Brilliant.

The folks at Americans for Tax Reform have received a bunch of attention for a new report entitled “Win Olympic Gold, Pay the IRS.”

In this clever document, they reveal that athletes could face a tax bill — to those wonderful folks at the IRS — of nearly $9,000 thanks to America’s unfriendly worldwide tax system.

The topic is even getting attention overseas. Here’s an excerpt from a BBC report.

US medal-winning athletes at the Olympics have to pay tax on their prize money — something which is proving controversial in the US. But why are athletes from the US taxed when others are not? The US is right up there in the medals table, and has produced some of the finest displays in the Olympics so far. … But not everyone is happy to hear that their Olympic medal-winning athletes are being taxed on their medal prize money. Athletes are effectively being punished for their success, argues Florida Senator Marco Rubio, a Republican, who introduced a bill earlier this week that would eliminate tax on Olympic medals and prize money. …This, he said, is an example of the “madness” of the US tax system, which he called a “complicated and burdensome mess”.

It’s important to understand, though, that this isn’t a feel-good effort to create a special tax break. Instead, Senator Rubio is seeking to take a small step in the direction of better tax policy.

More specifically, he wants to move away from the current system of “worldwide” taxation and instead shift to “territorial” taxation, which is simply the common-sense notion of sovereignty applied to taxation. If income is earned inside a nation’s borders, that nation gets to decided how and when it is taxed.

In other words, if U.S. athletes earn income competing in the United Kingdom, it’s a matter for inland revenue, not the IRS.

Incidentally, both the flat tax and national sales tax are based on territorial taxation, and most other countries actually are ahead of the United States and use this approach. The BBC report has further details.

The Olympic example highlights what they regard as the underlying problem of the US’ so-called “worldwide” tax model. Under this system, earnings made by a US citizen abroad are liable for both local tax and US tax. Most countries in the world have a “territorial” system of tax and apply that tax just once — in the country where it is earned. With the Olympics taking place in London, the UK would, in theory, be entitled to claim tax on prize money paid to visiting athletes. But, as is standard practice for many international sporting events, it put in place a number of tax exemptions for competitors in the Olympics — including on any prize money. That means that only athletes from countries with a worldwide tax system on individual income are liable for tax on their medals. And there are only a handful of them in the world, says Daniel Mitchell, an expert on tax reform at the Cato Institute, a libertarian think tank — citing the Philippines and Eritrea as other examples. But with tax codes so notoriously complicated, unravelling which countries would apply this in the context of Olympic prize money is a tricky task, he says. Mitchell is a critic of the worldwide system, saying it effectively amounts to “double taxation” and leaves the US both at a competitive disadvantage, and as a bullyboy, on the world stage. “We are the 800lb (360kg) gorilla in the world economy, and we can bully other nations into helping enforce our bad tax law.”

To close out this discussion, statists prefer worldwide taxation because it undermines tax competition. This is because, under worldwide taxation, individuals and companies have no ability to escape high taxes by shifting activity to jurisdictions with better tax policy.

Indeed, this is why politicians from high-tax nations are so fixated on trying to shut down so-called tax havens. It’s difficult to enforce bad tax policy, after all, if some nations have strong human rights policies on privacy.

For all intents and purposes, a worldwide tax regime means the government gets a permanent and global claim on your income. And without having to worry about tax competition, that “claim” will get more onerous over time.

P.S. Just because a nation has a right to tax foreigners who earn income inside its borders, that doesn’t mean it’s a good idea to go overboard. The United Kingdom shows what happens if politicians get too greedy and Spain shows what happens if marginal tax rates are reasonable.

P.P.S. The International Olympic Committee apparently insisted that London couldn’t host the games unless the UK government agreed not to tax any of the athletes on their winnings.

Cato scholars aspire to high standards for accuracy and analysis. Because of that, I feel obligated to note an error in Dan Mitchell’s recent post on the ongoing failure of Washington’s economic stimulus efforts.

Dan writes:

The politicians in Washington flushed about $800 billion down the toilet and we got nothing in exchange except for anemic growth and lots of people out of work.

About $800 billion? I wish. By my calculation, federal fiscal stimulus efforts for the recent recession are now close to $2.5 trillion—at least.

Of course, Dan had in mind the $820 billion American Recovery and Reinvestment Act that President Obama pushed through Congress within a month of becoming president. But ARRA was just one of several fiscal stimulus bills that Washington adopted, beginning with the February 2008 Economic Stimulus Act and continuing through to early this year. Some of those bills were explicit stimulus measures; others were ostensibly intended to address other policy goals, but were engineered to provide fiscal stimulus by borrowing and spending money now, and then using future government revenues to pay off that borrowing (perhaps when God grants St. Augustine chastity and continence).

Below is a list I’ve kept of these stimulus measures. I use multiple-sequence numbering to differentiate between major and minor legislation.

Keep this list in mind when someone says there was “only” $800 billion in stimulus—or when someone says the only reason the stimulus failed is because it was too small.

Post Script(2016): As part of its final Economic Report of the President report, the outgoing Obama Council of Economic Advisers offered a lengthy (and positive) assessment of its handling of the recession, including efforts to fiscally stimulate the economy. The report (p. 34) notes that “Together with automatic stabilizers, the total fiscal stimulus over these four years averaged 4 percent of GDP,” or about $2.5 trillion.

Overall, this Tennessean article summarizes well yesterday’s House Oversight Committee hearing on the IRS rule that Jonathan Adler and I write about here and here. Unfortunately, the article does perpetuate the misleading idea that the nation’s new health care law is “missing” language to authorize tax credits in federally created Exchanges. (The statute isn’t missing anything. It language reads exactly as its authors wanted it to read.)

Excerpts:

Rep. Scott DesJarlais’ argument that the health-care reform law lacks wording needed to implement a crucial part of it took a major step forward Thursday.

The Jasper Republican got a hearing before the House Committee on Oversight and Government Reform on his claim that the Internal Revenue Service lacks authority to tax employers who fail to offer health policies and leave workers to buy coverage through federally established exchanges.

His arguments, while not uncontested during the hearing, apparently won over the committee chairman, Rep. Darrell Issa, R‑Calif. Issa signed on Thursday as a co-sponsor of DesJarlais’ bill related to the issue. Other House Republican leaders also have shown interest, DesJarlais said in an interview afterward. He said he expects a vote on the House floor sometime this fall.

And a Senate version has been introduced by Sen. Ron Johnson, R‑Wis…

DesJarlais contends that Congress worded the law in a way that authorizes the taxes and tax credits only for insurance bought through state-based exchanges, not federal ones…

The distinction is important because many states are balking at setting up their own exchanges. DesJarlais’ argument would mean federal exchanges couldn’t be implemented in those states, either…

“They have rewritten a law Congress haphazardly drafted,” DesJarlais said.

His bill, which has 35 cosponsors, would keep the IRS from moving forward with its regulatory language.

“I have employers watching this very closely,” DesJarlais added. Essentially, he said, the issue is “about whether ObamaCare can continue to exist.”

Can we finally all agree that Keynesian economics is a flop? The politicians in Washington flushed about $800 billion down the toilet and we got nothing in exchange except for anemic growth and lots of people out of work.

Indeed, we’re getting to the point where the monthly employment reports from the Labor Department must be akin to Chinese water torture for the Obama administration. Even when the unemployment rate falls, it gives critics an opportunity to recycle the chart below showing how bad the economy is doing compared to what the White House said would happen if the so-called stimulus was enacted.

But for the past few months, the joblessness rate has been rising, making the chart look even worse.

I never watch TV, so I’m not in a position to know for sure, but I haven’t seen any articles indicating that the Romney campaign is using this data in commercials to criticize Obama. That seems like a missed opportunity. But since it’s not clear to me that Romney would actually do anything different than Obama (check out this post if that seems like an odd assertion), I don’t focus on the political implications.

Instead, I’m hoping the American people will learn an important long-run lesson: If you want more growth and prosperity, the recipe is smaller government and free markets. In other words, our economic policy should be more like Hong Kong and Singapore, but the Obama administration has been making us more like France.

Many people lament spending on elections. I am not certain why they do: more money means more information for voters. However, their laments foster headlines like “presidential campaign the most expensive ever!”

The Campaign Legal Center has just published a study with a similar headline: the 2012 presidential elections will be “the most expensive on record.” They estimate spending will be 7 percent above spending in 2008.

I recalled that a seminal paper on campaign finance concluded, “From 1912 to 2000, presidential campaigns have accounted for approximately the same, small fraction of GDP.” Americans on the whole seem to spend a fixed and small part of national wealth on campaign spending.

How about now? Have current outlays grown as fast as GDP?

The data at the Bureau of Economic Analysis indicate GDP has grown 8.1 percent from the second quarter of 2008 to the second quarter of 2012.

In sum, campaign spending in 2012 seems likely to shrink as a share of overall national wealth compared to 2008. That conclusion is compatible with spending rising to record in absolute dollars. Indeed, spending is likely to set such records in every presidential election unless the economy contracts over a four year period.

Amid all the complaints about “record spending” shouldn’t at least one person in the media point out that campaign spending is lower, maybe much lower, than history would have led us to expect?

This morning’s newspaper brings news of government officials seeking to punish individuals who provided relevant information to the public. In this case, the officials are seeking individuals who leaked secret information about national security issues.

Here’s the problem with these investigations: disclosing the source of the leaks will lead to retaliation by government officials against the leaker which in turn will lead to fewer leaks in the future and less information for the public. As the New York Times puts it, “Investigations into Security Leaks is Casting Chill on Coverage.”

Yet the editorial board of that same newspaper has long supported public disclosure of the sources of campaign spending which can lead to retaliation from government officials against the source of the spending, thereby discouraging future spending on speech and in the end, less information for the public.

Why the differences in perspective? The cynical among us might think the costs of disclosing the sources of national security leaks fall on the media (above all, the New York Times) while the costs of disclosing campaign spending fall on people who compete with the media for public attention. But I am not so cynical to think the media are so narrowly self-interested.

Media folks may also think that retaliation is much more likely from national security officials than from officials concerned about winning elections. But why? The incentives seem at least equally strong in both cases. If anything, suppressing speech seems more directly related to election outcomes than keeping official secrets. How many votes did Wikileaks cost the Obama administration in 2010?

A “business model” explanation also comes up short. The media does depend on national leakers for information to repackage and sell. So they are protecting their inputs. The media also repackage disclosed campaign spending information. But such information would be much more valuable to the media if it were secret in the first place. Has anyone received a Pulitzer for writing yet another story about SuperPACs?

Consider this alternative explanation for the difference. Egalitarianism is the view that politics should be about helping the oppressed and harming the oppressor. In the national security context, the oppressor class comprises military and national security officials. They are icons of inequality working as they do in hierarchical organizations wasting public money that could be redistributed to the truly deserving. In campaign finance, the oppressors are business people — i.e. “the rich and powerful” — who have unequal wealth. Disclosing sources in the national security case helps the oppressor and increases inequality. Not disclosing sources in the campaign finance case has the same effect. The question is not what the government does but rather its effect on equality.

I conclude we should not call use the broad term “civil libertarian” to refer to everyone concerned about government limiting information to the public. Instead, we should focus on the purposes and values that inform political action. Media folks are largely “civil egalitarians.” Those concerned about liberty from government are properly called “civil libertarians.”

Why does this matter? Naturally I would be happy if “civil egalitarians” would become, by my lights, more consistent and thus, “civil libertarians.” Even if they do not, both sides should keep in mind when working together on politics that theirs is coalition of circumstances and not a coalition of common purpose.