Archives: 04/2017

Supporters of BATs and VATs are wrong about trade and taxes

My crusade against the border-adjustable tax (BAT) continues.

In a column co-authored with Veronique de Rugy of Mercatus, I explain in today’s Wall Street Journal why Republicans should drop this prospective source of new tax revenue.

…this should be an opportune time for major tax cuts to boost American growth and competitiveness. But much of the reform energy is being dissipated in a counterproductive fight over the “border adjustment” tax proposed by House Republicans. …Republican tax plans normally receive overwhelming support from the business community. But the border-adjustment tax has created deep divisions. Proponents claim border adjustability is not protectionist because it would automatically push up the value of the dollar, neutralizing the effect on trade. Importers don’t have much faith in this theory and oppose the GOP plan.

Much of the column is designed to debunk the absurd notion that a BAT is needed to offset some mythical advantage that other nations supposedly enjoy because of their value-added taxes.

Here’s what supporters claim.

Proponents of the border-adjustment tax also are using a dodgy sales pitch, saying that their plan will get rid of a “Made in America Tax.” The claim is that VATs give foreign companies an advantage. Say a German company exports a product to the U.S. It doesn’t pay the American corporate income tax, and it receives a rebate on its German VAT payments. But an American company exporting to Germany has to pay both—it’s subject to the U.S. corporate income tax and then pays the German VAT on the product when it is sold.

Sounds persuasive, at least until you look at both sides of the equation.

When the German company sells to customers in the U.S., it is subject to the German corporate income tax. The competing American firm selling domestically pays the U.S. corporate income tax. Neither is hit with a VAT. In other words, a level playing field.

Here’s a visual depiction of how the current system works. I include the possibility that that German products sold in America may also get hit by the US corporate income tax (if the German company have a US subsidiary, for instance). What’s most important, though, is that neither American-produced goods and services nor German-produced goods and services are hit by a VAT.

Government Can’t Shut Down Public Recording That Doesn’t Interfere with Law Enforcement

A group called People Helping People heard of potential civil rights abuses and harassment occurring at Border Patrol checkpoints in Arizona—interior ones, not right at the border—so started a campaign to monitor such activity. The Border Patrol then decided to prohibit any recording within 150 feet of their location, which includes the public roadside.

A federal district court found that the new rule was a valid time, place, or manner restriction on First Amendment-protected activity. Cato, with the assistance of the UCLA Law School First Amendment Clinic and noted scholar Eugene Volokh, has filed an amicus brief asking the U.S. Court of Appeals for the Ninth Circuit to reverse that ruling.

Recording of law enforcement officers engaged in the public performance of their duties promotes the free discussion of government affairs. The roadside in this case is a “traditional public forum” of the sort that the Supreme Court has held to be required to be open to First Amendment-protected activities. The Border Patrol even got a permit that requires that the facilities be “maintained in a manner that will not interfere with the reasonable use of the public right-of-way.” The government cannot choose to shut down such a forum when it is still being used as a public thoroughfare.

There is also evidence that the Border Patrol closed this area specifically in retaliation for People Helping People’s First Amendment activities; new barriers were added within hours of the start of the monitoring program, making it significantly harder to film, and passers-by were told that the barriers were there only to exclude protesters.

The restriction is also not valid because it does not leave open “alternative channels of communication,” as the Supreme Court has required. In McCullen v. Coakley (2014), the Supreme Court struck down a 35-foot buffer zone around an abortion clinic because it burdened more speech than was necessary to advance the government’s interest. A 150-foot buffer zone burdens even more speech, entirely preventing the recording of law enforcement officers, rather than merely regulating the means of doing so.

Even if this were not a public forum, the Border Patrol’s policy constitutes viewpoint discrimination because it allowed observers who were critical of People Helping People to enter the enforcement zone and record. At base, this restriction is unreasonable because there is no articulable reason to prohibit recording from a public roadside that doesn’t interfere with the Border Patrol’s activities.

When the Ninth Circuit takes up Jacobson v. Department of Homeland Security later this spring/summer, it should reverse the district court and strike down the Border Patrol’s buffer zone.

Global Science Report: Hypotheses Masquerading as Facts in Federal Report on Climate Change Impacts in the U.S.

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

However, in addition to some very wet periods, the [Southeast] region has also experienced periods of extreme drying.
- U.S. Global Change Research Program, 2014

The quote above is from the 2014 federal report, Climate Change Impacts in the United States, Southeastern Region. Given the title and the subject, one would have to conclude that our government is telling us that this is a result of climate change.

“Authoritative” documents such as this often wind up in legal proceedings, as the “science” backup for proposed regulations. As such, statements of this ilk should be based upon some semblance of reality.

We find that many of these “factuals” are indeed subject to test. The one above is yet another assertion that climate change, presumably caused by emissions of carbon dioxide, is the cause of an increase in the frequency or severity of “extreme” events.

Floods and droughts qualify. After all, a flood is merely a cases of extreme high streamflow, and a prolonged drought will result an extreme low. Further, it is hard to find any weather extreme, any hurricane, tornado or wildfire where some apparent authority finds a television camera and does not blame it on global warming.

Cutting the National Endowment for the Arts

Establishment reporters don’t seem to think that anything good happens in society without a stream of federal money attached to it. That sort of tunnel vision was on display in a recent Washington Post story about the Appalachian Regional Commission (ARC). And it was on display again in the Post today in a story about the National Endowment for the Arts (NEA).

The story discusses NEA projects in Indiana, a state presumably chosen for the same reason that the prior story focused on the ARC and Kentucky: the Post wants to sow dissension in a part of the country that voted for Trump.

NEA-Indiana projects described by the Post include $3,000 for a tunnel made of twisted branches and $10,000 for a sound project that “takes place in multiple spaces and includes a hangout where visitors can listen to records, have a coffee or beer, and will eventually include a low-powered FM radio station.” Numerous NEA grants seem to trickle through state and local governments before being dispensed to local artists and nonprofits, thus creating jobs for paper pushers along the way.

The story warns that the NEA is “under attack.” President Trump “has proposed eliminating the agency altogether.” What a heathen! In Indiana, “artists and nonprofit leaders in small towns or underserved communities fear that lawmakers don’t understand how much they depend on the millions of arts dollars distributed each year outside booming metropolises.”

The NEA’s annual budget is $150 million. Indiana has two percent of the U.S. population, so I would guess that it receives about two percent of NEA funding, or $3 million a year.

If NEA spending in Indiana is important, couldn’t Indiana governments and philanthropists support it? State and local governments in Indiana currently spend $43 billion a year from their own revenue sources. Couldn’t they carve out just $3 million—or 0.007 percent—of that to support local quilters, hoop net makers, puppeteers, and other Indiana craftspeople?

For further reading on the NEA, see here.

Paid Leave Means Women Pay

Who pays for women’s mandated paid leave and other women-centric labor policies? At a superficial level, it depends on who you ask. Proposals for federal mandated paid leave and child care laws run the gamut, and advocates identify government, taxpayers, or private companies as backers. Unfortunately, those answers reveal a glaring oversight: directly or indirectly, women will pay.

Economists of a variety of ideological persuasions agree, including Larry Summers, former Director of the National Economic Council for President Obama. In 1989, Summers wrote “Some Simple Economics of Mandated Benefits” where he asserted that “The expected cost of mandated benefits is greater for women than it is for men.”

What does that mean? In his paper, Summers concludes that women will be paid less or not hired as a result of mandated benefits. In his words, “If wages could freely adjust, these differences in expected benefit costs would be offset by differences in wages.” And if not? “[T]here will be efficiency consequences as employers seek to hire workers with lower benefit costs.”

GAO Weighs In On “Countering Violent Extremism”

The ongoing controversy and litigation over the Trump administration’s “Muslim ban” has reignited a debate that has raged since the 9/11 attacks: Who commits more domestic terrorism–violent Salafists or traditional “right wing” extremists? According to a Government Accountability Office (GAO) report, it’s the latter and by a very wide margin. From p. 4 of GAO’s report:

Of the 85 violent extremist incidents that resulted in death since September 12, 2001, far right wing violent extremist groups were responsible for 62 (73 percent) while radical Islamist violent extremists were responsible for 23 (27 percent). 

But as researchers at the Georgia State recently reported, media coverage of terrorist incidents makes it seem as if terrorism is almost exclusively perpetrated by Muslims:

We examined news coverage from LexisNexis Academic and CNN.com for all terrorist attacks in the United States between 2011 and 2015. Controlling for target type, fatalities, and being arrested, attacks by Muslim perpetrators received, on average, 449% more coverage than other attacks. Given the disproportionate quantity of news coverage for these attacks, it is no wonder that people are afraid of the Muslim terrorist. More representative media coverage could help to bring public perception of terrorism in line with reality.

That incident-media reporting disconnect is matched by another: the notion that Arab/Muslim-Americans are more susceptible to radicalization, and thus to becoming terrorists, and that there are a discreet set of reliable indicators that will tell authorities who is or is not more likely to become a terrorist. 

The same month the Georgia State researchers released their terrorism-media bias findings, the Brennan Center released a report on the state of the debate and federal “countering violent extremism” (CVE) programs. Citing dozens of empirical studies and recognized experts in the fields of criminology, psychology, and intelligence, the report states “Extreme or radical views are often assumed to lie at the heart of terrorism. But evidence shows that the overwhelming majority of people who hold radical beliefs do not engage in, nor support, violence.”

Will Congressman Tom Marino be the Trump Administration’s Drug Czar?

CBS reports that President Trump plans to name Congressman Tom Marino (R-PA) to head the Office of National Drug Control Policy, an office colloquially known as the federal government’s “Drug Czar.”

Rep. Marino has a long history of taking a hard line on the drug war. He voted against the Rohrabacher-Farr Amendment that barred the Department of Justice from spending federal funds to prosecute state-legal medicinal marijuana operations. The amendment, which has passed several times with bipartisan support, allows state medical marijuana industries to function without the constant fear of federal prosecution. Rep. Marino also voted to prevent Veterans’ Affairs doctors at facilities in states with legal marijuana from prescribing medical marijuana to their patients.

While the Drug Czar has a limited impact on policy, the expected nomination of Rep. Marino is another red flag for marijuana reform advocates.

44 states and the District of Columbia allow some form of legal cannabis consumption, including eight states (and D.C.) which have legalized the recreational use of marijuana. The dire predictions of drug warriors in those states have not come true.

As we’ve noted before, Donald Trump campaigned on a relatively moderate platform regarding marijuana legalization, but his choices for key drug policy positions in the administration continue to raise the specter of a federal crackdown on marijuana reform efforts.

Of course the drug war isn’t just about marijuana.  A new Cato policy analysis from Christopher J. Coyne and Abigail R. Hall demonstrates how four decades of a hardline approach to drug policy in America have failed. 

With a growing heroin and opioid epidemic, it’s time to ditch the failed prohibitionist policies of the drug war. Countries like Portugal have successfully abandoned the militarized approach to drug policy; it’s time for the United States to do the same. 

Unfortunately, President Trump appears to be moving in the wrong direction.