are switching to the federal marketplace). That meant that, under the law, insurance buyers in the federal marketplace would be paying full price for their policies. It also meant that the federal government could not collect the “Roberts tax” (penalties) for not buying insurance, since those taxes were triggered by the availability of subsidies. No subsidies, no tax revenues, which the government was relying on to fund those same federal subsidies. You can just imagine how that prospect thrilled the pols in D.C.:

panic button red

 

So the IRS, hearing its master’s voice, suddenly decided it had the power to declare that “established by the State” intended to include the federal exchange, and thus the subsidy money could keep flowing.

Enter Halbig  and its argument that, no, the law meant what it plainly said, and then the First Circuit’s agreement.

The reaction on the Left has been amusing, to say the least. Ranging from shrieks of “judicial activism!!” to whines of “it’s just a typo and you know very well that’s not what Congress intended, meanies!”, they want the full, en banc, First Circuit to reverse the ruling. And, if they don’t do it, then, by golly, it’s on to the Supreme Court, where John Roberts will rewrite the law for us! Or something.

That got an awful lot harder to imagine, though, after the Competitive Enterprise Institute last night uncovered video from 2012 in which Jonathan Gruber, one of the key architects of both Obamacare and the earlier Romneycare, point-blank admitted the plaintiffs in Halbig were right:

The key moment starts at minute 31. Here’s CEI’s transcription of the big reveal:

What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits—but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges. But, you know, once again the politics can get ugly around this.

Per Michael Cannon, Gruber is off on one point, because the “Roberts taxes” are only triggered in states that create exchanges and thus get subsidies. But the core is that this destroys the government’s “congressional intent” argument, because we now have one of the designers saying the limitation of subsidies to state exchanges was the intent of Congress.

Where Obamacare defenders go from here (other than to a bar to drown their sorrows), I don’t know. They can’t give up, because the loss of the subsidies wrecks Obamacare. Can you imagine the reaction when customers on the federal exchange are told they have to pay full price, prices mandated by Obamacare, which was passed solely by Democrats?

I have no idea how the courts will handle this. Assuming the government asks for an en banc hearing, it’s possible the ruling in Halbig will be reversed, thus probably ending the matter, but I’d have to think less so after this revelation. And there is a contradictory ruling from the 4th Circuit, a situation that almost guarantees the Supreme Court would take the case in 2015.

As ST likes to say, stay tuned… popcorn.gif

RELATED: More from Reason. The Federalist on Michael Cannon’s revenge. Mr. Cannon himself points out how Halbig frees tens of millions from an illegal tax. Paula Bolyard reports how Mr. Gruber calls the plaintiff’s arguments in Halbig “nutty,” …er… but they’re his own ideas, too. Oops, again. By the way, did you know 91% of fake applicants for Obamacare can get subsidized coverage? Another reason to kill this thing and bury it under a crossroads at midnight with a stake through it.

UPDATE: This is amusing – four ways in which Obamacare defenders have desperately tried to spin Mr. Gruber’s “speak-o.”

(Crossposted at Sister Toldjah)


Follow

Get every new post delivered to your Inbox.

Join 13,941 other followers