Tag: tax

Thursday Links

  • A new T-shirt for Senator Baucus: I worked for six months with half a dozen members of the Senate Finance Committee, and all I got was this lousy 223-page summary of what I hope the new health care bill will look like.
  • It’s time to narrowly define the mission in Afghanistan. “The United States does not have the patience, cultural knowledge or legitimacy to transform what is a deeply divided, poverty stricken, tribal-based society into a self-sufficient, non-corrupt, and stable electoral democracy.”

That Costly Mandate

The Wall Street Journal notes that Sen. Max Baucus’s allegedly moderate health care plan “would increase the cost of insurance and then force people to buy it, requiring subsidies. Those subsidies would be paid for by taxes that make health care and thus insurance even more expensive, requiring even more subsidies and still higher taxes.” Other than that, it’s not so bad. The Journal also digs up a great graphic produced by the 2008 presidential campaign of a little-known Illinois senator named Barack Obama:

hillarycare

And speaking of health care mandates and how much they’re going to cost young people, as the Washington Post was yesterday, I just had lunch with Clark Ruper, program manager for Students for Liberty, who told me he’d be on the Newshour with Jim Lehrer on PBS tonight. In the interview he told them that as a young healthy person he has voluntarily chosen not to purchase health insurance and instead invests in his own savings. And he thinks a lot of young people make such choices and don’t want a government mandate requiring them to buy government-approved insurance. Check it out tonight on PBS.

More Evidence on America’s Socialism

KPMG has released its annual survey of personal income tax rates around the world. The survey covers 86 countries, including all the high-income nations and many middle- and lower-income nations, such as Brazil, China, and India.

The chart shows the top personal income tax rates in 2009 for national governments, per the KPMG study. The current top U.S. rate is 35 percent, which is substantially above the 86-country average of 28.9 percent. The Obama administration plans to let the U.S. rate jump to 39.6 percent in 2011, which would be almost 11 points higher than the international average.

Worse still, the United States has state income taxes with rates up to 10 percent that are piled on top of the federal tax. Some of the nations in the survey (e.g. Canada) also have subnational income taxes, but many, or  most, of them do not.

Finally, note that supporters of government health care expansion have been eyeing further increases in the top U.S. tax rate above 40 percent. Alas, we need more of the Global Tax Revolution to sweep across our shores.

NYT Nonsense on SAFRA

With the Student Aid and Fiscal Responsibility Act (SAFRA) likely to be voted on by the full House or Representatives today, the media is finally giving some space to debate over the bill. Unfortunately, the New York Times only pays attention to the parts it likes, writing in an editorial today that:

The private lenders and those who do their bidding in Congress have recently taken issue with a Congressional Budget Office analysis that showed that the bill would save about $87 billion over the next 10 years.

They argue, absurdly, for example, that the savings would be smaller if the system were analyzed under accounting rules other than the ones that the federal government is required to use. The aim is to mislead taxpayers and members of Congress into believing that the C.B.O. estimate is dishonest.

Um, excuse me New York Times, but the CBO has never said the bill – not just going from subsidized to direct lending, but the whole bill – would save $87 billion over ten years. Moreover, it has been a series of analyses from the CBO – albeit driven by requests from members of Congress – that have continually increased the cost estimates for SAFRA. (I have linked to all the CBO analyses here.) CBO’s very first estimate of the bill’s likely net cost put it at around $6 billion over ten years, and it only went up from there after incorporating such things as lending risk and potentially higher Pell grant costs.

Of course, the Times isn’t alone in its refusal to talk honestly about SAFRA. Despite all of the CBO estimates, yesterday U.S. Secretary of Education Arne Duncan said SAFRA would give college students and numerous other interests the world without costing taxpayers a dime.  “We’re not asking the taxpayers for one single dollar,” he said. And SAFRA’s sponsor, Rep. George Miller (D-CA), has been touting his bill as a revolutionary money saver since day one.

The truth on this thing is out there, but it’s definitely not in the New York Times.

An Australian Perspective on Joe Wilson

wilsonWill you allow a foreigner to comment on something that has intrigued her about this great country?

All this hand-wringing and then censure (not to mention impeachment talk) over Rep. Joe Wilson’s admittedly rude intervention at President Obama’s speech last week has me baffled. Partly, it is because I come from a land that is governed by a parliamentary system, where Question Time is a much-loved institution. The offense (manufactured, perhaps) that Representative Wilson’s comment has caused is almost laughable when I think about some of the insults that have been hurled in both directions in Australia’s parliament. Here’s a collection of quotes from former Australian Prime Minister Paul Keating just for starters (warning: offensive language). Here is a Brit’s take on why American politicians are “a bunch of wimps.”

Mainly, though, I am surprised that questioning of power is not more valued in America. To be sure, the President of the United States is not answerable to Congress in the same way that Ministers (including Prime Ministers) are to a Westminster-system parliament, but I would have thought that questioning the president would be well within the bounds of a nation conceived in liberty and on the understanding that all men are created equal. You got rid of infallible kings in 1776, remember?

I get why the Democrats are making political hay out of Representative Wilson’s outburst, even if I think they are hypocrites for suddenly finding religion on civility, given their own history. And I thoroughly reject, by the way, the notion that much of the criticism directed towards Obama is based on racism, even if this sort of talk gives unfortunate credence to the claims. But those same Dems who are shocked (shocked!) by Joe Wilson’s behavior are right now allowing a tax cheat to pull the nation’s purse strings.

This focus on style – who says what, how they say it, what their motivations might be – over the substance of what the congressional and administrative branches of government are doing is tremendously disappointing. I have heard far more censorious talk about Joe Wilson’s character and the propriety (or lack thereof) of what he did than of the point he was making. Meanwhile, the Dems are keeping “internal” investigations of Charlie Rangel’s ethical violations very quiet indeed.

Quite frankly, I’m far more interested in those than I am in Joe Wilson’s rudeness.

A Flat Tire for Low-Income Drivers?

Will the President raise taxes on new tires?

President Obama will need to decide any day now whether to impose tariffs on lower-end automobile tires imported from China. As my colleague Dan Ikenson has ably argued, the decision will tell us much about whether the president believes trade policy should serve the general interest of all Americans, or whether it is simply a political tool to satisfy key constituencies.
Neglected in the news coverage of the pending decision is the impact it could have on consumers. The imported tires targeted by this Section 421 case are of the cheaper variety, the kind that low-income Americans would buy to keep their cars on the road during a recession. If the president decides to impose tariffs, his union supporters will cheer, but “working families’ will find it more difficult to keep their cars running safely.
A central point of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, is that import competition is a working family’s best friend, especially imports from China. As I write in an excerpt published in today’s Washington Examiner,
Imports from China have delivered lower prices on goods that matter most to the poor, helping to offset other forces in our economy that tend to widen income inequality. …
Imposing steep tariffs on imports from China would, of course, hurt producers and workers in China, but it would also punish millions of American consumers through higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers.
We will see shortly if President Obama will punish low-income Americans who drive.

President Obama will need to decide any day now whether to impose tariffs on lower-end automobile tires imported from China. As my colleague Dan Ikenson has ably argued, the decision will tell us much about whether the president believes trade policy should serve the general interest of all Americans, or whether it is simply a political tool to satisfy key constituencies.

Neglected in the news coverage of the pending decision is the impact it could have on consumers. The imported tires targeted by this Section 421 case are of the cheaper variety, the kind that low-income Americans would buy to keep their cars on the road during a recession. If the president decides to impose tariffs, his union supporters will cheer, but “working families’ will find it more difficult to keep their cars running safely.

A central theme of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, is that import competition is a working family’s best friend, especially imports from China. As I write in an excerpt published in today’s Washington Examiner,

Imports from China have delivered lower prices on goods that matter most to the poor, helping to offset other forces in our economy that tend to widen income inequality. …

Imposing steep tariffs on imports from China would, of course, hurt producers and workers in China, but it would also punish millions of American consumers through higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers.

We will see shortly if President Obama will punish low-income Americans who drive.

Research Shows $100 Billion Ed. Stimulus Likely Hurting Economy

Tomorrow morning, the president’s Council of Economic Advisers will release a report assessing the short and long-term effects of the stimulus bill on the U.S. economy. As with previous iterations, this report will attempt to forecast overall effects of the stimulus across its many different components and the different economic sectors it targets. In doing so, it ignores the clearest research findings available pertaining to a key portion of the stimulus: k-12 education.

The president has committed $100 billion in new money to the nation’s public school systems, and required that states accepting the funds promise not to reduce their own k-12 spending. The official argument for this measure is that higher school spending will accelerate U.S. economic growth. But a July 2008 study in the Journal of Policy Sciences finds that, to the authors’ own surprise, higher spending on public schooling is associated with lower subsequent economic growth. Spending more on public schools hurts the U.S. economy.

How is that possible? There is little debate in academic circles that raising human capital – improving the skills and knowledge of workers – boosts productivity. So an obvious interpretation of the JPS study is that raising public school spending must not increase human capital. While this possibility surprised study authors Norman Baldwin and Stephen Borrelli, it is consistent with the data on U.S. educational productivity over the past two generations.

Since 1970, inflation adjusted public school spending has more than doubled. Over the same period, achievement of students at the end of high school has stagnated according to the Department of Education’s own long term National Assessment of Educational Progress. Meanwhile, the high school graduation rate has declined by 4 or 5%, according to Nobel laureate economist James Heckman. So the only thing higher public school spending has accomplished is to raise taxes by about $300 billion annually, without improving outcomes.

The fact that more schooling without more learning is not a recipe for economic growth is confirmed by the independent empirical work of economists Eric Hanushek and Ludger Woessmann. Their key finding is that academic achievement, not schooling per se, is what matters to economic growth.

Based on this body of research, the president’s decision to pump $100 billion into existing public school systems is likely slowing the U.S. economic recovery.