by | ARTICLES, BLOG, GOVERNMENT, LAW, TAXES
A good tax system is built on four principles: simplicity, transparency, neutrality, and stability. Serious minded professionals and statesmen have known and pushed for these principles for generations. These principles should be the basis for tax policies created by lawmakers so that our tax system is organized and understandable.
The first principle is simplicity. By this concept, both taxpayers and the IRS deserve to have policies and a system that makes tax compliance and tax enforcement easy and understandable. No one should be obligated to wade through a system that doesn’t make obvious sense.
Next is transparency. A transparent system is one that clearly explains the tax in question, the steps needed to pay it, and the dates by which the tax is due. This should go without saying.
The third concept is neutrality. Neutrality means that no one industry is preferred over another nor any personal behavior given favor. Picking winners and losers in business or activities should not be the function of the tax system.
Finally, stability is key. Consistent tax laws without sunsets or changes from year to year provide predictability and help promote long term planning for taxpayers. If a tax system is fair and equitable, taxpayers should be able to count on it and plan for it into the future, without worrying that politicking and partisanship will create an unfair trap.
I had a recent conversation with Congresswoman Claudia Tenney (NY) on these concepts. At the end of our discussion she had a brilliant realization: that these four principles: simplicity, transparency, neutrality, and stability, not only make for a good tax system, but should be part of ANY legislation. Imagine Congress using these concepts to form the basis of all policies when considering the content of legislation?
by | BLOG, CONSTITUTION, ELECTIONS, GOVERNMENT, POLITICS
There were several dozen proposed amendments to the huge stimulus bill that recently passed Congress. Many of them failed by a slim margin, but the votes were absolutely outrageous. It is worthwhile to remember these votes for 2022, as many of the Senators voted against their own constituents.
Here are some of the most notable ones:
The Cassidy Amendment, 1161: This would have “given some emergency assistance to non-public schools”, but it failed, so all of the $135 billion will go to public school and teachers unions.
The Fischer Amendment: This would have ensured that the “current laws and formulas for funding mass transit remained in place”, but instead it means that $5 billion in earmarked funds will go to New York’s system.
The Cruz Amendment 969: This would have provided “children with an option for in-classroom education instruction if the child’s local public school does not commit to re-opening to 5-day-a-week, in-classroom instruction for the remainder of the current school year and the 2021-2022 school year” but instead it means that the Democrats are still wedded to teachers unions than they are to education.
The Cassidy Amendment, 1162: This would have ensured that “the 2021 Recovery Rebates are not provided to prisoners” but instead the Democrats are giving taxpayer funds to felons.
The Cruz Amendment 968: This would have ensured that “ the 2021 Recovery Rebates are not provided to illegal immigrants” but this also failed.
The Daines Motion to Commit: This action would have supported building the Keystone XL Pipeline but instead means the irrevocable loss of jobs with Biden’s earlier Executive Action halting the project.
When political allegiance to the party line means that you vote against the very people who elected you, you deserve to be thrown out.
by | ARTICLES, BLOG, CONSTITUTION, ECONOMY, GOVERNMENT, HYPOCRISY, LAW
The most recent stimulus package gives money to one segment of the population by taking money from another segment of the population. Since wealth transfers cannot reasonably be inferred as any of the acts allowable by the federal government under the Constitution, the Stimulus Act is blatantly unconstitutional.
The recent stimulus checks from the federal government are a pure, vote buying giveaway. Neither need nor negative impact from Covid are factors in getting these payments. While some people have experienced financial difficulties over the past year, the majority of workers are doing okay or better than they were pre-COVID. Because the economy is in a strong growth spurt, there is really no need for a general stimulus at this point. (It would be reasonable to help those impacted by covid, but this is only a very small portion of the recipients). Yet these stimulus checks are being provided to all taxpayers who earn under the government-defined income threshold ($150,000 married, $75,000 single).
Now in order to pay for the stimulus, Biden is increasing taxes on the wealthy — which includes taxpayers who were above the arbitrary line and therefore ineligible to receive a check. There couldn’t be a more direct relationship of taking money from one group and giving it to another.
This very act is a constitutional violation as the Constitution does not allow for wealth transfer.
by | BLOG, CONSTITUTION, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, POLITICS, TAXES
On February 2nd Senator Elizabeth Warren announced that she will join the Senate Finance Committee, the committee tasked with writing this country’s tax laws. She stated, “I’m very pleased to join the Finance Committee, where I’ll continue to fight on behalf of working families and press giant corporations, the wealthy, and the well-connected to finally pay their fair share in taxes.”
Warren has often advocated for a wealth tax in the past, especially during her campaign last year for the Democratic presidential nomination. But now she is actually in a position to make proposed legislation happen. In fact, she’s promised that it will be her “first order of business.” This is wrongheaded on many levels, including fairness, constitutionality, impossibility of implementation, history of failure, negative effect on the economy, and morality.
Fairness: Senator Warren has always maintained that corporations and the wealthy are not paying their “fair share”. She has never addressed the question of what that “fair share” might be. That is not surprising, since corporations and the wealthy in the US pay a far higher share of the tax burden than is paid in virtually every other country in the developed world – and by a wide margin. This results not from very high rates, but rather from the fact that our poor and middle class – almost 50% of our population – pay almost no income tax. According to the Tax Foundation’s 2021 data analysis, in 2018 (the most recent figures available),“the top 50 percent of all taxpayers paid 97.1 percent of all individual income taxes, while the bottom 50 percent paid the remaining 2.9 percent.” Additionally, “The top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).” To add a wealth tax on top of the already extremely progressive tax system would be anything but fair.
The grotesque unfairness of a wealth tax is even more evident when it is actually calculated. This can be seen by the following example: Assume that an investor with $100M net worth in the present low interest environment (and because not all of his wealth is appreciating assets) has an average rate of return of 4%. His income therefore is $4 million. The investor would pay an income tax rate of about 45% total combined federal/state/local taxes which would be $1.8 million in taxes. Now consider a 2% wealth tax tacked on, which would be an additional $2 million. This would mean the investor would pay a total of $3.8 in taxes and he would have an effective tax rate of 95%. What’s even more sobering is that if he earns less than 4%, or if his tax rate was more than 45% (which it will be with Biden’s plans), then the investor’s taxes would be in excess of 100%.
Constitutionality: Our Constitution provides in Article 1, Section 9, Clause 4 that: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”
Both our income tax and a wealth tax would run afoul of this provision. To make the income tax constitutional we had to add the 16th Amendment. But no such amendment exists for the wealth tax. It may be that wealth tax proponents would argue that this tax is somehow taxing income potential using wealth as a proxy. But no Supreme Court, other than an off-the-charts progressive one, would approve of such strained logic. In fact, there’s currently a case before the Ninth Circuit Court of Appeals challenging Trump’s Mandatory Deemed Repatriation Tax on the ground that it is, in fact, an unconstitutional wealth tax.
Implementation: Taxing someone’s wealth requires determining the fair market value (“fmv”) of his or her assets, and then (presumably since no details are currently available) subtracting all liabilities. For anyone of considerable wealth, this would be an extraordinarily expensive, time consuming, and complicated effort. Even for assets that might have a publicly available market for valuation, it isn’t that simple. Consider volume. If someone has a substantial amount of something, you normally would apply a discount, since selling large volumes of assets can upset the market and reduce the overall value of an item.
But not everything has a value that can be determined easily. Investment in a closely held business, or real estate, or even paintings are examples of assets that are not susceptible to easy valuation on an annual basis, making it not very economically feasible to try to do so. Additionally, valuation can be determined in any number of ways — such as appraisals, discount rates, and reductions in the lack of marketability– so that valuations may be varied.
Another factor that makes valuations difficult are contingencies. For example, many assets have contingencies backed up with guarantees, and it’s difficult to value those contingencies. Finally, there is a question of liquidity/ability to liquidate or pay. Most people who have extraordinary assets like that often don’t have sufficient income or liquid assets to pay a wealth tax on them. Since many assets are not easily marketable, there could be a liquidity crunch.
Of course, a wealth tax would add even more burdensome complexity to the already byzantine tax code. The IRS would have to substantially increase its number of agents and its budget just to have the manpower to devote to compliance and enforcement. Given the IRS’s history of being discriminatory and incompetent, this is not a good thing.
Failure: It should also be noted that the wealth tax has already been tried — and failed — repeatedly. At one point, 15 European countries had a wealth tax. To date, all but four nations have since repealed it because it was ineffective in accomplishing its goals and was extraordinarily complicated and expensive to administer. Additionally, the wealth tax induced capital flight and asset hiding. For instance, in 2017 France decided to abandon its wealth tax after it caused the loss of “10,000 people with about 35 billion euros ($41 billion) in capital abroad” over a 15 year period according to the Prime Minister. Likewise, Switzerland — one of the four remaining wealth tax countries — experienced substantial tax evasion, noting that a mere “.1% wealth tax lowers reported wealth by 3.4%” according to a study by the National Bureau of Economic Research. As Switzerland has a wealth tax rate of 1%, that amounts to 34.5% in unreported assets.
Effect on the Economy: The growth of our economy is dependent on putting capital to productive use. Every time a corporation reinvests its retained earnings, or an individual puts his wealth to work by investing in an ongoing or new venture, the economy grows. This growth results in new purchases of equipment, facilities, hiring of employees, research and development, etc. Conversely, when capital is removed from the economy, such as by requiring the payment of a wealth tax, the economy shrinks. In fact, the wealth tax is a form of double taxation. Wealthy Americans already pay taxes on their income; under a wealth tax, they would then be taxed again for keeping that income in various assets. This not only punishes success, but discourages investment and savings.
Though progressives may argue that the capital taken out of circulation will be used to redistribute income to those who will spur the economy by consuming those funds, we revert back to Economics 101 – consumption has a much smaller effect on the economy than investment.
Morality: There is no moral justification to take something from someone just because they have it, even if they have a lot of it. One is reminded of the great scholar Thomas Sowell, who understands this quite well: “Since this is an era when many people are concerned about ‘fairness’ and ‘social justice,’ what is your ‘fair share’ of what someone else has worked for?” The wealthy in this country are an extraordinarily charitable group. But it should be their choice as to how charitable they wish to be with their hard-earned assets.
Senator Warren has argued that a real benefit of this tax is that it will only affect a relatively small number of people. This reveals what this tax really is – an attempt to foment class warfare by giving a large number of people (read: voters) a benefit through confiscating substantial amounts of money from a small group.
A wealth tax will certainly not bring in the revenue expected by the progressives – who relish the thought of punishing wealthy Americans in order to throw more money at their failed policies. Wealth redistribution is inherently the antithesis of the American Dream. Bastiat was right. No matter how you spin it, explain it, try to justify it, a wealth tax is simply “legal plunder.” Perhaps Senator Warren is being disingenuous (since the wealth tax would never be passed) but she will nevertheless score political capital among her constituents who do not know any better. She is taking advantage of the lack of economic knowledge among people who don’t understand the complexity and stupidity of a wealth tax.
by | BLOG, COVID, ECONOMY, GOVERNMENT
Proposed legislation in Congress has at its core the addition of $1400 per person (on top of the $600 already passed in other legislation) creating a $2,000 per person payment. Its purpose is stated to be to “stimulate the economy” even though what we actually need to focus on is getting more people back to work.
The prospect of giving out an additional $1400 payment is absolute insanity. We don’t need it, as we have the highest rate of savings right now that we’ve had in a long time. The vast majority of “stimulus” funds go to working people who are in as good or maybe even better financial shape than before COVID, so the money is going into savings or to reduce debt. This is NOT stimulus. (Note that having to repay the money borrowed to make the stimulus payments 1) slows the economy by having to service this debt, and 2) adds extraordinary burdens to our children and grandchildren who must pay it back.)
However, the most egregious element of this stimulus fiasco are amounts going to non-working – but being paid – public service employees.
In the private sector, employees who could not or would not do their jobs would have been furloughed or fired, as a private business would do out of necessity. But the public sector can just abuse taxpayers by keeping them on – and even giving them raises! So many of them are home because there has been no productive work to do. In a horrific economy like ours, businesses simply can’t afford to carry people who are not performing work. Just like a hurricane hitting a factory, we have to furlough even public service employees because there is nothing to do.
But public service employees, in an absolutely unethical and immoral way, have, with help of unions, have put themselves in an undeserved place in society: they neither have to work, nor get furloughed. On top of it, we give them “stimulus” funds even after being already unjustly rewarded? To the detriment and abuse of everyone else who is paying them to do nothing? It’s an affront to all taxpayers.
by | BLOG, BUSINESS, CONSTITUTION, COVID, ECONOMY, GOVERNMENT, POLITICS
It is undeniable that people are hurting from COVID. It is also untenable that one of the continued solutions is an ongoing moratorium on evictions. Such a policy would seem to be blatantly unconstitutional.
A national moratorium on evictions picks winners and losers by government fiat by preferring one population (renters) over another population (landlords). The moratorium continues to allow people to live in their spaces without paying what they are contractually obligated to pay, putting the landlord at a loss. Would the same people championing this policy support the government letting people take food from a grocery store without paying for the food? How about taking clothing from a store without paying for it? It is the same thing. Those who argue that there is a moral right to housing would be hard pressed not to agree that this is also a moral right to food and clothing as well. Put it another way, the moratorium allows renters to consume their rental space for free that they would otherwise be purchasing through the payment of rent. What gives the government the right, therefore, to tell people they are allowed to consume their product — be it food, clothes, or rental property — without just compensation?
Originally, the moratorium was declared as a hedge against a perceived health hazard, namely that if people are evicted, they could contribute to the spread of COVID, and from this line of thinking was the flimsiest constitutional justification for the policy. If therefore, the government wants to assume the responsibility for avoiding an even bigger health emergency, it is only just that the government should cover the cost of the loss or rent to the landlord or guarantee that the rent is paid. You can’t have it both ways. The current policy is utterly ludicrous and puts many landlords at financial risk and ruin.
by | BLOG, COVID, ECONOMY, GOVERNMENT, POLITICS
The current national moratorium on evictions (which is likely to be extended yet again) is problematic for several reasons. The CDC (of all agencies) issued its rule without any particular act of Congress granting it the power to do so under the auspices of a generic “public health and safety” threat. What’s more, the federal eviction ban essentially overtakes any and all existing laws between tenants and landlords at the state level.
Because of the moratorium, landlords are now unable to follow any due process it has with regard to removing a tenant who has not kept up his or her end of their housing contract. Furthermore, landlords have no recourse to replace or remove a tenant by legal means until the end of the moratorium, a date which keeps changing. If a landlord violates the moratorium, he faces fines and/or possible jail time.
But perhaps the most egregious aspect of the eviction moratorium is that landlords are still responsible for maintaining payments to their banks and mortgage lenders on their rental properties. In fact, in some parts of the country, lenders have the ability to foreclose on them because they are not owner-occupied residences. What if the government told grocery store owners they had to provide their food for free as a means to alleviate hunger? Or tell a doctor he has to treat people for free as a means to provide universal access to medical services. How is it that the government is allowed to tell one set of citizens that you cannot enforce your own contracts and must provide services for free, while simultaneously not providing any sort of restitution for the hardship?
This moratorium has created intense and immediate deprivation for property owners who now bear the burden of property ownership without means to carry out or modify existing rental contracts. Essentially, the government is engaging in a massive, unconstitutional wealth transfer from one constituent to another. The eviction moratorium is a blatantly unconstitutional abuse of power.
by | BLOG, CONSTITUTION, FREEDOM, GOVERNMENT
There is a renewed push for ending qualified immunity especially since the unrest earlier this summer. Qualified immunity affords police officers protection from litigation for their actions in pursuit of the law, while immunity is lost if an officer violates a citizen’s constitutional rights. At least, that is what qualified immunity was before it metastasized into a near entitlement shield for officers and other public officials. Qualified immunity does not need to be abolished but it should definitely be qualified. It needs to be turned around to what it originally meant, not what decades of SCOTUS rulings has made it to be.
by | BLOG, BUSINESS, ECONOMY, GOVERNMENT
Despite what you may have heard from politicians and journalists, trade deficits are not a bad thing… In fact, they almost always indicate a healthy economy.
Some people (including a number of our civil leaders) believe that the United States’ trade deficit is a bad thing. They think that it means that other countries are abusing us. This is just wrong – and economically ignorant. It is the same as saying that a deficit of sugar in your diet is a bad thing. Just wrong.
By definition, a trade deficit is when one country’s people and businesses are buyingmore goods than they are selling to other countries. Rather than indicating negativity or poverty, this highlights that the people and companies in the United States have the wealth to be able to buy more stuff than the poorer people from other countries are able and willing to buy from us. This is reflective of a healthy economic circumstance.
Actually, throughout history when the US has had a trade surplus it generally has been in economic recession or depression. Let’s take a look at what a trade deficit actually is, and why trying to eliminate our trade deficit is misleading and ultimately based in ignorance.
Ultimately, basic economics shows that the amount of money flowing back and forth between two countries has to be the same. What changes is the form of that money: capital vs. consumable goods. When the United States has a trade deficit it means that the United States people and companies as a whole are buying more consumable goods from a country than that country is buying from us. That country in turn is using those dollars
to make capital or other investments in the US – rather than buying consumable goods from US companies. China is a great example of this. The reason that we have a trade deficit with China is because we have a lot of wealth and we are willing to spend money on consumable goods. By allowing this deficit, we are in fact just letting Americans enjoy what they want to enjoy, creating a high living standard. The Chinese, on the other
hand, are willing to forego the current enjoyment of things so that they can invest in their future – by buying US bonds, or investing in US companies (like automobile plants in Tennessee which provides jobs and economic growth to the US). Those in the US have decided – one by one – that they want to buy stuff to make them happy. Let’s let them do that.
Furthermore, a trade deficit is not a US Government deficit, or debt, or anything of the kind. There is no such thing as a “country’s” deficit. It is not the United States government but rather individual Americans and individual American companies that are choosing to spend their money on consumable goods. The deficit just recognizes that in the moment, US individuals and companies are choosing, transaction by transaction, to
part with dollars in exchange for stuff that they would rather have. This is an individual choice that is reflective of individual wealth and ability to spend on consumable goods. We must reject the thinking of some in Congress and elsewhere who are trying to stop US people from buying more stuff from China and other countries. This ignorant recommendation is, by definition, hurting Americans and limiting their freedom to enjoy the things they choose.
An understanding of basic economics shows that trade deficits are a reflection of wealth and success and anyone who denies that doesn’t understand the concepts of trade and deficits.
by | ARTICLES, FREEDOM, GOVERNMENT, LAW
Everyone is aware of the tragic death of Breonna Taylor and its surrounding circumstances. But many are calling for murder charges against the police officers who did the shooting, and are calling the event evidence of systemic racism. Both positions are ridiculously off base.
The grand jury did not charge any officers with the killing of Ms. Breonna Taylor in her home. The mainstream media would have you believe that this means that the grand jury was derelict in its duties. This skewed, biased view from the media is ignorant of the facts. The evidence clearly delineated that no laws were broken in connection with Ms Taylor’s shooting – the officers were acting within the legal confines of a warrant. The blame for this horrible outcome may well have been that the warrant was issued too easily and with terms that might create an unnecessarily dangerous situation. In fact, none of the actions by the police officers could be counted as homicide or murder nor could they be chalked up to systematic racism. Don’t let the media blind your vision as to where the real injustice is occurring: police warrants.
As Americans who have agreed to live within a republican system of justice, we have no right to contest the grand jury’s decision. However, we do have every right to contest the laws that created this situation. Laws can be flawed and as thoughtful citizens of a republic we have every right to go through the proper channels and request a change of law where we see fit. If the problem is a too aggressive approach by law enforcement, maybe No-Knock warrants should not be allowable, or at least much more restricted. The way to fix the problems that gave rise to the Taylor tragedy is not societal upheaval over racial injustice, as the grand jury found no clear racial motivation involved in the case. No – the answer is criminal law reform, specifically in relation to laws surrounding warrants.
The claim of systemic racism also has no basis. The police entered the home due to a narcotics case with a legally valid warrant to do what was necessary within the home to complete their objectives. The wrongdoing in this case is rather coming from why policemen are busting in in the middle of the night – who gave the order to do that, why is that allowed, and so many other questions that the media should be focusing on. If anyone is really looking to see where the problem was in the Taylor case, it was not the policemen executing a warrant nor the boyfriend who was shooting back in self-defense. Nothing in all this reflects anything about race. The media and demonstrators were charging racism long before the details of the case were known. That alone is clear evidence of the dishonesty of those claiming racism was the cause.
Criminal law reform is where the focus must be if we are actually going to create a better America. Someone’s head should roll. Not the policemen but those who set the dominos in motion. Maybe it’s not a particular person that needs correction but a whole system created by a host of people. The system is the problem. Let’s focus on fixing that.
