In the new issue of Regulation, economist Pierre Lemieux argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil.  The increased supply allows the economy to produce more goods, which benefits some people, if not all of them.  Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole. 

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power.  David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies. 

Tag: tax increase

Republicans made many big mistakes when they controlled Washington earlier this decade, so picking the most egregious error would be a challenge.  But continued American involvement with the Organization for Economic Cooperation and Development would be high on the list.  Instead of withdrawing from the OECD, Republicans actually increased the subsidy from American taxpayers to the Paris-based bureaucracy.  So what do taxpayers get in return for shipping $100 million to the bureaucrats in Paris?  Another international organization advocating for big government. 

The OECD, for example, is infamous for trying to undermine tax competition.  It also has recommended higher taxes in America on countless occasions.  And now it is suggesting that Iceland impose high tax increases - even though Iceland’s economy is in big trouble and the burden of government spending already is about 50 percent of GDP:

Both tax increases and spending cuts will be needed, although the former are easier to introduce immediately.  The starting point for the tax increases should be to reverse tax cuts implemented over the boom years, which Iceland can no longer afford.  This would involve increases in the personal income tax… Just undoing the past tax cuts is unlikely to yield enough revenue.  In choosing other measures, priority should be given to those that are less harmful to economic growth, such as broadening tax bases, or that promote sustainable development, such as introducing a carbon tax. 

President Obama will hold a press conference tonight to answer questions about his health care reform proposal.  This is what I would ask him:

Mr. President, during your campaign, you said, “I can make a firm pledge…Under my plan, no family making less than $250,000 a year will see any form of tax increase.”  You also said that “no one will pay higher tax rates than they paid in the 1990s.” 

Your National Economic Council chairman, Larry Summers, has written that employer mandates “are like public programs financed by benefit taxes.”  Under the House health reform bill, an uninsured worker earning $50,000 per year, with no offer of coverage from her employer, would face a 15.3-percent federal payroll tax, a 25-percent federal marginal income tax rate, an 8-percent reduction in her wages (to pay the employer penalty), plus a 2.5 percent uninsured tax.  In total, her effective marginal federal tax rate would reach 50.8 percent. 

Do you stand by those pledges, and would you therefore veto any employer mandate or individual mandate as a tax on the middle class? 

With unemployment continuing to climb and the economy struggling along, some lawmakers and pundits are raising the possibility of a second stimulus package at some point in the future.  The Cato Institute was strongly opposed to the $787 billion package passed earlier this year, and would oppose additional stimulus packages on the same grounds. 

“Once government expands beyond the level of providing core public goods such as the rule of law, there tends to be an inverse relationship between the size of government and economic growth,” argues Cato scholar Daniel J. Mitchell. “ Doing more of a bad thing is not a recipe for growth.” 

Mitchell narrated a video in January that punctures the myth that bigger government “stimulates” the economy.  In short, the stimulus, and all big-spending programs are good for government, but will have negative effects on the economy. 

Writing in Forbes, Cato scholar Alan Reynolds weighs in on the failures of stimulus packages at home and abroad:

In reality, the so-called stimulus package was actually just a deferred tax increase of $787 billion plus interest. 

Whether we are talking about India, Japan or the U.S., all such unaffordable spending packages have repeatedly been shown to be effective only in severely depressing the value of stocks and bonds (private wealth).  To call that result a “stimulus” is semantic double talk, and would be merely silly were it not so dangerous. 

Palin’s future remains uncertain, but it’s hard to see how her cryptic and poorly drafted resignation speech positions her for a presidential run.  Nonetheless, her departure presents a good opportunity to reflect on the Right’s affinity for presidential contenders who - how to put this? -  don’t exactly overwhelm you with their intellectual depth. 

It’s one thing to reject liberal elitism.  It’s another thing to become so consumed with annoying liberals that you cleave to anyone they mock, and make presidential virtues out of shallow policy knowledge and lack of intellectual curiosity. 

Writing at Politico, Cato scholars David Boaz and Roger Pilon weigh in on what her resignation means for the former Vice-Presidential candidate’s political future:

Will we one day say that her presidency was ‘born on the Fourth of July’?  I doubt it.  This appears to be just the latest evidence that Sarah Palin is not ready for prime time.  The day McCain chose her, I compared her unfavorably to Mark Sanford.  Despite everything, I’d still stand by that analysis.  At the time I noted that devout conservative Ramesh Ponnuru said ‘Palin has been governor for about two minutes.’  Now it’s three minutes. 

Running for president after a single term as governor is a gamble.  Running after quitting in the middle of your first term is something else again.  If this is indeed a political move to clear the decks for a national campaign, then she needs adult supervision soon.  But I can’t really believe that’s what’s going on here.  I suspect we’re going to hear soon about a yet-unknown scandal that was about to make continuing in office untenable. 

It seems that since her return to the state following the campaign, activist opponents and bloggers have bombarded the governor’s office with endless document requests.  And she’s faced 16 ethics inquiries, with no end in sight.  All but one have since been resolved, but the politics of personal destruction has cost the state millions, as Palin noted.  Add to that the unrelenting, often vicious and gratuitous attacks on her and even on her family, and it’s no wonder that she would say ‘Enough.’  It has nothing to do with ‘quitting’ or with being ‘unable to take the heat.’  It has everything to do with stepping back and saying you’re not willing to put your family and your state through any more.  She seems confident that history will judge her more thoughtless critics for what they are.  I hope she’s right. 

Honduras’ President Is Removed from Office

In reaction to Honduran President Manuel Zelaya’s attempt to stay in power despite term limits set by the nation’s Constitution, armed forces removed him, sending the Latin American nation into political turmoil. 

The removal from office of Zelaya on Sunday by the armed forces is the result of his continuous attempts to promote a referendum that would allow for his reelection, a move that had been declared illegal by the Supreme Court and the Electoral Tribunal and condemned by the Honduran Congress and the attorney general.  Unfortunately, the Honduran constitution does not provide an effective civilian mechanism for removing a president from office after repeated violations of the law, such as impeachment in the U.S. Constitution.  Nonetheless, the armed forces acted under the order of the country’s Supreme Court, and the presidency has been promptly bestowed on the civilian figure — the president of Congress — specified by the constitution. 

To be sure, Hidalgo writes, the military action in Honduras was not a coup:

What happened in Honduras on June 28 was not a military coup.  It was the constitutional removal of a president who abused his powers and tried to subvert the country’s democratic institutions in order to stay in office. 

The extent to which this episode has been misreported is truly remarkable. 

Economists have advanced many theories of taxation.  But as usual, the one that seems to explain the policies of the Obama administration best is what I call the Mikulski Principle, the theory most clearly enunciated in 1990 by Sen. Barbara Mikulski (D, Md.):

Let’s go and get it from those who’ve got it. 

Just take a look at the myriad taxes proposed or publicly floated by President Obama and his aides and allies:

As the links will indicate, not all of these taxes have been formally proposed, and some have already run into sufficient criticism to have become unlikely.  But together they illustrate the mindset of an administration and a Congress determined to extract as much money as they can from Americans rather than cut back on expenditures, which have doubled in about eight-and-a-half years. 

Indeed, the administration’s programs remind us that today is July 2, the 233rd anniversary of the day on which the Continental Congress voted for American independence, issuing a document that declared, among other things,

He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance. 

President Obama broke his pledge not to raise taxes on lower- and middle-income families with his large tobacco tax increase back in February.  It appears that the increase is not just hurting tobacco consumers, but also hurting workers in the cigar industry.  From Tampa Bay Online:

Tampa will lose part of its cigar heritage in August when Hav-A-Tampa shuts its factory near Seffner and lays off about 495 employees, closing a factory that has been operating since 1902. 

Several things conspired to hurt Altadis’ sales, McKenzie said, including the recession and the growth of indoor smoking bans.  The bans have especially hurt sales in cold-weather states, where it’s impractical to smoke a cigar outdoors in the winter, he said. 

However, the company attributed much of its trouble to the State Children’s Health Insurance Program, or SCHIP, a federal program that provides health insurance to low-income children.  It is funded, in part, by a new federal tax on cigars and cigarettes.  McKenzie couldn’t say how much sales of Hav-A-Tampa cigars had fallen off, but the numbers have dropped significantly, he said. 

Previously, federal excise taxes on cigars were limited to no more than a nickel, said Norman Sharp, president of the Cigar Association of America trade group.  The tax increase, which took effect April 1, raises the maximum tax on cigars to about 40 cents, Sharp said. 

This health-tobacco legislation raised taxes $65 billion over 10 years.  Imagine the damage that would be caused by the giant health bill currently moving through Congress, which will cost $1 trillion or more over 10 years. 

The Obama Administration is proposing higher taxes on just about everyone and everything, but one common theme is that most of the tax increases are being portrayed as ways of fleecing the so-called rich.  This new video, narrated by yours truly, provides five reasons why the economy will suffer if entrepreneurs and investors are hit with punitive taxes. 

President Obama is promoting an expansion in federal health care spending, and Democratic leaders are scrambling to find ways to pay for it.  The plan is expected to cost about $1.5 trillion over the next decade, but the administration has promised that health care legislation won’t add to already huge federal budget deficits.  In a new paper, Cato scholars Michael D. Tanner and Chris Edwards argue that expanding government health care will likely involve huge tax increases on the middle class. 

Tanner warns of “Obamacare” to come, saying that Obama’s new health care plan will give “government control over one-sixth of the U.S. economy, and over some of the most important, personal, and private decisions in Americans’ lives.”  Don’t miss Tanner’s in-depth analysis of the new health care plan that is making its way through Congress, which “would dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients.” 

A part of the plan would include “public option” (read: government-run) health care, which would allow the government to compete against private health care providers.  Tanner says it would be the first step toward wiping out the private insurance market as we know it:

Regardless of how it is structured or administered, such a plan would have an inherent advantage in the marketplace because it would ultimately be subsidized by taxpayers.  It could, for instance, keep its premiums artificially low or offer extra benefits, then turn to the U.S. Treasury to cover any shortfalls.  Consumers would naturally be attracted to the lower-cost, higher-benefit government program. 

…It is unlikely that any significant private insurance market could continue to exist under such circumstances.  America would be firmly on the road to a single-payer health care system with all the dangers that presents.  That would be a disaster for American taxpayers, physicians, and—most importantly—patients. 

Treasury Seeks to Control Executive Pay Across the Private Sector

Fox Business reports, “The Treasury Department on Wednesday took new steps to rein in executive compensation, saying the Obama Administration would introduce legislation that could create stricter limits on pay; it also appointed an official to head up efforts on the issue.” 

Such populist sentiments are often based on misunderstandings about the role of corporate executives in the economy and the vigorous competition that exists for these highly skilled leaders.  In the past, federal regulatory efforts based on such misunderstandings have generated unintended consequences, which have damaged the economy and hurt the ability of the market for executives to self-regulate over time. 

The labor market for executives and the associated pay levels are already subject to high levels of regulation.  Indeed, U.S. corporations are subject to more stringent executive pay disclosure requirements than corporations anywhere else in the world.  Before additional regulatory and legislative efforts are unleashed, policymakers should examine the rationale for current pay structures and the strong links between executive pay and corporate performance. 

Congressional hearings to barbecue Wall Street executives are as fun as a circus, but with more clowns.  Presidential politics is now taking such political distractions to a lower level. 

…Most top executives who were actually in charge during the craze of overinvestment in mortgage-backed securities have been fired.  Executives who are fired are not in a position to be “giving themselves” anything. 

In reality, top executives are mainly paid by accumulating a big stockpile of company stock and stock options.  Estimates of annual CEO pay that Congress and the press have been focusing on look as high as they do only because of the high value of restricted stock or stock options at the time. 

Writing in 2007 (before the first round of major bailouts), Cato scholars Jerry Taylor and Jagadeesh Gokhale took it a step further: “Pay Bosses More!”: 

Excessive executive compensation harms no one but perhaps the stockholders who put up with it.  And stockholders put up with it because there’s good reason to believe that sizable CEO compensation packages help – not harm – corporate performance, which redounds to their benefit, and that of the firms’ workers. 

Companies pay workers what they must to deliver their products and services to the market, and supply and demand establishes executive compensation packages the same way it establishes consumer prices.  Any overcompensation comes out of the firm’s bottom line – at a loss to the shareholders, not the workers. 

North Korea Sentences Two U.S. Journalists to 12 Years Hard Labor

Two American journalists were convicted of entering North Korea illegally while on assignment, and exhibiting “hostility toward the Korean people.”  This week, a North Korean court sentenced them to 12 years in a labor prison. 

Washington should publicly downplay the controversy and present the issue to the Kim regime as a humanitarian matter.  The Obama administration should indicate its willingness to open a broader dialogue with North Korea, but indicate that positive results will be possible only if Pyongyang responds with cooperation instead of confrontation.  Releasing the two journalists obviously would provide evidence of the former. 

Regrettably, Laura Ling and Euna Lee are political pawns.  As such, Washington’s best strategy to achieve their release is to simultaneously reduce their perceived value to Pyongyang and ease tensions between the U.S. and North Korea.  Patience may be the Obama administration’s highest virtue and Ling’s and Lee’s greatest hope. 

In a Cato Daily Podcast, Bandow discusses what can be done for the American prisoners, and how the U.S. government should react.