Thursday, April 27, 2017

The Income Tax Implies that Government Owns You

The following article is by Jeffrey A. Tucker and was published by The Foundation for Economic Education.

The income tax is enshrined into law but it is an idea that stands in total contradiction to the driving force behind the American Revolution and the idea of freedom itself. We desperately need a serious national movement to get rid of it – not reform it, not replace it, not flatten it or refocus its sting from this group to that. It just needs to go.
The great essayist Frank Chodorov once described the income tax as the root of all evil. His target was not the tax itself, but the principle behind it. Since its implementation in 1913, he wrote, "The government says to the citizen: 'Your earnings are not exclusively your own; we have a claim on them, and our claim precedes yours; we will allow you to keep some of it, because we recognize your need, not your right; but whatever we grant you for yourself is for us to decide.”
He really does have a point. That's evil. When Congress ratified the 16th Amendment on Feb. 3, 1913, there was a sense in which all private income in the U.S. was nationalized. What was not taxed from then on was a favor granted unto us, and continues to be so.

This is implied in the text of the amendment itself: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."
No Limits
Where are the limits? There weren't any. There was some discussion about putting a limit on the tax, but it seemed unnecessary. Only 1% of the income earners would end up paying about 1% to the government. Everyone else was initially untouched. Who really cares that the rich have to pay a bit more, right? They can afford it.

Today, the ruling elite no longer bothers with things like amendments. This perspective totally misunderstands the true nature of government, which always wants more money and more power and will stop at nothing to get both. The 16th Amendment was more than a modern additive to an antique document. It was a new philosophy of the fiscal life of the entire country.
Today, the ruling elite no longer bothers with things like amendments. But back in the day, it was different. The amendment was made necessary because of previous court decisions that stated what was once considered a bottom-line presumption of the free society: Government cannot tax personal property. What you make is your own. You get to keep the product of your labors. Government can tax sales, perhaps, or raise money through tariffs on goods coming in and out of the country. But your bank account is off-limits.

The amendment changed that idea. In the beginning, it applied to very few people. This was one reason it passed. It was pitched as a replacement tax, not a new money raiser. After all the havoc caused by the divisive tariffs of the 19th century, this sounded like a great deal to many people, particularly Southerners and Westerners fed up with paying such high prices for manufactured goods while seeing their trading relations with foreign consumers disrupted.
People who supported it – and they were not so much the left but the right-wing populists of the time – imagined that the tax would hit the robber baron class of industrialists in the North. And that it did. Their fortunes began to dwindle, and their confidence in their ability to amass and retain intergenerational fortunes began to wane.

Limit to Accumulation
We all know the stories of how the grandchildren of the Gilded Age tycoons squandered their family heritage in the 1920s and failed to carry on the tradition. Well, it is hardly surprising. The government put a timetable and limit on accumulation. Private families and individuals would no longer be permitted to exist except in subjugation to the taxing state. The kids left their private estates to live in the cities, put off marriage, stopped bothering with all that hearth and home stuff. Time horizons shortened, and the Jazz Age began.

Class warfare was part of the deal from the beginning. The income tax turned the social fabric of the country into a giant lifetime boat, with everyone arguing about who had to be thrown overboard so that others might live.
The demon in the beginning was the rich. That remained true until the 1930s, when FDR changed the deal. Suddenly, the income would be collected, but taxed in a different way. It would be taken from everyone, but a portion would be given back late in life as a permanent income stream. Thus was the payroll tax born. This tax today is far more significant than the income tax.

The class warfare unleashed all those years ago continues today. One side wants to tax the rich. The other side finds it appalling that the percentage of people who pay no income tax has risen from 30% to nearly 50%. Now we see the appalling spectacle of Republicans regarding this as a disgrace that must change. They have joined the political classes that seek advancement by hurting people.
The Payroll Tax

It's extremely strange that the payroll tax is rarely considered in this debate. The poor, the middle class and the rich are all being hammered by payroll taxes that fund failed programs that provide no security and few benefits at all.
It's impossible to take seriously the claims that the income tax doesn't harm wealth creationIt's impossible to take seriously the claims that the income tax doesn't harm wealth creation. When Congress wants to discourage something – smoking, imports, selling stocks or whatever – they know what to do: Tax it. Tax income, and on the margin, you discourage people from earning it.

Tax debates are always about "reform" – which always means a slight shift in who pays what, with an eye to raising ever more money for the government. A far better solution would be to forget the whole thing and return to the original idea of a free society: You get to keep what you earn or inherit. That means nothing short of abolishing the great mistake of 1913.
Forget the flat tax. The only just solution is no tax on incomes ever.

But let's say that one day we actually become safe from the income tax collectors and something like blessed peace arrives. There is still another problem that emerged in 1913. Congress created the Federal Reserve, which eventually developed the power to create all the money that government would ever need, even without taxing.
For the practical running of the affairs of the state, the Fed is far worse than the income tax. It creates the more-insidious tax because it is so sneaky. In a strange way, it has made all the debates about taxation superfluous. Denying the government revenue does nothing to curb its appetites for our liberties and property. The Fed has managed to make it impossible to starve the beast.

Chodorov was correct about the evil of the income tax. Its passage signaled the beginning of a century of despotism. Our property is no longer safe. Our income is not our own. We are legally obligated to turn over whatever our masters say we owe them. You can fudge this point: None of this is compatible with the old liberal idea of freedom.
You doubt it? Listen to Thomas Jefferson from his inaugural address of 1801. What he said then remains true today:"…what more is necessary to make us a happy and a prosperous people? Still one more thing, fellow citizens a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement and shall not take from the mouth of labor the bread it has earned."

Monday, April 24, 2017

The Tale of the Slave

The following passage is from the book "Anarchy, State, and Utopia", pages 290-292 (1974), by Robert Nozick.

Consider the following sequence of cases... and imagine it is about you.

1. There is a slave completely at the mercy of his brutal master's whims. He often is cruelly beaten, called out in the middle of the night, and so on.
2. The master is kindlier and beats the slave only for stated infractions of his rules (not fulfilling the work quota, and so on). He gives the slave some free time.

3. The master has a group of slaves, and he decides how things are to be allocated among them on nice grounds, taking into account their needs, merit, and so on.

4. The master allows his slaves four days on their own and requires them to work only three days a week on his land. The rest of the time is their own.

5. The master allows his slaves to go off and work in the city (or anywhere they wish) for wages. He requires only that they send back to him three-sevenths of their wages. He also retains the power to recall them to the plantation if some emergency threatens his land; and to raise or lower the three-sevenths amount required to be turned over to him. He further retains the right to restrict the slaves from participating in certain dangerous activities that threaten his financial return, for example, mountain climbing, cigarette smoking.

6. The master allows all of his 10,000 slaves, except you, to vote, and the joint decision is made by all of them. There is open discussion, and so forth, among them, and they have the power to determine to what uses to put whatever percentage of your (and their) earnings they decide to take; what activities legitimately may be forbidden to you, and so on.

7. Though still not having the vote, you are at liberty (and are given the right) to enter into the discussions of the 10,000, to try to persuade them to adopt various policies and to treat you and themselves in a certain way. They then go off to vote to decide upon policies covering the vast range of their powers.

8. In appreciation of your useful contributions to discussion, the 10,000 allow you to vote if they are deadlocked; they commit themselves to this procedure. After the discussion you mark your vote on a slip of paper, and they go off and vote. In the eventuality that they divide evenly on some issue, 5,000 for and 5,000 against, they look at your ballot and count it in. This has never yet happened; they have never yet had occasion to open your ballot. (A single master also might commit himself to letting his slave decide any issue concerning him about which he, the master, was absolutely indifferent.)

9. They throw your vote in with theirs. If they are exactly tied your vote carries the issue. Otherwise it makes no difference to the electoral outcome.

The question is: which transition from case 1 to case 9 made it no longer the tale of a slave?"


You can watch a video of this passage at this link:

https://youtu.be/uxRSkM8C8z4

 

Monday, April 10, 2017

2017 Tax Burden by State


The study linked below is authored by Richie Bernardo and was recently published on the WalletHub website.  It has a very interesting table that allows you to sort the tax data by state and also by any of the 6 column headings.


Congratulations to New York coming in 1st place with the highest state tax burden.  I am also proud of my home state, Hawaii, finishing in second place.  I know that our state and local politicians are trying harder and someday we will make it to #1.

Monday, March 13, 2017

Socialism: Force or Fantasy?


An interesting article on a subject that should have died in 1991 was published by Lawrence W. Reed on the Foundation for Economic Education website.  Where are some highlights:

"Some socialists say that they are simply advocating “sharing,” and since socialism’s advocates have good intentions, it must be voluntary and beneficial, too. Except that it never is. If it were voluntary, it wouldn’t be socialism, and if it were beneficial, you wouldn’t need force to create it and sustain it."

"Today’s socialist dreamers think and act as if they just arrived from an alternate universe. A $19 trillion national debt means that the federal government hasn’t spent enough to solve our problems. Stealing money that belongs to others through taxation is perfectly alright if you spend it on good things. People become much more honest, fair, competent, and compassionate once they get elected to office. If you force employers to pay someone more than their services are worth, they will hire them anyway and just eat the difference. Regulations always do good because their advocates mean well. Civilizations rise and become great because they punish success and subsidize failure, then they collapse when they embrace freedom and free enterprise. Each person is entitled to whatever he wants other people to pay for, like free college and birth control."

The article is at this link:


This is the list of recommended reading at the end of the article:
·         TheWelfare State Has Slowly but Surely Eroded Nordic Character by Daniel J. Mitchell
·         “NordicSocialism Isn't the Answer for America” by Nima Sanandaji
·         “The Mythof Scandinavian Socialism” by Corey Iacono
·         “ScandinavianMyths: High Taxes and Big Spending are Popular” by Nima Sanandaji
·         “How LaissezFaire Made Sweden Rich” by Johan Norberg
·         “The Denmark Delusion” by Scott Sumner
·         “’DemocraticSocialism’ Is a Contradiction in Terms” by Sandy Ikeda
·         “DoesDemocracy Lead to Socialism?” by B.K. Marcus
·         “Socialism’sPrescient Critics” by Philip Vander Elst
·         “RenderingUnto Caesar: Was Jesus a Socialist?” by Lawrence W. Reed
·         “MillennialsReject Capitalism in Name but Socialism in Fact” by B.K. Marcus
·         “ActuallyBernie, Markets, Not Socialism, Promote Kindness” by Julian Adorney
·         “SocialismIs War and War Is Socialism” by Steven Horwitz
·         “VenezuelaRuns Out of Toilet Paper, Achieves True Socialism” by David Boaz

Wednesday, March 8, 2017

Five key reasons to pull plug on wind subsidies

Committee For A Constructive Tomorrow (CFACT) published an article by Larry Bell which can be viewed at this link:


The five reasons are listed below, and more details for each are in the article linked above:

1. First, consider that even gargantuan wind installations covering thousands of acres generate only small amounts of unreliable power.

2. Those intermittent outputs require access to a “shadow capacity” which enables utilities to balance power grids when wind conditions aren’t optimum . . . which is most of the time. Anti-fossil energy promoters aren’t eager to mention that those “spinning reserves” (which must equal the total wind capacity) are fueled by the same sort of coal or natural gas turbines that those friendly breezes were touted to replace.

3. A major study of nearly 3,000 on-shore British wind farms found that the turbines have a very short –12- to 15-year– operating life, not the 20- to 25-year lifespans applied in politicized government and industry projections.

4. Along with high life-cycle investment and operations costs, let’s also add environmental costs to the mix. A Sierra Club official described them as giant “Cuisinarts in the sky” for bird and bat slaughters. Other local wind critics have legitimate health concerns about land-based installations. Common symptoms include headaches, nausea, sleeplessness, and ringing in ears resulting from prolonged exposure to inaudibly low “infrasound” frequencies that even penetrate walls.

5. The existence of the entire wind power industry depends upon federal subsidies.

Tuesday, March 7, 2017

ObamaCare-Lite

Michael F. Cannon of The Cato Institute published an article today that evaluates the House of Representatives ObamaCare reform legislation.  The entire article can be read at this link:

https://www.cato.org/blog/house-gop-leaderships-health-care-bill-obamacare-lite-or-worse


Below are some highlights from the conclusion of this article:

The House Republican leadership bill does not replace ObamaCare. It merely applies a new coat of paint to a building that Republicans themselves have already condemned. Since the most important asset health reformers have is unified Republican opposition to ObamaCare, at least in theory, it would set the cause of affordable health care back a decade or more if Republicans end up coalescing around this bill and putting a Republican imprimatur on ObamaCare’s core features. If this is the choice, it would be better if Congress simply did nothing.

Making health care better, more affordable, and more secure requires first repealing all of ObamaCare’s regulations, mandates, subsidies, and taxes. Next, Congress should block-grant the Medicaid program, giving each state a fixed sum of money that does not change from year to year, combined with full flexibility to target those funds to the truly needy.

Finally, and crucially, Congress needs to enact reforms that make health care more affordable, rather than just subsidize unaffordable care. To make health insurance more affordable, Congress should free consumers and employers to purchase health insurance licensed by states other than their own. To drive down health care prices, Congress should expand existing tax-free health savings accounts into “large” HSAs. Large HSAs would be a larger effective tax cut than the Reagan and Bush tax cuts combined, adding $13,000 to the wages of a typical worker with family coverage. Large HSAs would drive down prices by making consumers cost-conscious at every margin, and would reduce the problem of preexisting conditions by freeing consumers to buy portable coverage that stays with them between jobs. Sen. Jeff Flake (R-AZ) and Rep. Dave Brat (R-VA) have introduced legislation to create Large HSAs.

Thursday, March 2, 2017

Protectionism

Tariffs and trade sanctions are experiencing a resurgence in popularity.  Mark J. Perry has recently published an article in TheAmerican Enterprise Institute blog AEIdeas that examines how this is possible given the stark economic reality of the damage that protectionism causes to the host nation.  The following excerpt from this article describes the damage caused by tariffs:

"It’s a scientifically and mathematically provable fact that all tariffs, at any time and in any country, will harm economic growth, eliminate net jobs, destroy prosperity, and lower the standard of living of the protectionist country because tariffs are guaranteed by the ironclad laws of economics to generate costs to consumers that outweigh the benefits to producers, i.e. tariffs will always impose deadweight losses on the protectionist country..."  

The full article can be viewed at this link:

25 reasons why protectionism is taken seriously when its actually a form of economic suicide