Category Archives: The Welfare State

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 1 of 3)

Constitution, Corruption, Culture, Democrats, Economics, Election '12, Equal Protection, Fiscal Policy, Government Waste, Politics, Republicans, Strategies For Advancing Liberty, Taxation, The Welfare State, Theory and Ideas

If there is one positive thing Herman Cain has contributed to the national debate it would be this renewed discussion about tax reform. While I am skeptical of some of the specifics of his 9-9-9 plan, if nothing else, Cain has forced the other candidates to come out with proposals of their own. Gov. Rick Perry in a seemingly desperate move to remain relevant proposed an alternative 20% flat tax – a single rate that’s less than the sum of all of Cain’s 9’s.

Before I was aware of and became a supporter of the Fair Tax (a 23% consumption tax that would replace the income tax, payroll tax and all other federal taxes; Gary Johnson and Herman Cain* both support the Fair Tax) I was a supporter of the Flat Tax as proposed by Steve Forbes in his 2000 presidential bid. If we must be subject to an income tax, it seems only fair that everyone pay the same tax rate. None of these proposed plans are perfect but at least everyone is subject to the same rates.

But apparently my definition of “fair” differs quite a bit from those who think a “progressive” tax (i.e. the more you make, the more the government will take) is fair. Take this article from Politico for example:

Taxing the poor has become a badge of honor among conservatives. When Occupy Wall Street protesters launched their cry of “We are the 99 percent,” the right-wing blogosphere responded, “We are the 53 percent,” meaning the 53 percent of American households that they say pay federal income taxes.

Conservatives have become fixated on the notion that largely because of the Earned Income Tax Credit — passed under Ronald Reagan and expanded under Bill Clinton — almost half of all Americans pay no income taxes.

Perry launched his presidential campaign expressing dismay at the “injustice that nearly half of all Americans don’t even pay any income tax.” And he was not alone. Every major candidate — Rep. Michele Bachmann (R-Minn.), Mitt Romney and Cain — has suggested that too many of the working poor aren’t paying income taxes, a position The Wall Street Journal describes as “GOP doctrine.”

[…]

The argument is disingenuous. Working poor people do pay taxes. They pay a larger portion of their incomes in payroll taxes and sales taxes than the wealthy. And they pay property taxes indirectly in their rental costs. Poor workers pay about one-eighth of their incomes in taxes, on average.

For the sake of argument, I will assume that the author’s assertion is correct that the working poor pay a greater share of their incomes than the wealthy counting both direct and indirect taxes. Indeed there are all sorts of hidden taxes that are embedded in every good or service we all buy.

Regulations on business (which the author of this article undoubtedly supports) that contributes to the overall cost of employing a worker** are potential earnings the worker might otherwise be paid. » Read more

Stephen Littau
http://fpffressminds.blogspot.com/

Gary Johnson and Ron Paul CPAC Speeches

Civil Liberties, Constitution, Credit Crisis, Currency and Monetary Policy, Economics, Election '12, Federal Reserve, Fiscal Policy, Foreign Affairs, Freedom, Libertarians, Liberty, Military, Monetary Issues, Multimedia, Politics, Republicans, Security, Strategies For Advancing Liberty, Taxation, The Welfare State, Theory and Ideas

The 2012 G.O.P. candidates each gave speeches at CPAC following the debates. Below are the speeches from Gary Johnson and Ron Paul. The first video is Johnson’s presentation before perhaps the largest audience he has had in awhile. Johnson spends a good part of his presentation introducing himself before giving an overview of his proposals. In the second video, Dr. Paul who is no stranger to CPAC, gets right into his prescriptions for fixing the economy and restoring lost liberty.

Stephen Littau
http://fpffressminds.blogspot.com/

Don’t Bother with the Fine Print, Just Pass the Bill

Civil Liberties, Constitution, Credit Crisis, Democrats, Economics, Election '12, Energy Policy, Fiscal Policy, Freedom, History, Legal, Liberty, Politics, Republicans, Separation Of Powers, Tea Party, The Bill Of Rights, The War on Drugs, The Welfare State, Theory and Ideas, Unions, War on Terror

The title of this post ought to be a red flag no matter who the president is or what your political persuasion. President Obama is demanding that congress pass his “American Jobs Act” in front of supportive crowds of people who I am sure have taken the time to read the whole bill and understand its contents. This bill should be passed “immediately” and with “No games, no politics, no delays,” so sayeth our dear leader.

I can’t help but think of another piece of legislation that had to be passed “immediately” and “without delay” nearly ten years ago in the aftermath of the terrorist attacks of 9/11. The piece of legislation I am referring to of course was the USA PATRIOT Act. I mean what’s not to like? The bill has the words “USA” and “PATRIOT” in them and would make our country safer because the law would give law enforcement the tools needed to fight terrorism.

One of the tools the PATRIOT Act (Sec 213), a.k.a. “sneak and peek” provided law enforcement the ability to delay notification of search warrants of someone suspected of a “criminal offense.” Between 2006 and 2009, this provision must have been used many hundreds or thousands of times against suspected terrorists, right? Try 15 times. This same provision was used 122 in fraud cases and 1,618 times in drug related cases.

Is this what supporters of the PATRIOT Act had in mind when most of them didn’t even read the bill?

So we’ve been down this road before – pass a bill with a name that no one would be comfortable voting against. To vote against the PATRIOT Act might suggest to voters that you are somehow unpatriotic as voting against Obama’s jobs bill will undoubtedly be used in campaign ads to say opponents are “obstructionists” or are not willing to “put politics aside” in order to “put Americans back to work.” And don’t even get me started on all the bad laws that have been passed using names of dead children.

But who is really playing political games here? I think the answer quite clearly is President Obama in this case. He knows damn well that if the economy is still in the shape it is come Election Day he has very little chance of winning a second term unless he can find some way to successfully pin the blame his political opponents. He knows that raising taxes is a nonstarter for Republicans – particularly Tea Party Republicans. There may be some good things in his bill that should be passed (the Devil is in the details of course) that Republicans can support but if it’s all or nothing, the answer will be nothing.

President Obama is counting on the nothing so he can say it’s the House Republicans’ fault that the economy hasn’t recovered. This class warfare rhetoric plays very well on college campuses and union rallies. The worst thing that could happen from Obama’s perspective is if the Republicans call his bluff, pass the bill, and the bill fails to provide the results he claims his bill will achieve (though as a political calculation, it may be a wash as Tea Party voters in-particular would not be pleased either).

The worst thing the congress could do for this economy would be to pass this bill as hastily as the PATRIOT Act was a decade ago. The best thing congress could do is for its members to actually read the bill and have a rational discussion* and debate it line by line. Whether Obama’s intentions are for good or ill, there will be seen and unforeseen consequences if the bill does pass. A top down approach (as I think this bill is) is rarely if ever a good recipe for an economy. No one is smart enough to plan the economy, not even the brain trust of the Obama administration (this should be obvious by now).

Just because the president says his bill will create jobs doesn’t make it so.
» Read more

Stephen Littau
http://fpffressminds.blogspot.com/

Social Security Trust Fund: Accounting Kabuki

Fiscal Policy, Government Transparency, Taxation, The Welfare State

The looming government debt ceiling crisis has cause Obama to threaten inability to pay Social Security checks. It’s renewed the debate, which I’ve hashed out many times (here, here, here and here, for posterity’s sake), whether the Social Security “Trust Fund” is a veritable asset or merely a convenient accounting fiction used to hide deficits.

I, of course, believe it to be the latter. But M.S., writing for The Economist’s Democracy in America blog, tries to make some analogies about the trust fund’s “accounting kabuki”:

I mean, look, our bank accounts are an accounting fiction. Everyone knows exactly how much money is in anyone else’s bank account: none. There is no money “in” our bank accounts; our banks have already spent it. Our so-called bank account is just an IOU, a promise from our bank to pay us up to the amount specified in our balance.

There are two things here. The first is that the bank account is merely a promise, which is true. This is clearly analogous to the Social Security Trust Fund. The second part, though, is the problem. Making good on the promise is the bank’s responsibility, NOT MINE.

If I want to withdraw money from the bank, they have a legal and moral responsibility to give it to me. It doesn’t matter to me where they get it, but it creates no obligation on me to get that money back.

If they told me that they’d give me my money, but they’d have to garnish my wages for the next year in return, however, I’d be a little pissed off. That’s what the Social Security Trust Fund is.

The key is that American taxpayers are the ones who are being “paid back” out of the Social Security Trust Fund, while American taxpayers are also the ones doing the paying. It’s not an accounting fiction because we have two different line items on the bill, it’s an accounting fiction because the revenues ultimately come from the same place, whether you’re hiring someone to do your accounting or using a virtual accounting office, your businesses’ accounting needs are covered.

From the point of view of the Social Security Administration, of course, the IOU’s are an asset. They are a claim on future government revenue that is essentially on par with the debt that China or institutional investors buy from the US. I.e. from an accounting standpoint, it is a “promise” that carries some heft. However, from the point of view of the American taxpayer, it is additional debt that must be repaid through higher taxation. They’re going to get it from our paychecks, it’ll just come from the line that says “FED INC TAX” rather than the lines that says “SOC SEC TAX” or “MEDICARE TAX”. It still comes out of the same paycheck, which means whether it’s an accounting kabuki or not, it still costs us more money. The last thing you want to do is lose money, especially if you are running your business, so looking for the best accounting firms in nyc or somewhere more local to you, maybe the more desirable option.

Brad Warbiany
https://thelibertypapers.org/

Quote of the Day: Wet Blanket Edition

Democrats, Economics, Fiscal Policy, Healthcare, Multimedia, Politics, Quote of the Day, Socialism, Taxation, The Welfare State, Theory and Ideas

President Obama and his sycophant Keynesian friends in the MSM can’t quite figure out why his policies haven’t improved the economy. Maybe President Obama should listen to an actual job creator, Steve Wynn to get some clue about why businesses aren’t expanding.

Here is an excerpt from Wynn from a recent conference call where he describes Obama’s policies as “the greatest wet blanket to business, and progress and job creation in my lifetime.”

[Partial transcript, Wynn responding to a question during the Q&A portion of the conference call]

“Well, here’s our problem. There are a host of opportunities for expansion in Las Vegas, a host of opportunities to create tens of thousands of jobs in Las Vegas. I know that I could do 10,000 more myself and according to the Chamber of Commerce and the Visitors Convention Bureau, if we hired 10,000 employees, it would create another 20,000 additional jobs for a grand total of 30,000 […] And I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems — that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration. And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America. You bet. And until we change the tempo and the conversation from Washington, it’s not going to change. And those of us who have business opportunities and the capital to do it are going to sit in fear of the President. And a lot of people don’t want to say that. They’ll say, “Oh God, don’t be attacking Obama.” Well, this is Obama’s deal, and it’s Obama that’s responsible for this fear in America. The guy keeps making speeches about redistribution, and maybe we ought to do something to businesses that don’t invest or holding too much money. We haven’t heard that kind of talk except from pure socialists. Everybody’s afraid of the government, and there’s no need to soft peddling it, it’s the truth. It is the truth. And that’s true of Democratic businessman and Republican businessman, and I am a Democratic businessman and I support Harry Reid. I support Democrats and Republicans. And I’m telling you that the business community in this company is frightened to death of the weird political philosophy of the President of the United States. And until he’s gone, everybody’s going to be sitting on their thumbs.

Stephen Littau
http://fpffressminds.blogspot.com/
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