Obama’s Truly Radical Capital Gains Tax Agenda

Every so often, a politician commits the horrible mistake of saying what he really thinks. This happened at the Democratic debate. Barack Obama has a very punitive proposal to nearly double the capital gains rate. When asked by one of the moderators whether this makes sense, especially given the historical evidence of big “Laffer-Curve” effects, Senator Obama dismissed concerns about falling revenue, arguing that a high rate was justified by “fairness.” In other words, Senator Obama is so fixated on punishing success that he is even willing to reduce the amount of tax revenue flowing to Washington that he and his buddies can redistribute. This position is so radical that my Cato colleague Sallie James was distracted from her work on the free trade agreement with Colombia (I’m not a foreign policy person, but that’s apparently a country bordering Nepal and Mauritania) and demanded that I say something about the issue. But let’s first look at what Senator Obama actually said

MR. GIBSON: And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

SENATOR OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.

The Senator then proceeded to bash evil rich (sorry for the redundancy) people, so the moderator asked the question again:

MR. GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.

SENATOR OBAMA: Well, that might happen or it might not. It depends on what’s happening on Wall Street and how business is going.

This exchange is particularly revealing since Senator Obama actually admitted that a tax rate increase might lose revenue, but he held firm to his position that the capital gains rate should be increased from 15 percent to 28 percent. This reminds me of a conversation I had years ago with an economics professor from an Ivy League university. He told me that he once asked his left-wing colleagues whether they would support lower tax rates if they knew that tax revenues would rise. Most of them, he said, shared Obama’s viewpoint that punishing success was more important to the statist ideology than increasing revenue for government.

Las Vegas’ Hepatitis-C Crisis

Las Vegans have been a little jumpy – and rightfully so – since public health officials revealed that a number of endoscopy clinics re-used syringes and medication vials, thereby infecting at least seven patients with hepatitis-C

Nevada’s physician-licensing board has proved largely inept in this matter, and a little too cozy with the profession it’s supposed to regulate.  Nevertheless, some want to give the licensing board more power.

Here’s an interview I did on Las Vegas 1’s Face to Face with Jon Ralston.  I argued that licensing laws don’t add much in the way of patient protection, and instead block innovations that would improve patient safety.  (The first interviewee provides lots of good information about the crisis, but if you want to skip to my interview, it begins about 12 minutes into the program.)

Imagining the Counterfactual

Earlier this week, Matt Yglesias remarked at “the arrogance of the hawks” and expressed his frustration that

In response to 9/11, the hawks launched a war that’s killed more Americans than Osama bin Laden ever could, at the cost of over 1 trillion dollars; they’ve done nothing to impede nuclear proliferation, nothing to build democracies in the Middle East, failed to kill or capture al-Qaeda’s top leadership, made Hamas and Iran more powerful than ever before, and brought American prestige and influence to a new low ebb.

Now obviously a lot of the folks who adhere to the ideas that have brought all this about somehow think they’re right anyway. And fair enough; there’s just no accounting for some people. But the attitude of thoughtless, unreflective scorn that you see from the [Noah] Pollacks and [James] Kirchicks and [Michael] Goldfarbs of the world is like it comes from some weird alternative reality where their ideas have generally been deemed vindicated, rather than one where 178% of the public says we’re on the wrong track.

Today, Andrew Sullivan links to this video chronicling Douglas Feith’s contorted non-apologies and notes “one wonders whether anyone in the Bush establishment actually believes they ever made an error.”

In this vein, it’s worth wondering what things would look like if things had turned out basically the mirror image of what’s happened today…

On landing in Iraq, U.S. forces walked through Saddam’s army swiftly, taking 21 days to defeat them. (This part is real.) But they were stunned when they found an isolated airstrip housing three Tupolev 95s armed with nuclear weapons. They were even more stunned when they discovered detailed coordinates on the bombers for key targets in Manhattan, Washington, and Miami. On interviewing the pilots, the CIA was floored to learn that Saddam had not only acquired several nuclear weapons, but had ordered an attack, in concert with al Qaeda, against American cities with them. Had the invasion not happened, the CIA judged, at a minimum tens of thousands of Americans would have died as a result of the attacks.

All of this concern about “what might have been” was quickly washed away by “what had emerged”: the unanimous gratitude of Iraqis at having been liberated from Saddam’s rule. After mostly incidental collateral damage from the invasion (a few hundred Iraqi casualties, U.S. forces estimated), Iraqi exiles, led by Ahmed Chalabi, quickly assembled a liberal government that recognized the State of Israel just a few weeks later. What no one could have known was what would come next.

The coherence of the Iraqi government allowed U.S. forces to exit swiftly, leaving only a small, residual force behind by the end of 2003. The example that the liberal government had throughout the region was a greater victory than anyone could have imagined, however. A veritable “democratic domino effect” took place, including velvet revolutions in Iran, Syria, and Saudi Arabia within 5 years of the invasion. (Like Iraq’s, these changes of government took place amid minimal violence and quickly led to coherent, effective governance in all three countries. Only 10 years later, a “League of Muslim Democracies” led the rest of the Islamic world in brokering an enduring peace between Israelis and Palestinians.)

On the homefront, however, the political scene did not seem to reflect the strategic masterstroke that the president and his advisers had engineered. John Kerry swept to power in 2004, making the case that President Bush had “committed war crimes” by masterminding the invasion. Opponents of the war in the punditocracy also prospered. Bill Niskanen, Chairman of the libertarian Cato Institute and an early critic of the war, was given a foreign affairs column at the New York Times.

Meanwhile, proponents of the war such as Peter Beinart, Bill Kristol, and Fred Hiatt all lost their prominence in the debate, despite having largely predicted the strategic victory the war would represent. Beinart lost his position at the New Republic, only to take a job as one half of “The Goldberg-Beinart Report,” a right-left talk program which debuted on a Fairfax County public access station. Kristol’s Weekly Standard magazine folded outright, with Kristol reassuming his position as chief-of-staff to Dan Quayle, except this time out of office. Hiatt, meanwhile, was ousted from his position as chief of the Washington Post’s editorial page after Post management issued a scathing denunciation of the “disgraceful, unmitigated disaster of a war that our editorial page somehow endorsed.”

You could go on and on like this, but I’d really like to think that if this had been the way it went down, I’d have the integrity to say “I called this wrong. I apologize, and I pledge to reevaluate how and why I made this mistake, and to attempt to make better judgments in the future.”

This Too Will Pass

Julian Simon used to remind us that humans had been worrying about things getting worse for as long as they have recorded their thoughts. Always there was a memory of a Golden Age now in the past, or at least a memory of the good ol’ days of one’s youth. And there’s always a market for predictions of doom. P. J. O’Rourke used a quotation from The Great Gatsby (1925) as the epigram for his book All the Trouble in the World (1994): “I read somewhere the sun’s getting hotter every year,” Tom said genially. “It seems that pretty soon the earth’s going to fall into the sun–or wait a minute–it’s just the opposite–the sun’s getting colder every year.”

Or as Roseanne Roseannadanna used to say, “If it’s not one thing, it’s another.”

And I was reminded of all this a few days ago by the comic strip “For Better or Worse.” Cartoonist Lynn Johnston is approaching retirement by recycling some of her earlier strips to show the development of the family at the center of the story. The recycled strips don’t include their original date, but judging from the style and the age of the characters, we can guess that last Saturday’s strip originally ran not long after its launch in 1979. And like Johnston’s comic strips, the contemporary ideas it reflects are also being recycled today (click for larger version):

For Better or Worse

Topics:

Another Company Escapes Britain’s Punitive Tax Regime

A major pharmaceutical company is moving its tax domicile to Ireland because the U.K.’s corporate tax systems is too burdensome. This story from the Guardian is a great example of tax competition, of course, but it also highlights the fact that governments are only subject to competitive pressure if taxpayers have the freedom to shift economic activity to jurisdictions with better tax law - and they have the ability to benefit from those better laws. Sadly, American companies no longer have this freedom thanks to “anti-expatriation” or “anti-inversion” laws enacted by greedy politicians:

Shire, the country’s third biggest drugmaker, has intensified the debate over Britain’s corporate tax regime with plans to move its tax base to Ireland from the UK. The FTSE-100 company said it was applying to a court to create a new holding company incorporated in tax-haven Jersey and would become tax resident in Ireland, where corporate tax rates are less than half those in the UK. …its board of directors will hold meetings in its Dublin office once the tax residence move gets court approval. Most importantly, the move means it will be subject to an official corporate tax rate of 12.5%, compared with 28% in the UK. …Business lobby group the CBI said Shire’s decision deepened its concerns about the UK corporate tax system. “We are particularly worried that an uncompetitive corporate tax system is spoiling the UK’s attractiveness as a place to do business, and that other internationally-mobile firms will follow Shire’s path,” said CBI director-general Richard Lambert. Last month, technology giant Yahoo announced it was moving its European headquarters from London to Switzerland to increase competitiveness and deliver “efficiencies”. A recent survey by accountancy firm KPMG blamed complex rules and a mass of legislation for putting the UK in the bottom half of a league table of the most attractive places to do business in Europe. The study ranked Cyprus, Ireland and Switzerland top for their combination of easy-to-understand rules, low tax rates and stable fiscal laws. The UK came 12th out of 22 countries for the attractiveness of their domestic tax regimes.

Berlusconi Wants 10-Percentage Point Cut in Italy’s Top Income Tax Rate

The good news, according to Tax-news.com, is that newly-elected Prime Minister Silvio Berlusconi wants to reduce Italy’s top income tax rate from 43 percent to 33 percent. The bad news is that he made similar promises the last time he held office, but never delivered. One can only hope that this time he is more serious about improving Italy’s economy:

Italy’s evergreen centre-right leader Silvio Berlusconi, is set to return for his third stint as the country’s Prime Minister following his recent election victory, and has promised to reduce Italy’s tax burden… Berlusconi has also pledged to axe other taxes, including an overtime levy, a tax on annual bonuses, and a tax on car ownership, and, before his five year term is out, he wants the top rate of income tax reduced from 43% to 33%. Ultimately, Berlusconi is targeting a reduction in the country’s overall tax burden to less than 40% of gross domestic product from its current level of more than 43%.