I like Bitcoin because it decentralizes money. I like it because it is a great experiment in free banking, in free market money. I like it because it directly challenges the central banks.
That last reason is why the government is doing all that it can to kill Bitcoin in the crib.
Would I put my life’s savings into Bitcoin? Nope. But some money, enough to make it interesting? Sure. Many other people feel the same as I do. And the Feds do not like that one bit.
View full post on AgainstCronyCapitalism.org
OECD Study Admits Income Taxes Penalize Growth, Acknowledges that Tax Competition Restrains Excessive Government
Daniel J. Mitchell
I have to start this post with a big caveat.
I’m not a fan of the Paris-based Organization for Economic Cooperation and Development. The international bureaucracy is infamous for using American tax dollars to promote a statist economic agenda. Most recently, it launched a new scheme to raise the tax burden on multinational companies, which is really just a backdoor way of saying that the OECD (and the high-tax nations that it represents) wants higher taxes on workers, consumers, and shareholders. But the OECD’s anti-market agenda goes much deeper.
- The OECD has allied itself with the so-called Occupy movement to push for bigger government and higher taxes.
- The OECD, in an effort to promote redistributionism, has concocted absurdly misleading statistics claiming that there is more poverty in the United States than in Greece, Hungary, Portugal, or Turkey.
- The OECD is pushing a “Multilateral Convention” that is designed to become something akin to a World Tax Organization, with the power to persecute nations with free-market tax policy.
- The OECD supports Obama’s class-warfare agenda, publishing documents endorsing “higher marginal tax rates” so that the so-called rich “contribute their fair share.”
- The OECD advocates the value-added tax based on the absurd notion that increasing the burden of government is good for growth and employment.
Now that there’s no ambiguity about my overall position, I can admit that the OECD isn’t always on the wrong side. Much of the bad policy comes from its committee system, which brings together bureaucrats from member nations.
The OECD also has an economics department, and they sometimes produce good work. Most recently, they produced a report on the Swiss tax system that contains some very sound analysis, including a rejection of Obama-style class warfare and a call to lower income tax burdens.
Shifting the taxation of income to the taxation of consumption may be beneficial for boosting economic activity (Johansson et al., 2008 provide evidence across OECD economies). These benefits may be bigger if personal income taxes are lowered rather than social security contributions, because personal income tax also discourages entrepreneurial activity and investment more broadly.
I somewhat disagree with the assertion that payroll taxes do more damage than VAT taxes. They both drive a wedge between pre-tax income and post-tax consumption. But the point about income taxes is right on the mark.
Evidence also suggests that tax autonomy may lead to a smaller and more efficient public sector, helping to limit the tax burden and improve tax compliance… Efficiency-raising effects of tax autonomy and tax competition on the public sector have also been reported in empirical research with Norwegian and German data… Tax autonomy generates opportunities to choose the level of public service provision and taxation, although in practice such “voting with your feet” seems mostly limited to young, highly educated and high-income households. Decentralised tax setting also fosters benchmarking of the performance of jurisdictions belonging to the same government level by voters, even in the absence of “voting with your feet”.
The report also notes that tax competition has reduced corporate tax rates.
Tax competition is likely to have contributed significantly to lowering corporate tax rates in Switzerland over the past 25 years. Indeed, empirical evidence shows that the responsiveness of sub-national governments to tax changes of other subnational governments (“tax mimicking”) is the strongest in the case of corporate taxation (Blöchliger and Pinero Campos, 2011). …Progressive corporate income taxes harm incentives for businesses to grow. Since growing businesses are likely to be high performers in terms of productivity, such disincentives are likely to hit high-performing businesses the most, with losses to aggregate productivity performance, which has been modest in Switzerland relative to best-performing high-income countries.
P.S.: This isn’t the first time the economists at the OECD have broken ranks with the political hacks that generally control the bureaucracy. In a 1998 Economic Outlook (see page 166) they wrote that “the ability to choose the location of economic activity offsets shortcomings in government budgeting processes, limiting a tendency to spend and tax excessively.” And in another publication (see page 1), the economists noted that “legal tax avoidance can be reduced by closing loopholes and illegal tax evasion can be contained by better enforcement of tax codes. But the root of the problem appears in many cases to be high tax rates.” These passages sound like they could have been authored by Pierre Bessard!
P.P.S.: I hasten to add that none of this justifies handouts from American taxpayers to the Paris-based bureaucracy any more than occasional bits of rationality from the World Bank (on government spending), IMF (on the Laffer Curve), or United Nations (also on the Laffer Curve) justify subsidies to those organizations.
View full post on Cato @ Liberty
Has the U.S. government become too vast for the President to be accountable for the misconduct of its bureaucrats?
Believe it or not, that’s the argument being advanced by President Obama’s former campaign manager David Axelrod for the
purpose of defending the President in the abuse of power scandals now engulfing his administration.
Politico reports on the political risk for the proponents of the kind of big government that President Obama champions in using this argument now to claim that the very politically-driven President bears absolutely no responsibility for the politically-driven misconduct of the government’s bureaucrats on his watch:
The uproars over alleged politicization of the IRS and far-reaching attempts to monitor journalists and their sources have not been linked directly to Obama. But it does not strain credulity to suggest that Obama’s well-known intolerance for leaks, and his regular condemnations of conservative dark-money groups, could have filtered down to subordinates.
The narrative is ideological. For five years, this president has been making the case that a growing and activist government has good intentions and can carry these intentions out with competence. Conservatives have warned that government is dangerous, and even good intentions get bungled in the execution. In different ways, the IRS uproar, the Justice Department leak investigations, the Benghazi tragedy and the misleading attempts to explain it, and the growing problems with implementation of health care reform all bolster the conservative worldview.
Hot Air’s Allahpundit tries to wrap his mind around the logic of Axelrod’s argument:
What’s significant about Axelrod’s defense of O is that he’s pointing to the size of government as a structural reason for why scandal might proliferate, which is downright Reaganesque as a critique of the federal leviathan. The bigger the government gets, the less accountability there’ll be. That’s conservatism 101.
The perverse twist is that he’s using that logic to exculpate Obama. Try to get your mind around that. A guy who helped O win two presidential elections by arguing that government needs to do more, especially for health insurance (which will soon be partly under the jurisdiction of the IRS, natch), is now trying to absolve Obama of responsibility for his underlings’ malfeasance by suggesting that … no one can really control a government this big. Obama’s off the hook, thanks to his dogged efforts to make the country even more ungovernable than it already is.
A government that is too vast is a government that cannot last.
The Independent Institute’s Robert Higgs has some pretty detailed thoughts on the problems that are inherent in having a government that’s too big for its own good….
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George Will, Michael Gerson, and our own Gene Healy are among the columnists who reminded us – in the wake of the IRS and AP snooping scandals – of President Obama’s stirring words just two days before the IRS story broke:
Unfortunately, you’ve grown up hearing voices that incessantly warn of government as nothing more than some separate, sinister entity. .?.?. They’ll warn that tyranny is always lurking just around the corner. You should reject these voices.
No road to serfdom here. Just us folks working together, to protect ourselves from sneaky reporters and organized taxpayers.
And now lots of people are noting that a series of scandals in government just might undermine people’s faith in government. John Dickerson of Slate writes:
The Obama administration is doing a far better job making the case for conservatism than Mitt Romney, Mitch McConnell, or John Boehner ever did. Showing is always better than telling, and when the government overreaches in so many ways it gives support to the conservative argument about the inherently rapacious nature of government….
Conservatives argue that the more government you have, the more opportunities you will have for it to grow out of control.
And Paul Begala, the Bill Clinton operative, notes:
This hurts the Obama Administration more than similar issues hurt the Bush administration because a central underpinning of the progressive philosophy is a belief in the efficacy of government. In the main almost all of the Obama agenda requires expanding folks’ faith in government, and these issues erode that faith.
“Faith in government” indeed. To paraphrase Oscar Wilde, putting your faith in government is, like a second marriage, a triumph of hope over experience.
But most particularly this week I’m reminded of Murray Rothbard’s comment in 1975 about what the era of Vietnam, Watergate, and stagflation had done to trust in government:
Twenty years ago, the historian Cecelia Kenyon, writing of the Anti-Federalist opponents of the adoption of the U.S. Constitution, chided them for being “men of little faith” – little faith, that is, in a strong central government. It is hard to think of anyone having such unexamined faith in government today.
Another 38 years later, it should be even more difficult to retain such faith.
View full post on Cato @ Liberty
Andrew J. Coulson
The Christian Science Monitor suggests this lesson be drawn from the Obama administration’s recent scandalpalooza:
Congress should use this IRS scandal to beef up civics education for federal workers as well as for public school students. Lesson No. 1: Government cannot restrict or discriminate against political causes that it disagrees with.
I think the scandals teach a different lesson: Government will misbehave because it, like Soylent Green, is made from people. Fallible, foible-ridden people. Therefore, government’s unique powers must be strictly limited to avoid miscarriages of justice.
One of these days, someone should build a nation on that lesson….
View full post on Cato @ Liberty
No big deal. Just the Department of Justice seizing the phone records of reporters and editors over a 2 month period. Nothing weird or intimidating about that.
AP Chief Executive Gary Pruitt, in a letter posted on the agency’s website, said the AP was informed last Friday that the Justice Department gathered records for more than 20 phone lines assigned to the agency and its reporters.
“There can be no possible justification for such an overbroad collection of the telephone communications of The Associated Press and its reporters,” Pruitt said in the letter, which was addressed to Attorney General Eric Holder.
View full post on AgainstCronyCapitalism.org
There’s a powerful irony lurking underneath the executive order and OMB memorandum on open data that the White House released in tandem today: We don’t have data that tells us what agencies will carry out these policies.
It’s nice that the federal government will work more assiduously to make available the data it collects and creates. And what President Obama’s executive order says is true: “making information resources easy to find, accessible, and usable can fuel entrepreneurship, innovation, and scientific discovery that improves Americans’ lives and contributes significantly to job creation.” GPS and weather data are the premier examples.
But government transparency was the crux of the president’s 2008 campaign promises, and it is still the rightful expectation of the public. Government transparency is not produced by making interesting data sets available. It’s produced by publishing data about the government’s deliberations, management, and results.
Today’s releases make few, if any, nods to that priority. They don’t go to the heart of transparency, but threaten to draw attention away from the fact that basic data about our government, including things as fundamental as the organization of the executive branch of government, are not available as open data.
Yes, there is still no machine-readable government organization chart. This was one of the glaring faults we found when we graded the publication practices of Congress and the executive branch last year, and this fault remains. The coders who may sift through data published by various agencies, bureaus, programs, and projects can’t sift through data reflecting what those organizational units of government are.
Compare today’s policy announcements to events coming up on Capitol Hill in the next two weeks.
On Thursday next week (May 16), the House Committee on Oversight and Government Reform will host a “DATA Demonstration Day” to illustrate to Congress and the media how technology may cut waste and improve oversight if federal spending data is structured and transparent. (That would include my hobby-horse, the machine-readable federal government organization chart.) We’ll be there demo-ing how we add data to the bills Congress publishes.
On May 22nd, the House Administration Committee is hosting its 2013 Legislative Data and Transparency Conference. This is an event at which various service providers to the House will announce not just policies, but recent, new, and upcoming improvements in publication of data about the House and its deliberations. (We’ll be there, too.)
The administration’s open data announcements are entirely welcome. Some good may come from these policies, and they certainly do no harm (barring procurement boondoggles–which, alas, is a major caveat). But I hope this won’t distract from the effort to produce government transparency, which I view as quite different from the subject of the new executive order and memorandum. The House of Representatives still seems to be moving forward on government transparency with more alacrity.
View full post on Cato @ Liberty
Conservative and libertarian scholars are clashing over the findings and political implications of the new Heritage Foundation immigration study. The study spans 92 pages and is jam-packed full of statistics and detailed calculations.
I’ll leave the immigration policy to my colleagues who are experts in that area. To me, the study provides a very useful exploration into how massive the American welfare state has become. Here are some highlights:
- “There are over 80 of these [means-tested] programs which, at a cost of nearly $900 billion per year, provide cash, food, housing, medical, and other services to roughly 100 million low-income Americans.”
- “The governmental system is highly redistributive … For example, in 2010, in the whole U.S. population, households with college-educated heads, on average, received $24,839 in government benefits while paying $54,089 in taxes … [and] households headed by persons without a high school degree, on average, received $46,582 in government benefits while paying only $11,469 in taxes.”
- “Few lawmakers really understand the current size of government and the scope of redistribution. The fact that the average household gets $31,600 in government benefits each year is a shock.”
Total federal, state, and local government spending in 2010 was $5.4 trillion, or $44,932 per U.S. household. The figure of $31,600 in “benefits” is total spending less spending on public goods, interest, and government pensions.
A useful feature of the Heritage study is a breakdown of the $5.4 trillion in spending into six categories constructed by the authors. “Direct benefits” includes mainly Social Security and Medicare. “Pure public goods” includes programs such as defense and scientific research. “Population-based services” includes programs aimed at whole communities, such as police and highways. (Some of these also seem to be public goods). “Means-tested benefits” includes programs such as food stamps. Education includes both K-12 and college subsidies. “Interest and pensions” is the current costs of past spending, which includes servicing the debt and paying for government pensions. The chart shows spending in 2010.
This spending breakdown is useful for thinking about the proper size of government. From a libertarian standpoint, governments ought to be spending only on public goods and population-based services, as a first cut. That would be $1.94 trillion, or just 36 percent of the current total of $5.4 trillion. As a percent of GDP in 2010, that would be spending of 14 percent, rather than current spending of 38 percent.
But some of the population-based services mentioned by the authors could be privatized, and spending on some of the public goods could be cut. So a good libertarian target might be less than 36 percent of current spending, or less than 14 percent of GDP.
The Heritage study is sparking a debate about what type of immigration reform the nation should have. But hopefully, it will also spur more discussion about the massive size of the American welfare state. Immigration is partly, or mainly, such a contentious issue because we have such a huge welfare state.
The study includes projections about how many trillions of dollars of government benefits will flow to immigrants and their children in the decades ahead. But conservatives and libertarians agree that we ought to cut trillions of dollars in benefits to immigrants and nonimmigrants alike.
So is there some common ground here? Can we work toward an immigration reform that cuts government dependency in general and downsizes the welfare state?
View full post on Cato @ Liberty