Archive for May, 2009
Marginal Tax on Corporate Profits was 74.2% in the 1st Quarter
From the Bureau of Economic Analysis news release of May 29:
Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $42.6 billion in the first quarter. . . Taxes on corporate income increased $31.6 billion. . . [therefore] profits after tax . . . increased $11.1 billion.
In other words, taxes extracted 74.2% of any added (marginal) corporate earnings, leaving only scraps for stockholder.
Companies that lost money, on the other hand, were often bailed out and/or nationalized.
Why bother even trying to maximize profits or minimize losses?
Filed under: Finance, Banking & Monetary Policy; Tax and Budget Policy
Here Comes World Government
Colleague Dan Mitchell sent me this heart-warming press release from the Organization for Economic Cooperation and Development, an international government organization.
Tax collectors worldwide to co-operate in revenue-raising to offset fiscal deficits.
The sub-heading is “Tax Commissioners Worldwide Join Forces To Tackle Fiscal Challenges Posed By The Financial And Economic Crisis.”
Crazy me, but I thought the way to get out of the economic crisis was for businesses and entrepreneurs to start investing and hiring again. But no, the key is apparently to launch a global drive to drain more money from the damaged private sector and fatten up the coffers of bloated governments.
The chair of the OECD’s Forum on Tax Administration, Pravin Gorhan, helpfully points out in the press release: “Tax plays a fundamental role in development through mobilising revenue, promoting growth, reducing inequalities and reinforcing governments’ legitimacy, as well as achieving a fair sharing of the costs and benefits of globalisation.”
You don’t have to be a libertarian to see what a government-centric view these OECD officials have. Taxes promote growth? I don’t think so. And we don’t need to hear about “reinforcing governments’ legitimacy” from an unelected government body that has been far overreaching its authority to force policy changes on the democratically elected governments of lower-tax nations.
If you don’t think this sort of worldwide police effort jibes with the American ideals of life, liberty, and the pursuit of happiness, you should contact your member of Congress because U.S. taxpayers pay one-fourth the budget of the Paris-based OECD.
The Price of Ignorance
We here at Cato’s Center for Educational Freedom spend a lot of time just trying to help people get their facts straight. You know, providing information that clearly shows that government schools are not the foundation of American democracy, or itemizing programs to show that school choice is not a political failure. That sort of thing.
Well, a new study in the journal Education Next demonstrates why just getting people solid information is so important: When the public has just a few basic facts about such things as public school expenditures or teacher salaries, support for heaping more dough on our sinkhole public schools takes a pretty big dip.
On spending, investigators William G. Howell and Martin R. West found that people provided with actual per-pupil expenditure data for their districts were significantly less likely to support increased spending, or to think that increased spending would improve student learning, than were respondents not given such data. Only 51 percent of respondents informed about actual outlays thought spending should be increased, versus 61 percent of uninformed respondents, and only 55 percent of informed respondents were confident that more spending would improve student learning (versus 60 percent of uninformed). Those levels are still way too high in light of the at-best very weak correlation between spending and achievement, but they do show that when people have good data to go on they tend to approach spending more rationally.
How about teacher salaries? Unfortunately, Howell and West didn’t inform respondents about teacher pay using hourly earnings, which in light of the relatively small number of hours teachers work is the fairest way to judge how well they are paid. The effect of knowing even annual salaries, however, is telling: While 69 percent of uninformed respondents supported increasing educator salaries, only 55 percent of informed people thought teacher salaries should be bolstered.
So when it comes to American education, it seems a little knowledge, far from being a dangerous thing, can be a pretty big step in the right direction.
Week in Review: Sotomayor, North Korean Nukes and The Fairness Doctrine
Obama Picks Sotomayor for Supreme Court
President Obama chose federal Judge Sonia Sotomayor on Tuesday as his nominee for the U.S. Supreme Court, the first Hispanic Latina to serve on the bench.
On Cato’s blog, constitutional law scholar Roger Pilon wrote, “President Obama chose the most radical of all the frequently mentioned candidates before him.”
Cato Supreme Court Review editor and senior fellow Ilya Shapiro weighed in, saying, “In picking Sonia Sotomayor, President Obama has confirmed that identity politics matter to him more than merit. While Judge Sotomayor exemplifies the American Dream, she would not have even been on the short list if she were not Hispanic.”
Shapiro expands his claim that Sotomayor was not chosen based on merit at CNN.com:
In over 10 years on the Second Circuit, she has not issued any important decisions or made a name for herself as a legal scholar or particularly respected jurist. In picking a case to highlight during his introduction of the nominee, President Obama had to go back to her days as a trial judge and a technical ruling that ended the 1994-95 baseball strike.
Pilon led a live-chat on The Politico’s Web site, answering questions from readers about Sotomayor’s record and history.
And at The Wall Street Journal, Cato senior fellow John Hasnas asks whether “compassion and empathy” are really characteristics we want in a judge:
Paraphrasing Bastiat, if the difference between the bad judge and the good judge is that the bad judge focuses on the visible effects of his or her decisions while the good judge takes into account both the effects that can be seen and those that are unseen, then the compassionate, empathetic judge is very likely to be a bad judge. For this reason, let us hope that Judge Sotomayor proves to be a disappointment to her sponsor.
North Korea Tests Nukes
The Washington Post reports, “North Korea reportedly fired two more short-range missiles into waters off its east coast Tuesday, undeterred by the strong international condemnation that followed its detonation of a nuclear device and test-firing of three missiles a day earlier.”
Writing in the National Interest online, Cato scholar Doug Bandow discusses how the United States should react:
Washington has few options. The U.S. military could flatten every building in the Democratic People’s Republic of Korea (DPRK), but even a short war would be a humanitarian catastrophe and likely would wreck Seoul, South Korea’s industrial and political heart. America’s top objective should be to avoid, not trigger, a conflict. Today’s North Korean regime seems bound to disappear eventually. Better to wait it out, if possible.
On Cato’s blog, Bandow expands on his analysis on the best way to handle North Korea:
The U.S. should not reward “Dear Leader” Kim Jong-Il with a plethora of statements beseeching the regime to cooperate and threatening dire consequences for its bad behavior. Rather, the Obama administration should explain, perhaps through China, that the U.S. is interested in forging a more positive relationship with [the] North, but that no improvement will be possible so long as North Korea acts provocatively. Washington should encourage South Korea and Japan to take a similar stance.
Moreover, the U.S. should step back and suggest that China, Seoul, and Tokyo take the lead in dealing with Pyongyang. North Korea’s activities more threaten its neighbors than America. Even Beijing, the North’s long-time ally, long ago lost patience with Kim’s belligerent behavior and might be willing to support tougher sanctions.
Cato Media Quick Hits
Here are a few highlights of Cato media appearances now up on Cato’s YouTube channel:
- Ted Galen Carpenter discuss the North Korean missile tests on WOR radio.
- On Fox News, Chris Edwards disputes the idea of a federal sales tax.
- Gene Healy comments on the future of Guantanamo detainees on BBC.
- On CNBC, Dan Mitchell explains why California is like the “France of America.”
- In Friday’s Cato Daily Podcast, John Samples discusses how at least three presidents used the Fairness Doctrine to squelch dissenting speech.
Filed under: Cato Publications; Foreign Policy and National Security; Government and Politics; Law and Civil Liberties
“We Don’t Want Venezuela to Become a Totalitarian Communist State”
“We don’t want Venezuela to become a totalitarian communist state,” declared Peruvian novelist Mario Vargas Llosa yesterday in Caracas at the opening of a major conference organized by the market-liberal think tank, CEDICE. I’m in Venezuela this week with my Cato colleagues Juan Carlos Hidalgo and Gabriela Calderon to participate in the event and to run a seminar for 60 students and young leaders from Venezuela, which took place earlier this week.
Vargas Llosa’s concern is not about some remote possibility. Nor is it the opinion of an isolated intellectual detached from reality. His comments received sustained applause from the over-flow crowd of the 600 people in attendance and he has been mobbed by the press since he arrived here yesterday. Venezuela is not yet a full fledged dictatorship, evidenced by the fact that we are meeting here with leading liberal intellectuals from the region. But the environment of intolerance, arbitrary rule, and state vilification of anybody who disagrees with Hugo Chavez’s march toward socialism has worsened at an alarming rate in recent months.
Democratic Deficit Hawks?
In a hagiographic profile of Obama budget director Peter Orszag, Ryan Lizza of the New Yorker writes of the “pressure” he might get from congressional deficit hawks:
The respective heads of the House and Senate Budget Committees, John Spratt, Jr., of South Carolina, and Kent Conrad, of North Dakota, have spent years trying to control the deficit…
Kent Conrad, the chairman of the Senate Budget Committee, has made eradicating the federal budget deficit his life’s work.
Now, you’d think that if the ranking Democrats on the congressional budget committees had made deficit reduction their life’s work, the budget wouldn’t have, you know, skyrocketed over the past decade and more. So let’s go to the tape.
The National Taxpayers Union has given Spratt an F for his votes on federal spending every year for more than a decade. (He had a couple of D’s earlier in his career.) In the past two years, he voted with the taxpayers 5 and 6 percent of the time. He voted for spending bills more often than the average member of the House, and more often than the average Democrat. Some deficit hawk!
Conrad has an almost identical record — almost all F’s, with ratings of 5 and 6 in the past two years.
By another measurement, in the 109th Congress (the most recent for which these calculations are available), Spratt voted for $184 billion in additional spending and voted to cut — drum roll, please — $4.8 billion in spending. Conrad voted to cut $8 billion, but he also voted to hike spending by $362 billion. In what world are these guys “trying to control the deficit”?
NTU does have one analysis that makes Conrad and Spratt look a little better: the bills they have sponsored or cosponsored. Spratt introduced 32 bills that would increase spending and 2 that would cut spending. While that may not sound very thrifty, it compares favorably to, say, Hilda Solis’s 110 bills to increase spending or Barney Frank’s 112. And the total new spending in Spratt’s bills — $7 billion — is positively Randian. Conrad’s record is similar — 36 bills to increase spending by $8 billion, which compares very favorably to, for instance, Hillary Clinton and Thad Cochran.
Apparently Conrad and Spratt don’t introduce too many spending bills, but they vote for all the ones that get to the floor. Not exactly a strategy that holds the budget down. The search for a fiscally conservative Democrat continues.
The Health Care Battle Begins
Sen. Edward Kennedy (D-Mass.) has begun circulating drafts of his proposed health care reform legislation. Initial reports, including an op-ed in the Boston Globe by Kennedy himself, suggest that the bill will contain every one of the bad ideas that I outlined in my recent Policy Analysis on what to expect from Obamacare.
Among other things, the Kennedy bill will call for:
- An employer mandate;
- An individual mandate;
- A so-called “Public Option,” a Medicare-like plan that will compete with private insurance;
- The use of comparative-effectiveness/cost-effectiveness research to restrain costs;
- Subsidies for families earning as much as 500% of the poverty level ($110,250 for a family of four).
- Insurance regulation, including guaranteed issue and community rating. (He would also establish a Massachusetts-style Connector); and
- Government-directed health IT.
There’s no indication yet of how much the plan would cost or how Sen. Kennedy plans to pay for it.
The bill will be formally presented to Senator Kennedy’s Committee on Health, Education, Labor & Pensions (HELP) sometime next week. Hearings could be held around June 10, and committee “mark up” could begin on June 17.
Senate Finance Committee chairman Max Baucus (D-Mont.) is expected to introduce his health care bill shortly before the Finance committee begins its scheduled mark up on June 10.
Meanwhile President Obama’s campaign apparatus is planning rallies and demonstrations around the country to build support for health care reform.
The battle over the future of health care in this country has begun.
It Is a Checkpoint, After All
The Philadelphia Inquirer asks why the TSA didn’t catch Bonnie Sweeten absconding to Orlando at the airport after faking her own and her daughter’s abduction.
The TSA and FBI are right: it’s not airport security’s job to look for people like Bonnie Sweeten. But they will quickly agree to make it part of their mission when newspapers and Members of Congress start to say they should. This is how a nominal airline security program transmogrifies into a general law enforcement checkpoint, and the noose tightens on your right to travel.
Filed under: Law and Civil Liberties; Telecom, Internet & Information Policy
Cheney’s Worldview
Former vice president Richard Cheney gave his big address on national security (pdf) over at AEI last week. He covered a lot of ground, but this passage, I think, tells us quite a bit about Cheney’s worldview:
If fine speech-making, appeals to reason, or pleas for compassion had the power to move [al-Qaeda], the terrorists would long ago have abandoned the field. And when they see the American government caught up in arguments about interrogations, or whether foreign terrorists have constitutional rights, they don’t stand back in awe of our legal system and wonder whether they had misjudged us all along. Instead the terrorists see just what they were hoping for — our unity gone, our resolve shaken, our leaders distracted. In short, they see weakness and opportunity.
So we shouldn’t let the terrorists see us get “caught up in arguments” about the wisdom of our foreign policy, about whether our country should go to war, about our country’s treaty obligations, about the parameters of government power under our Constitution? What is this former vice president thinking?
Does it matter if Charles Manson appreciates the fact that he got a trial instead of a summary execution? No. It does not matter what’s in that twisted head of his. Same thing with bin Laden. The American military should make every effort to avoid civilian casualties even if bin Laden targets civilians. Similarly, it does not matter if bin Laden scoffs at the Geneva Convention as a sign of ”weakness.” The former VP does not get it. It is about us, not the terrorists.
An obsession with the mentality of the enemy (what they see; what they hope for, etc.) can distort our military and counterterrorism strategy (pdf) as well. Cheney wants to find out what bin Laden’s objective is and then thwart it. I certainly agree that gathering intelligence about the enemy is useful, but Cheney seems so obsessed that he wants to thwart al-Qaeda’s objectives — even if some pose no threat to the USA, and even if some of al-Qaeda’s objectives are pure folly.
Filed under: Foreign Policy and National Security; Law and Civil Liberties
Cato Scholar Brings Administration to Heel
Last week, I complained loudly that the “Speeches” section of the Whitehouse.gov Web site had only four speeches on it, the most recent coming at the end of February.
And, voila, today the site is transformed. A new “speeches and remarks” page at that location has a 28-page list of official utterances from President Obama since he took office.
Does it matter a lot that people can now more easily find what President Obama has said? It kinda does. Americans will go a little more often right to the source rather than relying on media interpretations of what the president is saying. In the aggregate, we’ll have a better informed, slightly more skeptical, and more empowered populace.
Kudos to the folks at the White House for making the change. In retrospect, it appears that some arcane difference between “speeches” and “remarks” kept many important things the president says off the “Speeches” page. For my part, a 6,500-hundred word oration on national security delivered from behind a lectern is a speech, but the White House calls such a thing “remarks.”
Filed under: Government and Politics; Telecom, Internet & Information Policy
California, Here We Come
Next week the Cato Institute will hold seminars in Los Angeles and Santa Barbara. The program is the same both places.
Leda Cosmides, one of the world’s leading evolutionary psychologists, will kick things off at 11 a.m. with a talk on our intuitive ideas about fairness and justice. Then Cato’s Michael Tanner will warn about the horrors of Obamacare and Dan Mitchell will tell us that it doesn’t matter because the country’s going to be bankrupt anyway. Former California congressman and Senate candidate, and potential governor, Tom Campbell will wrap things up after lunch with a discussion of the state’s fiscal predicament.
A sobering program for sobering times. Sign up now!
Taxpayers and the Federal Diary
The Federal Diary column in the Washington Post is a curious piece of newspaper real estate. Most newspaper columns are aimed at the broad general public, but this column is aimed directly at the few hundred thousand government workers in the DC region. The result is that it takes a very government- and union-centric view of the world. The fact that the federal civilian workforce costs taxpayers an enormous $300 billion or so every year is beside the point for the column.
In a briefing with reporters yesterday, the head of the Office of Personnel Management complained about a Lou Dobbs television bit that featured this data that I assembled from the Bureau of Economic Analysis. The Federal Diary columnist called me yesterday about the data, and I explained to him the shortcomings of the OPM claims that federal workers are underpaid.
Unfortunately, the Federal Diary today simply parrots the OPM’s claims, calling the Dobbs/Edwards/BEA data “misleading.” Yet this data clearly shows that federal compensation has taken off like a rocket this decade.
Today’s column, like many of the Federal Diary columns, is about how to improve the pay, benefits, and working conditions of federal workers. What about the taxpayers who foot the bill? To provide some balance, the Post ought to at least have a side-by-side column entitled “Federal Taxpayers’ Diary.”
Prop 13 and the California Fiscal Crisis
In the Washington Post today, columnist Harold Meyerson blames 1978’s Proposition 13 for today’s budget mess in California. That claim is not supported by the data.
First note that California’s current fiscal crisis is in its state budget. Prop 13 puts restraints on local property taxes.
Second, the most recent Census data show that total state and local general revenues in California were $293 billion in fiscal 2006. Of that, $37 billion was property tax revenue, or just 13 percent of the total. Meyerson is arguing that that level of property taxes is too low, but it is hard to see how the recent crisis could have been caused by a three-decade old constraint on such a small fraction of overall state and local revenues.
Third, on a per-capita basis, California is in the middle of the pack on property tax collections, thus even though property taxes were cut three decades ago, California governments still get a decent pound of flesh from property owners in the state.
Fourth, Prop 13 placed a supermajority requirement on state tax increases, which Meyerson laments. But that restraint has certainly not led to undertaxation in California. After an initial dip in total state/local tax revenues as a share of income in the late-1970s, California’s tax take has been steady or rising. Estimates for 2008 put the state sixth highest with respect to state and local taxes as a percentage of state incomes.
Virginians’ Happiness Frustrates DMV
Showing off those pearly whites frustrates facial recognition software used by the Virginia Department of Motor Vehicles, so DMV workers are instructing motorists not to smile for their driver license photos. It’s a story worthy of The Onion, but it’s apparently true.
Facial recognition is just another way that governments are looking to keep tabs on citizens and residents. The need for specific no-smiling instructions will recede over time as national ID systems facilitate government control and make life in America naturally unhappy.
Secretary of Behavior Modification
George Will recently accused Obama’s token Republican, Transportation Secretary Ray LaHood, of being the “Secretary for Behavior Modification” because of his support for programs designed to coerce people into driving less. Speaking before the National Press Club on May 21, LaHood pleaded guilty as charged.
In the video of LaHood’s presentation, he was asked if the administration’s “livability initiative” is really “an effort to make driving more tortuous and to coerce people out of their cars.” His answer: “It is a way to coerce people out of their cars, yeah.”
The next question was, “Some conservative groups are wary of the livable communities program, saying it’s an example of government intrusion into people’s lives. How do you respond?” His complete answer: “About everything we do around here is government intrusion in people’s lives.”
Euro VAT for America?
Desperate for fresh revenues to feed the giant spending appetite of President Obama, Democratic policymakers are talking up ‘tax reform’ as a way to reduce the deficit. Some are considering a European-style value-added tax (VAT), which would have a similar effect as a national sales tax, and be a large new burden on American families.
A VAT would raise hundreds of billions of dollars a year for the government, even at a 10-percent rate. The math is simple: total U.S. consumption in 2008 was $10 trillion. VATs usually tax about half of a nation’s consumption or less, say $5 trillion. That means that a 10% VAT would raise about $500 billion a year in the United States, or about $4,300 from every household. Obviously such a huge tax hit would fundamentally change the American economy and society, and for the worse.
Some fiscal experts think that a VAT would solve the government’s budget problems and reduce the deficit, as the Washington Post noted yesterday. That certainly has not happened in Europe where the average VAT rate is a huge 20 percent, and most nations face large budget deficits just as we do. The hard truth for policymakers to swallow is that the only real cure for our federal fiscal crisis is to cut spending.
Liberals like VATs because of the revenue-raising potential, but some conservatives are drawn to the idea of using VAT revenues to reduce the corporate tax rate. The Post story reflected this in noting “A 21 percent VAT has permitted Ireland to attract investment by lowering the corporate tax rate.” That implies that the Irish government lost money when it cut its corporate rate, but actually the reverse happened in the most dramatic way.
Ireland installed a 10% corporate rate for certain industries in the 1980s, but also steadily cut its regular corporate rate during the 1990s. It switched over to a 12.5% rate for all corporations in 2004. OECD data show that as the Irish corporate tax rate fell, corporate tax revenues went through the roof — from 1.6% of GDP in 1990, to 3.7% in 2000, to 3.8% in 2006.
In sum, a VAT would not solve our deficit problems because Congress would simply boost its spending even higher, as happened in Europe as VAT rates increased over time. Also, a VAT is not needed to cut the corporate income tax rate because a corporate rate cut would be self-financing over the long-term as tax avoidance fell and economic growth increased.
What Is “De-Identified”?
On a post at the TechLiberationFront blog, I discuss the fluidity of important concepts in information policy — and catch a friendly organization disagreeing with itself.
The upshot? “Until more intellectual groundwork is laid, information policy arguments before regulators, lawmakers, and courts will not rest on solid footing.”
100 Days, 100 Projects, and . . .
More than $1,000 per U.S. family in spending under the Recovery Act.
Filed under: Tax and Budget Policy; Telecom, Internet & Information Policy
Greedy Politicians Intrigued by Value-Added Tax to Finance European-Style Welfare State in America
The Washington Post reports that there is growing interest among politicians for a form of national sales tax known as the value-added tax (VAT). But rather than use the VAT to replace the income tax, the politicians want a new source of revenue to expand the burden of government. The story explains:
With… President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax. Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need… At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate. “There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview. “I think a VAT and a high-end income tax have got to be on the table.” …”While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers,” said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag. Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book “Health Care, Guaranteed.” Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT. “Everybody who understands our long-term budget problems understands we’re going to need a new source of revenue, and a VAT is an obvious candidate,” said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan.
Not surprisingly, the Washington Post did not bother to quote any free-market people who oppose giving politicians a new source of money. For what it is worth, I wrote a piece for National Review in 2005 that explains why a VAT is a terrible idea. The core arguments are just as relevant today as they were then:
A VAT might have some theoretically attractive features, but it is a perniciously effective way of raising revenues and inevitably leads to bigger government. The best evidence comes from Europe. Back in the mid-1960s, the burden of government in Europe wasn’t that much higher than it was in the United States. Tax revenues consumed about 30 percent of gross domestic product in Europe. The U.S. had a small advantage: The tax burden, including state and local governments, was about 27 percent of GDP. But then European governments started adopting the VAT. Denmark was the first to do so in 1967. France and Germany followed, with many other European nations imposing the tax within 5 years. For politicians, the VAT was great news. Besides being a new source of revenue, the VAT has been a disturbingly easy tax to increase since it’s built into the price of products and hidden from consumers. Moreover, even small increases generate a big pile of revenue because the tax base is so broad. The tax has become so easy to raise that VAT rates in Europe average more than 20 percent. For taxpayers, however, the news has been disastrous. Thanks to this levy, the burden of government in Europe today is much higher than it is in the U.S. On average, taxes consume about 41 percent of Europe’s economic output. While other taxes have also climbed, the VAT certainly has helped finance the explosion of social welfare spending that creates such a drag on European economies. In the U.S., by contrast, the total tax burden as a share of GDP is about where it was 40 years ago — 27 percent… Many European governments…claimed that more destructive taxes would be reduced or repealed once the VAT was implemented. In the short term, this was true: As late as 1975, taxes on income and profits were lower in the EU than they were in the U.S. But this was a transitory phenomenon. Income-tax rates quickly began climbing and almost immediately jumped above U.S. levels. Ironically, the VAT facilitated higher tax rates on income since politicians often argued that a higher VAT had to be accompanied by higher income-tax burdens to ensure the tax burden wasn’t being shifted to lower-income taxpayers. There is only one scenario that would make a VAT acceptable. If U.S. lawmakers were willing to repeal the 16th Amendment and abolish all taxes on income, a VAT would be an acceptable risk. But until that happens, taxpayers should vigorously resist the Europeanization of America.
Filed under: International Economics and Development; Tax and Budget Policy
A Compelling Government Interest in… Fabulous Drapes!
Libertarians often disagree with their non-libby friends about the need for government-mandated occupational licensing in fields like medicine. The idea behind such licensing is that the government has a compelling interest in protecting citizens and that licensing actually achieves that end. The evidence is not as cut and dried on the latter point as many people assume, but at least there’s enough meat there to warrant a discussion.
Whatever you think about occupational licensing in the context of medicine, there’s one field where the government’s “compelling interest” — and ability to successfully execute on it – is particularly hard to defend: interior design.
In three U.S. states, government officials are, right now, “protecting” their citizens from bad Feng Shui, misguided uses of prints with plaids, gauche arrangements of bric-a-brac, and other crimes against fabulosity. No one in Florida, for instance, can call himself an interior designer lest he receives the official imprimatur of the state. The Institute for Justice has filed suit to overturn the licensing requirement. Imagine the harm to Floridians if they succeed….
No. I can’t imagine any either.
In this field, more than any other, the real reason for most occupational licensing becomes apparent: cartelization to protect incumbent businesses from competition.
UPDATE: Check out this video by ReasonTV about the interior design license laws around the country.
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