Archives: 06/2010

Dan Mitchell Gets Results

I gave a speech in Hungary about two weeks ago and now the government has announced a big step in the direction of better fiscal policy. My role was about as meaningful as the rooster crowing, followed by the sunrise, but this is still good news. According to Reuters, “Hungary’s new government plans to introduce a flat personal income tax of 16 percent from 2011, as well as a 15 percent cut in public sector wages.” Those are the headline initiatives, but the fiscal reform package includes other good policies. Here’s a blurb from The Economist.

After a three-day emergency cabinet meeting over the weekend, Viktor Orban, the prime minister, announced the government’s new economic programme this afternoon. The battered forint quickly jumped almost 2% in response. …The introduction of a 16% flat personal income tax is a daring move, and could have important repercussions beyond balancing the state’s books. Unemployment, or at least that element of it which is declared, is nudging 12%, and one reason is Hungary’s cumbersome bureacracy and heavy tax burden. Now Mr Orban has announced that corporation tax for companies with annual profits of less than 500m forints will be reduced from 19% to 10%. Ten more small and bothersome taxes are set to be abolished altogether.

A few years ago, when several nations each year were adopting the flat tax, I arbitrarily decided that this rock classic would be the theme song of the tax reform movement. Sadly, it doesn’t look like we’ll get to play it in America anytime soon.

A Public Thumb on the Election Scales

When taxpayers underwrite the campaign expenses of candidates for public office, serious questions arise: Not least, why should taxpayers subsidize candidates or ideas they oppose? But when taxpayers subsidize only one side in a campaign, there should be outrage. Perhaps there was at the Supreme Court this morning, when the Court blocked an appalling opinion out of, not surprisingly, the oft-overturned Ninth Circuit.

In McComish v. Bennett the Goldwater Institute is challenging Arizona’s Clean Elections Act, under which “candidates who run with public campaign subsidies receive an almost dollar-for-dollar match each time a privately funded opponent raises money above a certain amount,” the Goldwater press release states, “and additional matches when independent expenditures are made against the subsidized candidate.”

The problem for proponents of this Act is that the Supreme Court has said more than once that “leveling the playing field” is a forbidden rationale for campaign finance regulations. Moreover, and more precisely, in 2008, in Davis v. FEC, the Court held that the so-called Millionaires Amendment to the McCain-Feingold campaign finance act of 2002 was unconstitutional. Under that amendment the contribution caps that would otherwise apply to congressional candidates were lifted if a candidate was running against a self-financed opponent – a “millionaire” who, under the First Amendment, could not be restricted in funding his own campaign. Again, leveling the playing field won’t do. (Note also that that amendment put a lie to the main rationale for campaign finance restrictions – to prohibit corruption or its appearance. The caps are needed to prevent the candidate from being corrupted, so the argument runs – unless he’s running against a millionaire, in which case he won’t be corrupted by the added contributions. Such are the lengths to which campaign finance regulators are prepared to go to justify their schemes.)

Writing for the majority in Davis, Justice Alito went to the heart of the matter: “It is a dangerous business for Congress to use the election laws to influence the voters’ choices.” That it is, and it’s not through election laws alone that Congress – or states, as here – tries to influence voters choices through the use of taxpayer dollars. Do we need any better example, on this primary election day around the country, than publicly-funded National Public Radio?

In January, U.S. District Court Judge Roslyn Silver found Arizona’s Act unconstitutional under the First Amendment. But the state appealed, and last month a three-judge panel of the Ninth Circuit issued an opinion stating that the damage to free speech was minimal. This morning the Supreme Court issued an order to enforce the District Court’s injunction against the use of matching funds. As reported by the Goldwater Institute, the order says the injunction will remain in effect until the Court rules on the underlying appeal of the Ninth Circuit decision. The injunction also would be lifted if the Supreme Court decides not to consider the formal appeal. This is one to watch.

One From Silicon Valley: Leave Us Alone

A passionate plea from Michael Arrington TechCrunch, the number three tech blog in the country and the number four blog overall, according to Technorati’s current rankings:

Silicon Valley has fueled much of the growth in our economy over the last few decades and has created amazing (and highly profitable) companies that are making the world a much better and more interesting place to live. All that happened while the government ignored us.

We don’t want handouts. We don’t want “public-private partnerships,” and we sure as hell don’t want legislation. Just let us do our thing and maybe say thanks to those companies that create jobs by the hundreds of thousands and send in those humongous corporate tax payments on profits. Because all you can do is screw up something beautiful. Really.

While maintaining his hugely popular site, Arrington has made himself something of a controversialist. His policy preferences aren’t strictly libertarian, but his instincts are that freedom produces innovation much better than any alternative public policies.

Ninja Bureaucrats on the Loose

Quinn Hillyer has an excellent piece at the Washington Times highlighting the simultaneously farcical and frightening use of armed agents in enforcing suspected regulatory violations.

”The government,” wrote 50-year-old Denise Simon, “is too big to fight.” With those words, in a note to her 17-year-old son, Adam, she explained why she was committing suicide (via carbon monoxide) three days after 10 visibly armed IRS agents in bulletproof vests had stormed her home on Nov. 6, 2007, in search of evidence of tax evasion. Her 10-year-old daughter, Rachel, was there with Simon when the agents stormed in.

“I cannot live in terror of being accused of things I did not do,” she wrote to Adam. To the rest of the world, in a separate suicide note, she wrote: “I am currently a danger to my children. I am bringing armed officers into their home. I am compelled to distance myself from them for their safety.”

The IRS is not the lone culprit. The EPA, National Park Service, Small Business Administration and even the Railroad Retirement Board have acquired a taste for tactical enforcement of administrative sanctions.

Read the whole thing. And when you’re done, check out Tim Lynch’s book on the proper role of the criminal law, Radley Balko’s work on the unwarranted expansion of SWAT teams within American law enforcement, and the Heritage Foundation’s report on the uncontrolled growth of the federal criminal code.

Explaining Free Trade and Convincing Its Critics

Further to Tom Palmer’s illuminating post entitled “How to Explain Free Trade in Less Than Three Minutes,” let me add that, occasionally, skeptical professors, teachers, and our favorite protectionists muster up retorts to our sensible arguments.  And sometimes further elaboration and exposition are necessary before we can convincingly dispense with those objections.

For those occasions, you will be happy to have been acquainted with the work of the Cato Institute’s Center for Trade Policy Studies, which has been producing arrows for free trade quivers for 12 years.  Given the persistence of myths that feed trade’s skeptics, eradication of protectionism requires that our arguments appeal to those who can be convinced in three minutes, as well as those who may be more stubborn.

A Soda Tax Completely, Utterly, and Totally Unrelated to Individual Choice

An interesting article in Slate today about the social psychology of “sin taxes”  and how people in general resent being told what to do. They may, in fact, react by consuming even more of the sinning item than before the nannies intervened, just to prove a point.

Unfortunately, the point of the article seems to be how to implement sin taxes – in this case, a soda tax – without annoying people to the point where the tax is counterproductive.  Something about “refram[ing]” the tax so it doesn’t tip people off as to its real purpose. The author concludes with this gem:

If we want to implement a sweetened beverage tax and maximize its effectiveness, the best approach would be to dissociate it from the larger issue of individual choice and focus on its immediate practical benefits, such as the revenue it produces. Over time, we’ll get used to it. We might even wonder why we didn’t do it sooner.

To end on a positive note, many of the comments are striking a distinctly libertarian tone.