The Baltimore Sun says “Heck No” to REAL ID.
Previously on Cato-at-Liberty, Michael Cannon (post 1, post 2) and Andrew Coulson (post 1, post 2) argued with Jason Furman (on health care) and Sara Mead (on education) about the nature of tax credits and tax breaks.
Furman and Mead claim that tax credits and breaks, because they represent forgone tax revenue, are little different than government subsidies (with a raft of implications). Cannon and Coulson (for various reasons) disagree.
The great “a-ha” moment of the discussion came when Mead pointed to Cato scholars’ criticism of ethanol tax credits as subsidies or “tax expenditures.” Even other Cato scholars agree that ‘tax credit’ equals ‘government subsidy,’ she says.
Surprisingly, up to this point, the argument has largely ignored the use of the credited money/forgone government revenue. I would argue the use of the credited money is fundamental to determining if the credit/tax break is a subsidy.
In the case of an education credit, it is true that government would lose revenue because of the credit. But government has also assumed the obligation to educate the nation’s children, and government would be released from that obligation in the case of the child whose schooling is funded by the credited money. Is the credit, thus, a subsidy?
Consider: If Joe owes his bank a $10 fee for its services and, instead of sending Joe a bill, the bank simply deducts that amount from his account, we wouldn’t describe Joe as subsidizing the bank (or the bank as subsidizing Joe). Likewise, if government has assumed the obligation to educate little Johnny, but instead Joe pays Johnny’s tuition and receives a government tax credit as a result, it seems incorrect to say that Joe has received a subsidy. Instead, just as with the bank and Joe, the education credit represents a net adjustment of Joe’s obligation to government and government’s obligation to little Johnny.
Now, there may be reasons why government should not make this adjustment, but those reasons would not include that the adjustment is a subsidy to Joe. The only subsidy in this system is government’s taking on the obligation to provide little Johnny with schooling — a subsidy that I assume Mead finds acceptable.
Parenthetical #1: I suppose there is one condition under which Joe’s education tax credit should be considered a subsidy: if government education expenditures aren’t about educating Johnny, but about providing jobs for unionized public school workers. Thus, Joe’s paying for Johnny’s tuition at a private school wouldn’t be fulfilling government’s intended obligation. But surely, no one thinks that government education policy is about benefiting unions and bureaucrats instead of educating kids, right?
Health care tax benefits (e.g., HSAs, tax deductions for medical expenses, the tax-free status of employer-provided medical coverage) are a murkier subject. There is no explicit government financial obligation to provide the entire nation with health care (though supporters of socialized medicine claim there should be such an obligation — and, I assume, they are intellectually consistent and support tax breaks and credits for the private provision of health care).
There are, however, legally established government obligations to provide health coverage to the poor (Medicaid, SCHIP, et al.), the elderly (Medicare, Medicaid, et al.) and to guarantee everyone access to care. It may be that the various medical tax credits and insurance tax breaks help government to fulfill those obligations at lower cost than other policies. If that is the case, then tax breaks and credits may be part of the optimal policy for fulfilling that obligation (and Furman would be arguing for a policy change detrimental to welfare).
Parenthetical #2: Full disclosure here — I’m of the camp that health care expenditures should be treated no differently, tax-wise, than other expenditures, and that government has no special a priori obligation to provide health care or health coverage.
Now, juxtapose the above two situations with ethanol tax credits and the other sorts of tax breaks that Cato scholars regularly decry. While there are legally established government obligations to provide schooling for children and health benefits to certain sub-groups of the population, there is (that I’m aware) no government obligation to provide American citizens with corn-based energy for transportation.
This means that there is no government obligation that ethanol producers can fulfill privately, and thus receive a tax credit or tax break. The ethanol industry’s tax breaks and benefits are not simply “squaring accounts” in the manner as Joe, little Johnny, and the government. The ethanol tax benefits seem to be clear cases of government subsidy, and they should be criticized as such.
Where does this reasoning leave the discussion between Cannon and Coulson on the one hand, and Furman and Mead on the other? At the very least, it seems Coulson’s position is fully consistent with Cato’s general critique of subsidies. Further, given the premise that government has some special obligation to provide health care, Cannon’s position also seems consistent with Cato’s general critique of subsidies.
I am curious, though, whether the Left’s sudden concern over subsidies is consistent with positions they take on health care, education, and other policy areas….
Under the benign headline “Turning Apathy Into Good Deeds,” former secretary of defense Melvin Laird endorses a strikingly authoritarian proposal: “a system of compulsory universal civil service for young people.” Laird recognizes that the military doesn’t need all the recruits a draft would produce and that today’s high-tech military needs longer-term training and commitment. But the drawn-out war in Iraq threatens to discourage future enlistments. So “universal service” might pressure just enough young people to join the army, while also producing a bumper crop of slave labor for schools, Head Start, Peace Corps, hospitals, the Department of Health and Human Services, and the State Department.
Laird thinks such a program would “foster a culture of responsibility for our democracy.” Not among free and responsible people, it wouldn’t. It may be no accident that Laird repeatedly mentions democracy, but the words freedom and liberty–the fundamental values of America, which our constitutional republic was created to protect–do not appear in his piece.
Laird does not address how you square compulsory service with the Thirteenth Amendment to the Constitution: “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” Laird’s proposed “service” is clearly involuntary.
For generations and centuries, old people have complained that today’s young people just don’t appreciate the sacrifices of their elders. They talk too loud and they don’t care about the community. They need, in the words of William James, “to get the childishness knocked out of them, and to come back into society with healthier sympathies and soberer ideas.”
And meanwhile, they can do a lot of useful things that we older taxpayers would like to have done but don’t want to pay for. After all, in a market economy, if you want more people working in hospitals or day-care centers, you can pay them to do so. And if you don’t think $2.9 trillion is enough to pay for all the useful services of the federal government, you can propose a tax increase. But how much easier it might seem just to commandeer four million free or cheap laborers.
Of course, they’re not really so cheap. You do have to pay them something. And you’ll need massive new layers of bureaucracy to manage four million people (the approximate number of Americans who turn 18 each year).
And then there are the opportunity costs. Workers will be allocated to government make-work jobs instead of the jobs where the market demand is strongest. The economy will be less efficient and less productive. As Doug Bandow writes, “paying young people to sweep floors entails the cost of forgoing whatever else we could do with that money and the cost of forgoing whatever else those young people could do with their time. An additional dollar spent on medical research might be a better investment than one used to add an extra hospital helper; an additional young person who finished school and entered the field of biogenetics might increase social welfare more than one more kid shelving books in a library.”
What kind of message does compulsory service send to young people? It tells them that they are national resources, state property, that they do not own themselves. That’s not the message the Founders thought they were sending in the Declaration of Independence and the Constitution. It’s not an attitude appropriate for citizens of a free society. It’s a collectivist, authoritarian concept. It says, with much less charm than the old song, “You belong to me.”
Melvin Laird should be ashamed. So should John Edwards.
Okay, the headline is an exaggeration, but Sweden’s decision to eliminate the wealth tax already is paying dividends as successful Norwegians contemplate moving across the border to escape Norway’s even more punitive tax regime.
Other Nordic nations, including Denmark and Iceland, already have abolished their wealth taxes, so hopefully tax competition will force Norway to end this punitive form of double taxation:
There are not many countries in which Sweden would be considered a tax haven, but one wealthy Norwegian says she plans to move across the border now that the government has scrapped the wealth tax. Caroline Hagen is the daughter of Norwegian financier Stein Erik Hagen, and plans to take advantage of the less severe taxes under the new centre-right government. Her sister Camilla could soon follow. Stein Erik Hagen, whose family-owned holding company Canica has major shareholdings in a number of retail companies and consumer goods firms, said that Sweden’s decision to axe the wealth tax would encourage many more wealthy Norwegians to cross the border.
“For the past four years, the Clintons have jetted around on Vinod Gupta’s corporate plane, to Switzerland, Hawaii, Jamaica, Mexico — $900,000 worth of travel. The former president secured a $3.3 million consulting deal with Gupta’s technology firm,” according to the Washington Post.
The hot tip? Short the stock of any technology firm that values Bill Clinton’s advice at $3.3 million.
The global shark population may be sharply declining, according to an article in the Washington Post. Actually, the article never quite gives a number for the global population, but it does warn that “something must be done to prevent sharks from disappearing from the planet.” And there are suggestive reports like this:
In March, a team of Canadian and U.S. scientists calculated that between 1970 and 2005, the number of scalloped hammerhead and tiger sharks may have declined by more than 97 percent along the East Coast, and that the population of bull, dusky and smooth hammerhead sharks dropped by more than 99 percent. Globally, 16 percent of 328 surveyed shark species are described by the World Conservation Union as threatened with extinction.
Post reporter Juliet Eilperin notes that shark attacks can be big news, but in reality sharks kill about 4 people a year worldwide, while people kill “26 million to 73 million sharks annually.”
Why kill sharks? To make money, of course, mostly for the Asian delicacy shark-fin soup. Shark fins are much more valuable than shark meat. Mexican shark hunters say they get $100 a kilogram for shark fins but only $1.50 a kilo for meat.
Unlike fish that reproduce in large numbers starting at an early age, most sharks take years to reach sexual maturity and produce only a few offspring at a time. Shark fishermen also tend to target pregnant females, which are more profitable because they are larger. As a result, said Michael Sutton, director of the Monterey Bay Aquarium’s Center for the Future of the Oceans, “there is no such thing as a sustainable shark fishery.”
So OK, here’s where Eilperin should have said, “Wait a minute … if there’s money to be made, why would greedy capitalists want to destroy the goose that lays the golden egg? Shouldn’t they want to maximize their long-term profits?” And if she had, she might have run into a concept called “the tragedy of the commons.” Owners try to maximize the long-term value of their property. Timber owners don’t cut down all the trees and sell them this year; they cut and replant at a sustainable rate. But when people don’t own things, they have no incentive to maintain the long-term value. That’s why passenger pigeons went extinct, but chickens did not; why the buffalo was nearly exterminated but not the cow.
But Eilperin says that “sharks take years to reach sexual maturity.” Maybe that’s why they can’t be profitably farmed. Maybe. But elephants also mature slowly, and African countries that allow ownership and markets are seeing booming populations of previously threatened wildlife (pdf).
Oceans, of course, present even more challenges: how do you create private ownership in fish or sharks or sea turtles that can easily move through vast and unfenced bodies of water? It’s a more difficult challenge, but attempts to create private solutions that overcome the tragedy of the commons are being studied and experimented with, especially in Iceland.
Eilperin reports on many proposals for “tight new controls” and legislative bans and endangered species lists and catch limits. Those proposals provide no incentives for sustainable harvests, they leave shark hunters every reason to try to evade them, and they failed to protect elephants and tigers. The Post’s readers — and the world’s sharks — would benefit if Eilperin would do a follow-up article on property-rights solutions that might properly line up incentives and create sustainable shark markets.
Local governments routinely set up taxi cartels, limiting the number of cabs in order to boost profits of (and campaign contributions from) owners. As George Will explains in the Washington Post, one plucky immigrant, with help from the Institute for Justice, has managed to break the cartel in Minneapolis. In response, the cartel is claiming that the loss of their entitlement to monopoly profits is akin to a regulatory taking. Will concludes by stating it would be a good idea if the people who think that they have a right to use government coercion to obtain unearned wealth would leave the country as entrepreneurial immigrants arrive:
Paucar, 37, embodies the best qualities of American immigrants. He is a splendidly self-sufficient entrepreneur. And he is wielding American principles against some Americans who, in their decadent addiction to government assistance, are trying to litigate themselves to prosperity at the expense of Paucar and the public. …In 1937, New York City, full of liberalism’s itch to regulate everything, knew, just knew, how many taxicab permits there should be. For 70 years the number (about 12,000) has not been significantly changed, so rising prices have been powerless to create new suppliers of taxi services. Under this government-created scarcity, a permit (“medallion”) now costs about $500,000. Most people wealthy enough to buy medallions do not drive cabs, any more than plantation owners picked cotton. They lease their medallions at exorbitant rates to people like Paucar who drive, often for less than $15 an hour, for long days. … Paucar moved… Unfortunately, Minnesota has a “progressive,” meaning statist, tradition that can impede the progress of people like Paucar … 343 taxis were permitted. He wanted to launch a fleet of 15. That would have required him to find 15 incumbent license-holders willing to sell their licenses for up to $25,000 apiece. …[He] helped persuade the City Council members, liberals all (12 members of the Democratic Farmer-Labor Party, one member of the Green Party), to vote to allow 45 new cabs per year until 2010, at which point the cap will disappear. In response, the cartel is asking a federal court to say the cartel’s constitutional rights have been violated. It says the cap – a barrier to entry into the taxi business – constituted an entitlement to profits that now are being “taken” by government action. …By challenging his adopted country to honor its principles of economic liberty and limited government, Paucar, assisted by the local chapter of the libertarian Institute for Justice, is giving a timely demonstration of this fact: Some immigrants, with their acute understanding of why America beckons, refresh our national vigor. It would be wonderful if every time someone like Paucar comes to America, a native-born American rent-seeker who has been corrupted by today’s entitlement mentality would leave.
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