Tag: IRS

Bennett’s Ouster: a Sign That Conservatives Have Started Paying Attention to Health Care?

Utah Republicans will not be re-nominating U.S. Senator Bob Bennett (R-UT) for another term.  A principal reason appears to be their displeasure over a health care bill that Bennett teamed with Sen. Ron Wyden (D-OR) to sponsor.

Some commentators decry how Bennett’s ouster demonstrates that the Republican party has lurched to the right.  That’s a reasonable interpretation if you believe, as conservative Washington Post columnist Kathleen Parker does, that Wyden-Bennett was a moderate, “market-driven” bill.

Rather than a moderate, market-driven bill, Wyden-Bennett would have created “Medicare Advantage for All.” It would have made health insurance compulsory for all Americans, and imposed stringent government controls on what type of coverage Americans must purchase.  It would have imposed federal price controls on health insurance.  As I explain elsewhere, once you have those elements in place, you’ve got socialized medicine.

Wyden-Bennett went further.  It would have created a new government entitlement to insurance subsidies.   Yes, the legislation would have given workers more insurance choices – at first.  But it would have set in motion economic and political dynamics that would reduce choice and innovation, forcing all Americans into a narrow range of health plans.  It effectively would have prohibited employer-sponsored health insurance, forcing even more Americans to give up their current coverage than ObamaCare would.

Wyden-Bennett was more honest than ObamaCare, in that it would have forced workers to pay their premiums to the IRS.  That would have made it explicit that the mandatory premium payments are indeed a tax.  Those tax payments would have appeared in the federal budget, and the American people would have been able to evaluate the law based on its actual cost. In contrast, ObamaCare’s authors assiduously worked to keep those mandatory (read: tax) payments out of the federal budget.

But on policy grounds, as National Review notes, Wyden-Bennett is more radical than ObamaCare – which itself was so radical that a majority of voters oppose it, and Democrats could just barely corral enough members to pass it.

“Okay, Cannon,” you might object, “but if Wyden-Bennett is even further to the left than ObamaCare, then why do its cosponsors include not just Bennett, but other conservative Republican senators like Lamar Alexander (TN), Mike Crapo (ID), and Judd Gregg (NH)?” Good question.

The answer: conservatives and Republicans just don’t pay as much attention to health care as they should.  (Ask any leftist or free-market health policy wonk; they’ll agree.)  As a result, the health care industry and the Left can easily seduce them into supporting legislation that violates their limited-government principles.  Sen. Wyden pulled it off by dangling the words “choice” and “health savings accounts” in front of his Republican colleagues.  Even when Republicans do pay attention to health care, it’s often after someone convinces them that a left-wing goal like universal coverage can be done in a free-market way. (Exhibit A: Mitt Romney.)

Viewed from this perspective, Bennett’s ouster is not evidence that the GOP has lurched rightward.  It is a sign that conservative voters may be starting to pay attention to health care.  And it gives hope that conservative politicians will do the same.

Washington Rakes in the Money

The Washington Post launches a new weekly today, Capital Business, covering business in the Washington area. The cover of the first edition is striking:

As the cover line exults, “There’s a wave of government money headed our way – bringing opportunities in health care, green energy, cybersecurity and education.” Of course, it’s not actually “government money” – it’s money taxed or borrowed from those who produce it in the 50 states and then sprinkled liberally around the Washington area, which now contains 6 of the 10 richest counties in America.

If the Capital Business cover image had a few more arms, it would look like the logo for this year’s Cato University, “Confronting Grasping Government”:

Awful Tax System Causing a Growing Number of Americans to “Go Galt”

Being an American citizen is an honor in many ways, but it is a huge millstone around the neck for highly successful investors and entrepreneurs because of an oppressive and complex tax system. This is particularly true for those based in and/or competing in global markets. Indeed, because the tax system (and regulatory system) is so onerous and because it is expected to get far worse in the future, a growing number of Americans are actually giving up citizenship and “voting with their feet.” The politicians view these people as “tax traitors” and are trying to erect higher barriers to hinder economic migration, particularly in the form of confiscatory “exit taxes” that are disturbingly reminiscent of the totalitarian practices of some of the world’s most unsavory regimes. The Wall Street Journal recently reported on this issue:

The number of American citizens and green-card holders severing their ties with the U.S. soared in the latter part of 2009, amid looming U.S. tax increases and a more aggressive posture by the Internal Revenue Service toward Americans living overseas. According to public records, just over 500 people world-wide renounced U.S. citizenship or permanent residency in the fourth quarter of 2009, the most recent period for which data are available. That is more people than have cut ties with the U.S. during all of 2007, and more than double the total expatriations in 2008. …Others are giving up their U.S. nationality to avoid tax increases in the U.S., as the government struggles under huge budget deficits. The top marginal tax rate is set to rise to 39.6% from 35% at the end of this year. A proposal to tax fund manager pay at ordinary income rates, instead of the 15% capital gains rate, is gaining currency in Congress. “Everybody sees the tax rates are going up. At a certain point, it gets beyond people’s pain threshold,” said Anthony Tong, a tax partner at accounting firm PricewaterhouseCoopers in Hong Kong. Unlike most jurisdictions, the U.S. taxes the income of citizens and green-card holders no matter where in the world it is earned.

The Joy of Tax Serfdom

Like a good peasant, I have already filed an extension, so I am at least temporarily compliant with the friendly people at the IRS. But since it is tax day, perhaps a slight bit of criticism of the tax code is warranted. I have already posted my video on the flat tax and warned about the risks of adding a value-added tax on top of the income tax in another video. I also posted a very successful video narrated by a former Cato intern about the harsh compliance costs of the internal revenue code. So it is time to reach into the archives and post this classic video produced by Caleb Brown and Austin Bragg of the Cato Institute.

P.S. Not that I would ever want to put my thumb on the scale of any contest, but I am defending the flat tax in an online debate for U.S. News & World Report with someone who favors the current system. You can cast a vote if you have an opinion on the matter.

P.P.S. Caleb has independently produced a video on the meaning of free enterprise. With politicians acting as if the business community is an ATM machine to finance a bigger welfare state, Caleb’s video puts a human face on what it means to be a risk-taking entrepreneur.

New Video Exposes Nightmare of IRS Complexity

My former intern, Hiwa Alaghebandian, has just narrated a new Economics 101 video about the cost of the tax code. I won’t spoil the surprise by giving the details, but you if you’re not angry now, you will be after watching.

In the video, Ms. Alaghebandian notes that a study from 1996 (back when the tax code was not nearly as complex) estimated that a flat tax would reduce the compliance burden of the income tax by 94 percent. In my video on the flat tax, I mostly focused on how a single-rate, consumption-base system would boost growth and competitiveness, but simplicity also would be a remarkable achievement. Not only would real tax reform reduce compliance costs by hundreds of billions of dollars, it would also put a big dent in the corrupt practice of distorting economic choices with deductions, exemptions, credits, preferences, shelters, and other loopholes. That’s a profitable game for politicians and lobbyists, but the rest of us pay the price because the tax code is even more of a nightmare.

There is also an under-appreciated connection between simplicity and fairness. My colleague Will Wilkinson sagely observed that “…the more power the government has to pick winners and losers, the more power rich people will have relative to poor people.” The tax code is a good example. Many leftists want the tax system to penalize success with high tax rates. I’ve explained why this is economically misguided in a video on class-warfare tax policy, but it’s also worth pointing out that a simple and fair tax system like the flat tax makes it much more difficult for the well-connected to take advantage of complexity. Simply stated, the tax system should not punish the rich with high rates (notwithstanding the neurotic views of self-loathing trust-fund heirs), and it shouldn’t reward them with special deals.

The good news is that we know the policies that will fix the current system. The bad news is that politicians keep making the system worse. Putting the IRS in charge of enforcing key parts of Obamacare is just the latest example of why America needs a tax revolt.

Ultra-Rich Leftists Want to Atone for their Guilt by Paying Higher Taxes…And They Want to Impose their Neurotic Views on the Rest of Us

A Washington Post columnist reports on a group of limousine liberals who are lobbying to pay more taxes. Of course, there’s no law that prevents them from writing big checks to the government and voluntarily paying more, so what they’re really lobbying for is higher taxes on the vast majority of investors and entrepreneurs who don’t want more of their income confiscated by the clowns in Washington and squandered on corrupt and inefficient programs:

A group of liberals got together Tuesday and proved that they, too, can have a tax rebellion. But theirs is a little bit different: They want to pay more taxes. “I’m in favor of higher taxes on people like me,” declared Eric Schoenberg, who is sitting on an investment banking fortune. He complained about “my absurdly low tax rates.” “We’re calling on other wealthy taxpayers to join us,” said paper-mill heir Mike Lapham, “to send the message to Congress and President Obama that it’s time to roll back the tax cuts on upper-income taxpayers.” …They are among 50 families with net assets of more than $1 million to take a “tax fairness” pledge – donating the amount they saved from Bush tax cuts to organizations fighting for the repeal of the Bush tax cuts. According to a study by Spectrem Group, 7.8 million households in the United States have assets of more than $1 million – so that leaves 7,799,950 millionaire households yet to take the pledge. …Of course, if millionaires really want to pay higher taxes, there’s nothing stopping them. The Treasury Department Web site even accepts contributions by credit card to pay the public debt. …His donation will, however, ease the sense of guilt that comes with great wealth, described poignantly by the millionaires: “In 1865, my great-great-grandfather Samuel Pruyn founded a paper mill on the banks of the Hudson River in Glens Falls, New York,” Lapham explained. Judy Pigott, an industrial heiress on the call, added her wish that her income, “mostly unearned income, be taxed at a rate that returns to the common good that I have received by a privilege.” Confessed Hollender, who now runs the Seventh Generation natural products company: “I grew up in Manhattan on Park Avenue in a 10-room apartment.”

P.S. It’s also rather revealing that Massachusetts had (and maybe still has) a portion of the state tax form allowing people to pay extra tax, yet very rich statists like John Kerry decided not to pay that tax while urging higher taxes for mere peasants like you and me.

P.P.S. I debated one of these guilt-ridden, silver-spoon, trust-fund rich people on CNN last year and never got an answer when I asked him why he wanted to pull up the ladder of opportunity for the rest of us who would like to become rich some day

The Flat Tax: Good for America, Bad for Washington

America’s biggest fiscal challenge is excessive government spending. The public sector is far too large today and it is projected to get much bigger in coming decades. But the corrupt and punitive internal revenue code is second on the list of fiscal problems. This new video, narrated by yours truly, explains how a flat tax would work and why it would promote growth and fairness. Something to keep in mind with tax day in just a couple of weeks.

There are two big hurdles that must be overcome to achieve tax reform. The first obstacle is that the class-warfare crowd wants the tax code to penalize success with high tax rates. That issue is addressed in the video in a couple of ways. I explain that fairness should be defined as treating all people equally, and I also point out that upper-income taxpayers are far more likely to benefit from all the deductions, credits, exemptions, preferences, and other loopholes in the tax code. The second obstacle, which is more of an inside-the-beltway issue, is that the current tax system is very rewarding for the iron triangle of lobbyists, politicians, and bureaucrats (or maybe iron rectangle if we include the tax preparation industry). There are tens of thousands of people who make very generous salaries precisely because the tax code is a playground for corrupt deal making. A flat tax for these folks would be like kryptonite for Superman. But more than two dozen nations around the world have implemented a flat tax, so hope springs eternal.