Topic: Government and Politics

One Strategy to Better Address Responsible Muslim Organizations

America’s relationship with Islam is fraught with tension. No one wins if America ends up fighting an endless war with 1.6 billion people worldwide.

Rather, Washington should encourage responsible Islamic voices. One is the Organization of Islamic Cooperation. According the group diplomatic status would give Americans greater opportunity to influence an important forum for Islamic activism.

The OIC was founded in 1969 and is made up of 57 states, most with majority Islamic populations. Past relations have been difficult.

In 1990 the group adopted the Cairo Declaration on Human Rights in Islam which emphasized the role of Sharia Law. At the UN the OIC routinely attacked Israel.

Much Higher Tax Rates in 2013 Left Top 1% Taxes About the Same

Top Tax Rate and Taxes Paid

A timely new blog post from the Tax Foundation points out that, “taxes on the rich are much higher than they’ve been in recent years. Between 2008 and 2012, the top 1 percent of households paid an average tax rate of 28.8 percent. However, in 2013, this figure spiked to 34.0 percent, as a result of tax increases in the “fiscal cliff” deal and the Affordable Care Act”.

“Readers should check out the new CBO report,” the authors suggest, “and reflect for themselves about whether or not high-income Americans are now paying their fair share of taxes.”

The trouble is that the tax rate alone can’t tell us how much the Top 1% paid in taxes: To know how much taxes were paid by the Top 1% requires knowing how much income they reported to the IRS.  The reason this matters is that there is ample evidence that the “elasticity of taxable income” is very high among top taxpayers, which simply means they find ways to report less income if marginal tax rates go up.  This doesn’t require lawyers or loopholes: Avoid capital gains tax by not selling assets and/or shifting into exempt assets (housing up to $500k); avoid the dividend tax by holding tax-exempt bonds; defer personal tax on business income by retaining earnings within a C-corporation; avoid punitive tax rates on second earners by becoming a one-earner household; retire early, etc.

Looking at the same thing from a different angle, the graph shows that average taxes actually paid by the Top 1% grew rapidly after the tax rate on capital gains was cut from 28 percent to 20 percent in 1997. Taxes paid by the Top 1% grew even more rapidly after 2003 when the tax rate on capital gains and dividends was further reduced to 15 percent and the top tax on salaries and unincorporated businesses was cut from 39.6 percent to 35 percent.  If you want the rich to pay more taxes, cut their tax rates.  

As it turns out, 2013 showed that we can’t just assume higher tax rates mean docile taxpayers will simply write bigger checks to the U.S. Treasury. On the contrary, when the average tax rate on the Top 1% increased by 18.4 percent in 2013, the amount of income reported by the Top 1% fell by 15.4 percent – from $1,856,000 in 2012 to $1,571,600. The net effect was almost a wash, in terms of taxes actually paid. According to the CBO, average federal taxes paid by the Top 1% were $530,128 in 2013 –virtually unchanged from $529,056 in 2012. 

Presidential candidates Bernie Sanders and Hillary Clinton propose even more increases in top tax rates on income and capital gains (to 54.2 percent with Sanders, 43.6 percent with Clinton), ostensibly to finance their lavish government spending plans.  But even a relatively small dose of this same poison failed to raise significant revenue from the Top 1% in 2013, partly because of the drag on the overall economy from reduced incomes and incentives. 

Libertarians Are More Racially Diverse Than Some May Realize

In recent weeks, Libertarian presidential candidate Gary Johnson has been gaining media momentum as polls show him garnering about 10 percent of the vote in a race with Trump and Clinton. His candidacy has attracted attention to the libertarian ideas he espouses and the people who embrace the label.

The popular media stereotype of libertarians is disproportionately white and male. But is this accurate? What do the data actually say?

As it turns out, the libertarian label is embraced by a more racially and ethnically diverse group of individuals than some may realize, but tilts male.

Averaging across nine Reason-Rupe surveys I conducted at Reason Foundation/Reason Magazine with Princeton Survey Research Associates between 2012-2014 and a recent survey we conducted here at the Cato Institute with YouGov, here’s what we find: Among those who self-identify as “libertarian”, 71 percent are Caucasian, 14 percent are Latino, 5 percent are African-American, 8 percent identify as another race, and 4 percent chose not to identify. While not an exact reflection, these numbers are similar to the demographic makeup of all respondents averaged across the surveys: 67 percent white, 13 percent Latino, 12 percent African-American , 7 percent identifying as other, and 1 percent not identifying.  

Is Defending Tax Competition Akin to “Trading with the Enemy”?

When I was younger, my left-wing friends said conservatives unfairly attacked them for being unpatriotic and anti-American simply because they disagreed on how to deal with the Soviet Union.

Now the shoe is on the other foot.

Last decade, a Treasury Department official accused me of being disloyal to America because I defended the fiscal sovereignty of low-tax jurisdictions.

And just today, in a story in the Washington Post about the Center for Freedom and Prosperity (I’m Chairman of the Center’s Board of Directors), former Senator Carl Levin has accused me and others of “trading with the enemy” because of our work to protect and promote tax competition.

Here’s the relevant passage.

Former senator Carl Levin (D-Mich.)…said in a recent interview that the center’s activities run counter to America’s values and undermine the nation’s ability to raise revenue. “It’s like trading with the enemy,” said Levin, whose staff on a powerful panel investigating tax havens regularly faced public challenges from the center. “I consider tax havens the enemy. They’re the enemy of American taxpayers and the things we try to do with our revenues — infrastructure, roads, bridges, education, defense. They help to starve us of resources that we need for all the things we do. And this center is out there helping them to accomplish that.”

Before even getting into the issue of tax competition and tax havens and whether it’s disloyal to want limits on the power of governments, I can’t resist addressing the “starve us of resources” comment by Levin.

McConnell, Gingrich Differ over When Trump Must Start Being Civil

Following up on my comments Monday about Donald Trump “changing his tone,” I note that this week prominent Republicans are offering different timetables for Trump beginning to act like a leader instead of an angry score-settler.

Senate majority leader Mitch McConnell said Tuesday, “My advice to our nominee would be to start talking about the issues that the American people care about and to start doing it now. In addition to that, it’s time to quit attacking various people that you competed with or with various minority groups in the country and get on message. This election is eminently winnable.”

Note that, as I pointed out Monday, McConnell is not hoping for the 69-year-old Trump to change his actual character or his vast ignorance about public policy, just to “get on message” and listen to his campaign consultants. But he wants it done now.

Senate Foreign Relations Committee chairman Bob Corker is a bit more lenient: “He’s got this defining period that’s over the next two or three weeks where he could pivot, can pivot, hopefully will pivot to a place where he becomes a true general election candidate.” Corker also refuses to say whether the candidate he supports is fit to be president.

Former speaker Newt Gingrich, perhaps remembering his own verbal stumbles, offers a much longer leash: “I am confident the Trump campaign, from the convention on, will be remarkably inclusive and will do much better with minorities than [Mitt] Romney did in 2012.”

So Gingrich gives Trump a full six weeks to start presenting himself as a serious, civil presidential candidate not focused on personal slights and ethnic insults. That’s very generous.

But as I wrote Monday, 

When Republicans say that Trump must change his tone, they are saying that they want him to conceal his character for the duration of the election. But he’s a scorpion, and they knew that when they picked him up.

Perhaps along with changing his tone, Trump could change his policy positions: Support free trade, not trade war; sensible immigration reform, not walls around America; religious liberty, not Muslim immigration bans and spying on mosques; fiscal responsibility, not more money for the military and for transfer programs. Now that would be an attractive pivot.

Socialism Destroys Venezuela as its People Feel the “Bern”

Venezuela no longer can feed or care for its people. Yet many Americans have forgotten what socialism really is. Sen. Bernie Sanders campaigns as if Karl Marx was just another Santa Claus.

Real socialism largely disappeared decades ago. The collapse of the Soviet Union and its Eastern European satellites effectively ended the age of collectivism.

Nevertheless, oil-rich Venezuela since became a flamboyant exponent of socialism. Its travails should remind us how America’s power is built upon a prosperous economy. Prodigal spending at home and promiscuous intervention abroad are undermining our nation’s economic foundation.

Like most Latin American nations, Venezuela never enjoyed a genuine market economy. After years of misrule, Lt. Col. Hugo Chavez attempted a coup in 1992. He failed, but six years later frustrated Venezuelans elected him president, leading to his “Bolivarian Revolution.” Before his death in 2013 he nationalized industries, provided bountiful social benefits, spent wildly on domestic and foreign ventures, turned the state oil company into a fount of political patronage, and imposed price controls.

Chavez’s successor, Vice President Nicolas Maduro, is no more competent but less charismatic. Today the economy is in virtual collapse. With oil revenues declining the regime no longer can mask its many failures.

What Does It Mean to Ask Donald Trump to Change His Tone?

As Republicans fall in line behind Donald Trump, despite their misgivings, many of them are urging him to “change his tone” as he moves toward the general election. But is a change in tone sufficient or even honest?

Last Thursday, announcing his endorsement, Speaker Paul Ryan said, “It is my hope the campaign improves its tone as we go forward and it’s all a campaign we can be proud of.” Former Republican nominee Bob Dole says, “I can already see sort of a shift with Trump. He needs to start talking (like) he is about to be president.” Asked about Trump’s repeated comments that offend Hispanic voters, Senate majority leader Mitch McConnell says, “I hope he’ll change his direction on that.” Republican chair Reince Priebus says, “I think there’s work to do, and I think that there’s work on tone to do. I’ve been clear about that…. I think he gets it…I think you’re going to see the change in tone.”

But what does “change his tone” mean? These pleas don’t ask him to change his policies. He has proposed, among other things, building a wall on our southern border, deporting 11 million Mexican-Americans, banning Muslims from entering the United States, blowing up U.S.-China trade, forcing American companies to stop manufacturing products overseas, torturing suspected terrorists and killing their families, not touching entitlement benefits, ending our 200-year-old policy of birthright citizenship, “loosen[ing] up” libel laws to make it easier to sue newspapers, and much more. He has also supported, in the recent past, single-payer health care and the largest tax increase in world history. Are Republicans OK with those policies as long as Trump changes his tone?

He remains, as George Will puts it, an “impetuous, vicious, ignorant and anti-constitutional man.” He insults Mexicans, women, disabled Americans, Muslim Americans, and so on. Are Republicans comfortable with that man having the nuclear codes, as long as he tones it down?