Topic: Tax and Budget Policy

Americans Overwhelmingly Reject Redistribution

In some heartening news, new poll results from Gallup show that Americans decisively reject redistributionist policies by an 84 percent-13 percent margin. Even Democrats prefer that government focuses on growth rather than redistribution by a margin of 77 percent-19 percent. A blogger for the New Republic claims the question was poorly worded, but that seems like wishful thinking. People were basically asked whether government should focus on making the pie bigger or focus on re-slicing the pie, and the results are very encouraging:

…given a choice about how government should address the numerous economic difficulties facing today’s consumer, Americans overwhelmingly – by 84% to 13% – prefer that the government focus on improving overall economic conditions and the jobs situation in the United States as opposed to taking steps to distribute wealth more evenly among Americans. … Americans’ lack of support for redistributing wealth to fix the economy spans political parties: Republicans (by 90% to 9%) prefer that the government focus on improving the economy, as do independents (by 85% to 13%) and Democrats (by 77% to 19%). This sentiment also extends across income groups: upper-income Americans prefer that the government focus on improving the economy and jobs by 88% to 10%, concurring with middle-income (83% to 16%) and lower-income (78% to 17%) Americans. … In sum, free-market advocates can take considerable solace in Americans’ overwhelming belief that the government should not focus on redistributing income and wealth, but on improving the overall economy. And, to a lesser degree, Americans also believe government continues to do too much – not too little – to solve the nation’s problems.

Justice Department Bureaucrats May Set Risky Precedent with Extra-Territorial Tax Persecution

Bush Administration appointees involved with issues such as the Iraq war and coercive interrogation of suspected terrorists probably don’t spend much time thinking about international tax policy, but they may rue the day that the Justice Department decided to persecute Swiss banks and Swiss bankers for obeying Swiss law and protecting the financial privacy of customers. What’s the connection? By going after Swiss banks and Swiss bankers in hopes of finding a few Americans who might be hiding money from the IRS, the Justice Department is embracing the notion that governments should not be constrained by national boundaries and national laws. Richard Rahn already has an excellent piece explaining why this is an absurd policy, but let’s consider some of the broader implications.

What if John Yoo or Donald Rumsfeld travel to Europe in the near future for business or personal reasons and some European government decides to throw them in jail for violating “international law”? This may sound fanciful, but German authorities already have moved in this direction by asserting universal jurisdiction, and it doesn’t take much imagination to foresee politically ambitious officials from other nations grabbing the baton. The Wall Street Journal report does not cover these broader implications, but it is a good summary of the Justice Department’s fishing expedition:

The Justice Department, in an unprecedented move against a foreign bank, is seeking to force UBS AG to turn over the names of wealthy U.S. clients who allegedly used the giant Swiss bank to avoid taxes. …U.S. authorities have been holding discussions for several weeks with UBS and Swiss banking authorities to identify the U.S. account holders. People familiar with the talks say UBS officials floated the possibility that the U.S. could obtain the names through a request to Swiss regulators. Monday’s federal court filing instead puts the bank in direct conflict with the U.S. government. …The filing is the first against a non-U.S. bank by the Justice Department using what it calls a “John Doe summons,” a maneuver typically used to investigate tax fraud by people whose identities are unknown. The move could spark a major legal battle because the Justice Department is essentially gambling that courts will bless the move when it’s directed at a company with extensive U.S. operations but that isn’t based in the U.S.

Tax Credits We Don’t Need, Tax Credits We Do … Maine #1

Yesterday I posted the first in a continuing series about tax credits we don’t need to illustrate how absurd it is that more politicians don’t support the one good kind of tax credit; education tax credits.

I noted that one of the more popular tax credits is for saving old buildings that some people don’t want torn down but don’t care enough about to save with their own money. So they subsidize the renovation with credits. Maine’s government likes their old buildings just as much as Ohio’s, so the legislature recently expanded the state building rehab credit:

A new law that makes up to $5 million available to developers willing to rehabilitate historic buildings in Maine drew a record crowd Tuesday, a bellwether of its potential to spur new life in old buildings, organizers said.

With an estimated 25 projects that could take advantage of the expanded credit, Maine is looking at somewhere around $100 million in credits for building rehab.

What most states don’t have are education tax credits – the one and only tax credit that makes fiscal sense because it really does save taxpayers’ money and the only tax credit that actually decreases market distortion rather than increasing it.

So, I have a question for Maine’s politicians; if it’s good to encourage developers to invest in building preservation, why isn’t it good to encourage all taxpayers to invest in education? Are developers and old buildings more important than a child’s future?

Will Representative Ted Koffman, Speaker Glenn Cummings, Senator Peggy Rotundo, and Governor John Baldacci, all of whom pushed hard for the building credit, come out in support of at least $100 million in tax credits for educating Maine’s children?

If not why not? Inquiring minds want to know …

Holy Moses, Do We Need Medicaid Reform

Steve Moses is a one-man long-term-care-reform juggernaut. 

No, literally. Moses is currently conducting a whirlwind National Long-Term Care Consciousness Tour.  The tour aims to educate the public about the damage that government has done to the market for long-term care, the fact that the government will not be able to provide long-term care to baby boomers as it has for their parents, and the need to plan for one’s own long-term care needs.

As he passed through D.C. last week, Moses stopped to have lunch with me and to conduct a mini-interview with me, which he has posted on the tour’s YouTube page.

Edwards’ Budget Law: More Evidence

New evidence reveals the continued power of Edwards’ Budget Law over government policymaking. The law holds that government projects will end up costing at least twice what policymakers initially claim. The policymaking trick is that by the time the full cost is revealed to taxpayers, it’s too late–the project has become too entrenched to be reversed. 

  • From the Washington Post today (“Sports Complex’s Costs Skyrocketing”): “Now that the Arlington County Board has finalized the last land-use deal needed to build a long-awaited sports complex near Crystal City, officials are scrambling to come up with the money to pay for the entire facility, which could exceed $100 million … Initial projections put the cost of the complex at $50 million. But a rapid increase in construction costs has put the planned 119,000-square-foot aquatic center out of reach of the $50 million bond approved by voters in 2004.” 

I wonder where Arlington policymakers will “scramble” to for the other $50 million. Taxpayers perhaps?

  • From the National Journal’s CongressDaily today: “The USDA needs at least twice and possibly four times the $50 million Congress provided to implement the new farm bill, including the new average crop revenue program and disaster aid, Agriculture Secretary Schafer and his deputies said Wednesday.”

The extra costs stem from the USDA’s apparent need to modernize its “antiquated computer system” to process all the new subsidies promised by the bill. That a department which spends more than $90 billion each year has an antiquated computer system is beyond belief.

Has Trade Saved Us from Recession?

Good news on the economy, sort of. The Commerce Department reported this morning that it has revised the economy’s growth rate in the first quarter of 2008 to 1.0 percent. That is slightly higher than the government’s earlier two estimates and it means we have probably dodged a technical recession, at least for the first half of this year.

Politicians on the campaign trail should take note of the report for a couple of reasons. First, let’s not exaggerate the U.S. economy’s current difficulties. Politicians love a full-blown crisis because it can be used to justify all sorts of regulatory and spending programs. This is not a crisis (and government “stimulus” efforts typically have little effect, anyway).

Second, they should give thanks to America’s more globalized economy for smoothing the business cycle and possibly saving us from full-blown recession this time around. Trade is one of the bright spots of the latest report. While the housing sector has contracted by a quarter, shaving more than a percentage point from overall GDP growth, exports have been going gangbusters. Exports rose by more than 5 percent in the first quarter on an annual basis, offsetting about two-thirds of the negative effect of the housing market.

As I wrote in a Cato Free Trade Bulletin earlier this year on the subject:

[E]xpanding trade and globalization have helped to moderate swings in national output by blessing us with a more diversified and flexible economy. Exports can take up slack when domestic demand sags, and imports can satisfy demand when domestic productive capacity is reaching its short-term limits. … A weakening dollar has helped to boost exports and earnings abroad, but the main driver of success overseas has been strong growth and lower trade barriers outside the United States.

Instead of blaming trade for our current economic slowdown, politicians should be thankful that trade has spared us from something worse.

Pawlenty, Clarified

My recent blog on Minnesota governor — and potential Republican vice presidential nominee — Tim Pawlenty brought a great deal of e-mail from Pawlenty partisans. Most of their criticism was of the “definition of ‘is’” variety. Governor Pawlenty doesn’t support “price controls” for the Medicare prescription drug program, he merely wants the government to “negotiate” prices. (Anyone who thinks that distinction is a difference should read this article by Robert Goldberg or this piece by Benjamin Zycher). And, while he supported one increase in the state’s minimum wage, he opposed a second increase. (So he only abandons conservative principles and basic economics sometimes.) However, in fairness to Governor Pawlenty, two of my criticisms do deserve clarification.

On SCHIP: Governor Pawlenty did not specifically oppose President Bush’s veto of the Democratic expansion of SCHIP. He did praise the bill for “increasing” SCHIP funding, and both individually and as head of the National Governors Program urged the program’s renewal, while the Democrats were trying to override the president’s veto. But he did not specifically call for overriding the veto.

And, on an individual health insurance mandate: Governor Pawlenty’s Health Care Task Force endorsed such a mandate. Although the governor initially hailed the task force report and called it “a framework” for reform in Minnesota, he did later distance himself from the recommendation for a mandate.

I don’t think any of this makes him less of a big-government conservative, but I want to make sure my criticism is as accurate as possible.