Difficult sheep to shear

Alan Reynolds of the Cato Institute had the following article published in the Wall Street Journal on 3/30/10:


http://www.cato.org/pub_display.php?pub_id=11631

This article lists all of the health care tax increases that will affect individuals in the highest tax brackets. Alan has it exactly correct when he makes the following statements:

Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.

It won't work. It never works.

Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn.

In short, the belief that higher tax rates on the rich could eventually raise significant sums over the next decade is a dangerous delusion, because it means the already horrific estimates of long-term deficits are seriously understated. The cost of new health-insurance subsidies and Medicaid enrollees are projected to grow by at least 7% a year, which means the cost doubles every decade — to $432 billion a year by 2029, $864 billion by 2039, and more than $1.72 trillion by 2049. If anyone thinks taxing the rich will cover any significant portion of such expenses, think again.

The federal government has embarked on an unprecedented spending spree, granting new entitlements in the guise of refundable tax credits while drawing false comfort from phantom revenue projections that will never materialize.

The basic economic principle of lower tax revenue generated by higher tax rates was explained by Economist Arthur Laffer. For a brief explanation of the “Laffer Curve” see the following:

http://www.conservapedia.com/Laffer_curve

The new public enemies

Unintended consequences

The debate and passage of the federal health care legislation has already produced 2 unintended consequences.


The first consequence is a grassroots revolt by enraged citizens. This revolt will manifest itself in the vote totals during the midterm election in November. Supporters of this health care legislation will find that they have drunk from a poisoned chalice.

The second consequence is of far greater significance. State legislatures are passing laws banning the enforcement of the federal health care act. Virginia and Idaho have passed laws that expressly prevent the enforcement of federal health care penalties. The Virginia law is as follows:

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding a section numbered 38.2-3430.1:1 as follows:

§ 38.2-3430.1:1. Health insurance coverage not required.

No resident of this Commonwealth, regardless of whether he has or is eligible for health insurance coverage under any policy or program provided by or through his employer, or a plan sponsored by the Commonwealth or the federal government, shall be required to obtain or maintain a policy of individual insurance coverage. No provision of this title shall render a resident of this Commonwealth liable for any penalty, assessment, fee, or fine as a result of his failure to procure or obtain health insurance coverage.

The Idaho law is longer and may be read at the following page:

http://legislature.idaho.gov/legislation/2010/H0391.pdf

The most important sections of the Idaho law are these:

LEGISLATURE OF THE STATE OF IDAHO

HOUSE BILL NO. 391

STATEMENT OF PUBLIC POLICY. (1) The power to require or regulate a person’s choice in the mode of securing health care services, or to impose a penalty related thereto, is not found in the Constitution of the United States of America, and is therefore a power reserved to the people pursuant to the Ninth Amendment, and to the several states pursuant to the Tenth Amendment. The state of Idaho hereby exercises its sovereign power to declare the public policy of the state of Idaho regarding the right of all persons residing in the state of Idaho in choosing the mode of securing health care services.

(2) It is hereby declared that the public policy of the state of Idaho, consistent with our constitutionally recognized and inalienable rights of liberty, is that every person within the state of Idaho is and shall be free to choose or decline to choose any mode of securing health care services without penalty or threat of penalty.

This second consequence can be summarized as the States Rights Movement. The foundation for this movement is expressed in the Idaho legislation paragraph 1.

10 amendments were added to the U.S. Constitution on 12/5/1791. Collectively these amendments have become known as the Bill of Rights. The first and second amendments are well known to most citizens and are constantly discussed in the media. The ninth and tenth amendments are less well known and rarely discussed. These two amendments set the fundamental ground rules for the federal government’s activity.

Amendment 9:

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Amendment 10:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The States Rights movement is in its infancy. According to the American Legislative Exchange Council, 37 states currently have legislation under consideration that is similar to those listed above. You can learn much more about this movement at the following websites:
 
http://www.alec.org/

http://www.tenthamendmentcenter.com/

Speak no evil

The following Chicago Tribune story describes an almost daily routine for Chicago politicians, granting favors in return for bribes:

http://www.chicagotribune.com/news/local/ct-met-developer-corruption-carothers-19-20100318,0,7896465.story

The story itself is as old as the incorporation of Chicago. An alderman accepts a bribe to rezone property for a developer. This process of aldermanic enrichment is written into the City of Chicago zoning laws. All zoning changes must first be approved by the alderman before it can be considered by the rest of the zoning governing boards.

 

Why should we examine this particular case of a developer who bribed an alderman? I find the details of this trial fascinating. In this trial the developer Calvin Boender was convicted of paying Alderman Isaac "Ike" Carothers a $38,000.00 bribe. Alderman Carothers has already been separately tried and convicted for accepting this bribe. The interesting part of the Boender trial is that the federal prosecutors did not call Alderman Carothers to testify against Calvin Boender. The following is a quote from the news article:

 

• Carothers pleaded guilty to corruption charges last month and resigned as 29th Ward alderman. He has been cooperating with the FBI's investigation for months, working undercover at times. In a surprise, prosecutors decided not to call him as a witness at the trial.

 

Why would the prosecutors choose not to have their star witness testify? The Tribune offers this as an answer:

 

• Veteran lawyers said the decision not to put Carothers on the witness stand may have been a signal that prosecutors were concerned about his credibility, the baggage he brought or what he might say on the stand.

 

In my opinion the concern was not about the alderman’s credibility or any baggage that he would bring. The prosecutors could not allow Alderman Carothers to testify because of what he might say. The following paragraphs from the Tribune story contain the smoldering embers of testimony that could ignite a political firestorm:

 

• In 2008 the Tribune chronicled how Boender eventually got his way on Galewood Yards after enlisting the support of Carothers and U.S. Rep. Luis Gutierrez, D-Ill. Gutierrez, who had just received a $200,000 loan from Boender for his own real estate investments, personally lobbied Mayor Richard Daley. The congressman has not been charged with any wrongdoing.

• Daley's and Gutierrez's names came up during the trial when a former city planning commissioner testified about a meeting involving the two and Boender in 2004-05 at which Boender brought a model of his 50-acre project.

• The Tribune reported this week that FBI agents and other federal authorities had secretly interviewed Daley in 2008 at a downtown hotel about the politicians who supported the Galewood Yards project. Daley had no comment Thursday on Boender's conviction.

 

My conclusion is that Alderman Carothers was not called to testify because he has first hand evidence of malfeasance by U.S. Representative Luis Gutierrez and possibly by Mayor Daley himself. The question that we now must answer is this:

 

Is the U.S. Attorney’s office holding back on indictment of Gutierrez and possibly Daley because their investigation is ongoing and these indictments will occur at sometime in the future, or have they been called off by someone higher up in Washington?

Dreams from my public employee unions

Illinois Governor Pat Quinn is proposing a 33% tax increase. Some of the details can be found in this Chicago Tribune article:

http://www.chicagotribune.com/news/elections/ct-met-quinn-budget-speech-0311-20100310,0,4512692.story?

Think of the reaction you would receive if you were to ask your employer today for a 33% raise, or if you were to tell your customers that you will be raising your prices or fees by 33%. Only politicians and government employees live in a world where such fantasies could come true. This passage from the article is truly at odds with reality:


“The Illinois Federation of Teachers welcomed Quinn's call for a tax increase, but said it's not large enough to deal with the state's overall money problems.”

So there you have it, the government employees do not think that a 33% tax increase is enough to satisfy their gluttony.

The Governor is selling this outrage to the taxpayers of Illinois in the name of education for the children. It is a minor oversight for the Governor not to mention that the State of Illinois does not pay one dime for education of children in grade school or high school. The state is only responsible for some community colleges and the state university system. The primary education system grades 1 through 12 are paid for by local governments primarily by real estate taxes. The burden on local taxpayers to support primary education is overwhelming. This crushing real estate tax allows the Governor to imply that the state income tax is now low at the 3% level and that he is only proposing an additional 1% increase.

Resist this madness. Just say no to raising taxes.