Friday, September 18, 2009

Rep. Ron Paul on liberty and the need for a revived anti-war movement

Rep. Ron Paul in an interview by Time magazine. You have to love a guy who can coherently link a denunciation of the income tax to a denunciation of conscription.

By the way, Alexander Cockburn has made the same (accurate) point about how the anti-war movement has neutered itself now that Bush is out of office.

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Tuesday, August 4, 2009

Government may be getting just a little more unpopular

Even though I found arguments that former President George W. Bush "stole" the 2000 election to be unconvincing, I was gladdened to hear people who usually hold coercive power in excessively high regard use the word "illegitimate" when referring to the head of state. I'm equally encouraged to see reports that tax revenues are drying up and that members of Congress are being greeted at home by angry protesters. Anything that erodes the cult of government is a good thing.

And tax revenues do, indeed, appear to be drying up. According to the Associated Press, the federal government is seeing its biggest decline in revenue since 1932. Overall receipts are expected to drop 18% this year -- a number that squares with Congressional Budget Office projections.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

Internal Revenue Service figures (XLS) reveal that tax receipts have declined during past recessions, but to a relatively minor degree. This year's cash crunch is historically impressive..

But reviewing those IRS figures reveals more interesting information -- in particular, how much less the federal government used to cost us all within living memory. Using current dollars -- that is, figures adjusted to represent 2009 purchasing power so that we're comparing apples and apples -- it's easy to see that the assemblage of czars and apparatchiks in D.C. has become a much more expensive indulgence than in the past. In 1960, gross federal tax revenues were about $91.8 billion; in 2008, gross federal tax revenues stood at $2.7 trillion.

Gross Federal
Tax Revenues, 1960-2008
figures in current dollars

And yet the federal government has been so effective at finding ways to spend that extra cash that it's poised to rack up a $1.8 trillion deficit this year alone, with a total deficit of $9.1 trillion forecast for 2010-2019 (according to the Congressional Budget Office). It seems that, no matter how much the government collects, there's never enough to pay for all of the things that politicians want to do for, with or to their constituents.

You can insert the government ever-more deeply into people's lives when you keep expanding your resources by such an enormous measure, with everything that implies for the size and power of the state relative to the autonomy of the individual. Wiretaps, marijuana and immigration raids, "smart" ID cards and extensive databases don't come cheaply -- but there's been more than enough cash to pay the bills for many decades.

Of course, lots of people like the loss of liberty that comes with a government that has a seemingly endless stream of funding -- and still spends more than it takes in. But not everybody hankers after the suffocating embrace of the all-powerful state. That's why so many members of Congress are going home this month, only to run headlong into vigorous protests against proposals to expand the federal government's already enormous role in the regulation and provision of health care.

Yes, Rep. Llloyd Doggett insists that the crowd that shouted him down was a nasty "mob" dispatched by libertarians and Republicans. Well, isn't public opposition always a "mob" in the eyes of comfortable officials?

And political organizations wish they had the ability to make enthusiastic protesters show up at a whim; In reality, the best they can do is to help coordinate passion that already exists at the grassroots. Those protesters may have received a little literature and a few emails from some groups' twenty-something outreach types, but they showed up because they're ticked off.

It's too much to hope that we're seeing the end of the metastasizing state -- expansive government still has too many supporters and resources to dry up and blow away.

But we are seeing further erosion of the credibility and legitimacy of coercive institutions and officials who are discovering new resistance to their efforts to run the world.

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Wednesday, May 27, 2009

Where have all the millionaires gone?

Hmmm ... Last year, Maryland deliberately slapped an (even more) onerous tax on higher income state residents in order to try to soak up some of the red ink in which state books are awash. State politicians and newspaper editorialists basically gloated that the rick would suck it up.

How's that working out?
One year later, nobody's grinning. One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did last year -- even at higher rates.
Some of the millionaires got chewed up by the recession, of course. Contrary to popular belief, the rich are not immune to bad times. But others ... Others headed for the hills -- or the sun, anyway.
The Maryland state revenue office says it's "way too early" to tell how many millionaires moved out of the state when the tax rates rose. But no one disputes that some rich filers did leave. It's easier than the redistributionists think. Christopher Summers, president of the Maryland Public Policy Institute, notes: "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."
Wow. If you paint a target on people, they tend to head for the exits rather than stay and take it. Who ever would have guessed?

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Tuesday, May 19, 2009

U.S. suffers a bigger government than Canada?

Really, really interesting comparison in the Washington Post of how Canada and the U.S. stack up in terms of size of government, expenditures, taxes and the like. Basically, Canada has been cutting government expenditures and taxes over the past few years, even as spending and taxes rise in the United States. For instance, government spending as a percentage of GDP has dropped in Canada from 53% to 40%, while the same measure has risen in the U.S. to 39% and is poised to go higher.

Also, if President Obama follows through on his plan to raise taxes, Canada and the U.S will have the same top average tax rate at 46%.

Overall, Canada and the U.S. are closing in on the same numbers. The difference is that Canada has been trending toward smaller government, while the U.S. has been trending toward a larger state. The lines are in the process of crossing.

Oh, and by cutting government spending, Canada has managed to balance its federal budget every year since 1998. The U.S. ...

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Wednesday, April 15, 2009

Anti-state, not just anti-Obama

With thousands of "tea party" tax protests planned around the country on this grim day when we formally surrender a large share of our income to satisfy the ravenous appetite of government, some commentators suggest that tax-protest and anti-government rhetoric has gone too far. One of my own colleagues frets that opposition to the powers that be has crossed the line to actually challenging the legitimacy of the government. Well, I can't speak for everybody, but I do question the legitimacy of the government. I hope the tea party protests are a sign that more people are coming to this point of view.

Says John Zorabedian, the Boston Top News Examiner:

It concerns me that a broad segment of the citizenry has apparently refused to recognize the legitimacy of this government and have opted to take their political opposition outside of the "accepted channels of politics" ...

I started my Disloyal Opposition blog under the Bush administration and have continued it under the new Obama regime, so my contempt for government has nothing to do with the party in power. Not everybody raising heated protests against the government's spending spree and accumulation of power can make that claim. As Anthony Gregory of the Campaign for Liberty, which supports the tea parties, points out:

For eight years, Republican protest of income taxation was scant. Some conservatives complained quietly about Bush’s domestic welfare spending, but all in all they were apologists for the regime we are still paying for. They certainly did not talk about the state as their enemy, as many of them do today. The quickness of their transition to opposition rhetoric has been staggering. ...

Thankfully, there are more Americans than ever who eschew the statism of both right and left, who seek liberty, peace and free markets. Those who resent tax day and are searching for real solutions can join our ranks, rejecting the conservative as well as liberal policies that have gotten us into this mess.

Republican apologists for the Bush years didn't create the tea party protests, and they didn't invent criticism of government. The idea of emulating the Boston Tea Party got a push when CNBC talking head Rick Santelli called for a "Chicago tea party" in a much-publicized on-air rant. That wasn't part of any coordinated effort, though. I'm on a mailing list of bloggers and observed people spontaneously organizing tax-day protests with only scattered and belated assistance from established organizations. A representative of a small-government group sent a query to the list, asking if anybody knew how to reach Santelli, with hopes of getting the broadcaster's support after the fact.

Demoralized GOP functionaries looking for something -- anything -- to reenergize their organization have tried to hang their hats on the tea parties and on the rising tide of anti-state rhetoric. But many of the people issuing the strongest denunciations of the government now were equally harsh about government power and policies during the Bush years.

Economist Robert Higgs, a consistent critic of government power who I frequently quote, has been publicly excoriated for his strong denunciations of policies foisted on us by Congress and the White House. But he has made his criticisms for decades. As he writes:

During the painful years of the Bush regime, we had to endure the slings and arrows of the brown shirts who compose the so-called Republican base. Now that Obama has ascended the throne, the brown shirts of the left are emerging as the more conspicuous barbarians. Thank God it is not the case, as far too many people suppose, that we must be on one of these sides or the other. We can transcend this disgusting political spectrum, placing ourselves neither on the left nor on the right — nor even in the so-called “independent” zone somewhere between them — but rather rising above the entire line and insisting that red-state savagery and blue-state savagery are equally despicable and intolerable.

The problem, ultimately, isn't that "leftists" are in power, just as the problem last year wasn't with the "right wing." The problem, now as always, is that government wields vast power, and it does so with the approval and support of the most powerful political factions in our society. Republicans and Democrats alike bludgeon us with the state when they are in command -- they just have slightly different priorities when it comes to abusing us and and curtailing our freedom.

Simple-minded commentators (and nobody is more simple-minded than a mainstream journalist) insist that we must embrace one faction or another, and that to criticize a government led by one party is to implicily endorse the other party.

But those of us with brains in our heads know that's a false choice. We recognize, as did Leo Tolstoy, that "Government is an association of men who do violence to the rest of us." It remains such an association whether led by team red or team blue.

But we can vote! Isn't a democratic government legitimate because it represents the will of the people?

Not really. Many of us are no more willing to be robbed and bullied by our neighbors than by some dictator or politburo -- and that's even assuming that the democracy works as advertised. But even democracies have a nasty habit of turning tyrannical under pressure. Long before today's financial woes inspired the federal government to subsidize and seize private businesses, H. L. Mencken wrote:

I need not point to what happens invariably in democratic states when the national safety is menaced. All the great tribunes of democracy, on such occasions, convert themselves, by a process as simple as taking a deep breath, into despots of an almost fabulous ferocity. Lincoln, Roosevelt and Wilson come instantly to mind: Jackson and Cleveland are in the background, waiting to be recalled. Nor is this process confined to times of alarm and terror: it is going on day in and day out. Democracy always seems bent upon killing the thing it theoretically loves. I have rehearsed some of its operations against liberty, the very cornerstone of its political metaphysic. It not only wars upon the thing itself; it even wars upon mere academic advocacy of it.

Ultimately, it is liberty that matters, not the administrative means the government uses to decide when and how to violate our liberty. A lack of respect for liberty is what delegitimizes the state.

Because we care about liberty before all other political concerns, many of us have long denied the legitimacy of the government under which we live. I hope that today's flurry of loud and passionate tea parties is a sign that we are welcoming many more converts to our ranks.

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Tuesday, April 7, 2009

Tasers don't pay for themselves, y'know

Tax day is almost upon us, so it's a good time to reflect on just what it is we're paying for when we cut our checks to Uncle Sam (or just watch the growing deductions from our paychecks). What does it mean to be a good citizen? And how does our payment of taxes fit into our obligations to society and the government? Filmmaker David McElroy, a former newspaper journalist, takes on exactly that topic in his educational video about good citizenship. The video is below.

If you didn't have time to watch the full presentation, here's the film in a nutshell: The government needs resources in order to boss people around, meddle in the world around us, tick off our neighbors, subsidize bad behavior and, ultimately, come back and extract more taxes from you in order to address the mess it created with more bad behavior.

I mean, really, how could the government afford to do all the important things it does, like detain suspects indefinitely, tell you what you can't smoke or eat, and paw through your underwear at the airport if it didn't mug you on a regular basis? Tasers don't pay for themselves, you know. And those millimeter-wave x-ray spec scanners at the airport are expensive.

If you're even slightly successful, you better learn to love that mugging. According to the latest CBS/New York Times poll, 74% of your fellow Americans support higher taxes on the "rich."


Tuesday, March 3, 2009

Get ready for the tax cops

It's tax season now, and with the federal government on an unprecedented spending spree, politicians' proposals inevitably turn to collecting taxes owed under the law, but never paid. Closing the so-called "tax gap" is an easy sell to the public because it sounds like simple fairness. It also avoids unpleasant talk about raising taxes. But the IRS is already the envy of international tax collectors for its results. And trying to collect the elusive billions that remain outside official reach would mean an escalating and doomed war by the government against the American people.

The latest income tax compliance figures for the United States, released by the Internal Revenue Service, put compliance with the tax code (PDF) at about 84%. That means that 16% of all taxes the government claims it is owed are never paid.

[T]he Internal Revenue Service (IRS) estimated that for tax year 2001, taxpayers paid about 84 percent of the taxes that should have been paid on time under the law, resulting in an estimated gross tax gap of $345 billion."
-- Government Accountability Office

Those hundreds of billions of uncollected dollars have politicians salivating. What less provocative way could there be for funding the government's ever-growing wish list (or, maybe, reducing the debt just a tad) than by going after money that is owed under existing tax laws, but which is being hidden from the IRS?

After all, it's about making people pay their fair share, isn't it?

But there's a difference between fever dreams of 100% compliance and the real world, and the fact is that no law ever achieves complete compliance. In fact, the IRS is already the envy of tax collectors around the world for the relatively large degree of cooperation it receives from the American people, resulting in a smaller tax gap than other nations could ever hope to achieve.

What do I mean?

First, you have to understand that the IRS is one of the few tax agencies to release its compliance figures. When you look at the numbers for other countries -- painstakingly compiled by independent economists -- the reason is clear.

In What Explains Tax Evasion: An Empirical Assessment Based on European Data (PDF), a paper repared for the Vienna Institute for International Economic Studies, authors Edward Christie and Mario Holzner calculated tax compliance rates for European Union members and several candidate countries.

In terms of personal income tax, the most recent compliance rates calculated in the paper are shown below. For the purposes of a more apples-to-apples comparison, I've used numbers only from more-developed Western European countries:

Personal Income Tax
Compliance Rates
in Europe
Austria 74.80%
Belgium 70.15%
France 75.38%
Germany 67.72%
Italy 62.49%
Netherlands 72.84%
Portugal 68.09%
United Kingdom 77.97%

A separate paper, Tax Evasion in Switzerland: The Roles of Deterrence and Tax Morale (PDF), puts Swiss income tax compliance at 77.7%.

Is anything jumping out at you? How about the fact the U.S. tax compliance, at 84%, is higher than other countries have been able to manage?

The "why" of tax compliance rates certainly depends on a variety of factors, and these likely vary a bit from country to country. Christie and Holzner point to the complexity of tax systems (interestingly, they believe that too much simplicity may reduce compliance), corruption and income inequality as potential influences on tax compliance.

Overall, though, Christie and Holzner conclude that tax rates matter -- when rates are higher, people hide more money; when rates come down, people put less effort into evading the authorities. "[W]e found as our most general result that tax evasion is positively correlated with the tax rate itself ... reducing average effective tax rates should positively impact on compliance rates."

[W]e found as our most general result that tax evasion is positively correlated with the tax rate itself ... reducing average effective tax rates should positively impact on compliance rates."

That's not that surprising, is it? If you raise the price of anything, fewer people are willing to pay. There's no reason that shouldn't go for government as much as for cars or potato chips.

But governments are the only vendors that don't let customers walk away. And the Obama administration's emphasis on tax enforcement, with increased IRS audits and every possible effort to close the tax gap, isn't exactly a new idea.

In Germany, ferocious tax police are kicking in doors in an effort to squeeze the last euro from tax evaders great and small. The German authorities have even taken to paying for data stolen from banks in other countries in an effort to find where the money is hidden.

And still the underground economy, beyond the reach of tax authorities, grows along with the government's appetite.

Similar abuses by tax collectors in the United States led to congressional hearings a decade ago. Tax agents were waging SWAT-style raids on homes and businesses, pointing guns at people, and generally acting like an occupying army. The IRS pulled in its horns after public outrage led to tongue-lashings by powerful lawmakers and much embarrassment.

But when a government is running multi-trillion-dollar deficits and has abandoned any pretense of fiscal discipline, that tax gap starts looking like a piggy bank, and there are always tax collectors willing to do some smashing.

The international experience suggests that enforcement efforts don't do much to budge the bottom line. Compliance is largely a matter of finding the right price. Keep taxes within an acceptable range and maintain a system that people perceive as reasonably fair, and you'll get a decent amount of compliance (but never 100%). Raise the price, and people stop paying.

Right now, the Obama administration is talking about raising taxes on higher-income Americans. If the economists are right about the record of taxes and tax enforcement around the world, that will lead to higher levels of non-compliance, no matter what enforcement efforts are put in place.

And kicking in doors and staging intrusive audits runs the risk of making the government "the enemy" in the eyes of many Americans. That means a big hit on the "tax morale" that helps determine taxpayers' willingness to cooperate with the authorities. Nobody willingly surrenders their lunch money to somebody they hate.

So the tax gap will grow even as enforcement efforts become more intrusive and brutal.

When government officials don't get what they want, they tend to escalate. That has happened with Prohibition, the war on drugs, efforts to stamp out Internet gambling -- and tax enforcement. Tactics get nastier, and nastier, and -- as they don't achieve the desired result -- turn increasingly abusive.

So, as politicians and talking heads chatter on about closing the tax gap, keep in mind that they're talking about waging an unwinnable but still nasty war -- against you.


Friday, February 27, 2009

Nationalizing charities?

Over at Reason's Hit & Run, Jacob Sullum has already pointed out an interesting facet of President Obama's tax changes, but I think it's worth highlighting. From The Washington Times:
Democrats and Republicans poured cold water on President Obama's budget plan to cut down on wealthy taxpayers' charitable giving tax deductions, the second of his ambitious cost-savings plans to earn lawmakers' scorn, and underscoring the legislative minefield he is entering. ...

Roberton Williams, senior fellow at the Tax Policy Center, said it's impossible to calculate the exact effects of all the tax changes, but said the overall result is clear - less philanthropic giving.

"This will lead people to give less to charities if they behave the way they've behaved in the past," he said. "We've already seen a drop in giving as a result of the economic collapse. On top of that, this will just reduce the amount of giving."

Asked about that, Office of Management and Budget Director Peter Orszag said Mr. Obama took care of that by giving charities government money to make up part of the difference.

"Contained in the recovery act, there's $100 million to support nonprofits and charities as we get through this period of economic difficulty," he said.
Not that I'm a huge fan of social engineering through the tax code, with a deduction for this, that and the other righteous cause to encourage us all to do supposedly good deeds. But isn't this a move toward cutting a major part of civil society -- private charitable organizations -- off from their sources of independent support and making them dependent on the good will of government officials?

Oh, and I'm sure the tax dollars will be directed by politicians to precisely the same recipients that each and every one of us would have chosen of our own free will ...

It's plausibly deniable, of course, since private individuals could keep giving at old rates and private organizations could refuse government money, but the overall effect will be to strengthen the power of the state without ever twisting an arm -- outside the oh-so-gentle enforcement of the tax code, of course.

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Arizona Taxpayer Tea Party--Friday, February 27

For all you Arizonans in the Valley of the Sun:

It's a tax and spending protest!

Join the Arizona chapter of Americans for Prosperity (AFP), allied pro-taxpayer organizations, and hundreds of taxpayer activists for an Arizona Taxpayer Tea Party, this Friday, February 27, at noon at the Tempe Beach Park to protest (and stop!) the tax increases proposed by big-spending politicians at the federal, state, and local levels. Wally the (Empty) Taxpayer Wallet will also be in attendance.

The meetup for the Tea Party is at 11:45 a.m. at the Tempe Beach Park, on the south side of the lake, west of the Mill Avenue Bridge. A parking lot is available next to the park, on Rio Salado Parkway.

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Thursday, January 15, 2009

Can I have the number for Geithner's accountant?

In 2003, faded Twin Peaks star Sherilyn Fenn filed for bankruptcy, admitting owing $101,532 in unpaid state and federal taxes.The Internal Revenue Service alone is now going after her for over $170,000. Just a few years ago, the IRS went after Robert J. Gordon, a Toledo, Ohio, electrician, for nearly $900,000 because he failed to pay about $193,000 in quarterly employee taxes back in the 1980s. And the IRS hit the United Way with a lien for $12,000 -- for a clerical error committed by tax collectors. But Timothy Geithner, Barack Obama's pick for Treasury Secretary ... He gets to make good on his unpaid taxes plus a little interest -- with no penalties.

It's not that the rather draconian penalties the IRS can impose are a secret. The tax agency publicizes them far and wide:

If you do not file your return and pay your tax by the due date, you may have to pay a penalty. You may also have to pay a penalty if you substantially understate your tax, understate a reportable transaction, file an erroneous claim for refund or credit, file a frivolous tax submission, or fail to supply your SSN or individual taxpayer identification number. If you provide fraudulent information on your return, you may have to pay a civil fraud penalty.

Filing late. If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%. The penalty is based on the tax not paid by the due date (without regard to extensions).

Paying tax late. You will have to pay a failure-to-pay penalty of ½ of 1% (.50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. This penalty does not apply during the automatic 6-month extension of time to file period if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return.

The monthly rate of the failure-to-pay penalty is half the usual rate (.25% instead of .50%) if an installment agreement is in effect for that month. You must have filed your return by the due date (including extensions) to qualify for this reduced penalty. If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued. This penalty cannot be more than 25% of your unpaid tax. You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time.

Geithner's unpaid taxes have been characterized as "honest mistakes" and that may be right. Some experts say the relatively unusual employee-without-withholding status that Geithner held when he worked for the International Monetary Fund trips up all too many people. Then again, he's supposed to be an economic expert who is in line to take over the department that administers the IRS. Not everybody is convinced of Geithner's innocence. Tom Ochsenschlager, vice president of tax for the American Institute of Certified Public Accountants, said, "It's such a basic mistake that I kind of wonder if we know all the facts."

But let's give Geithner the benefit of the doubt. Lots of people make innocent mistakes when they're wading through the unknowable morass that is the Internal Revenue Code. Many accountants, lawyers and fly-by-night tax negotiators make their living saving people from the consequences of their own misunderstandings when it comes to filing taxes. Even the IRS's own employees disagree over how to apply the tax code -- and the tax agency's advice is just flat-out wrong over one-third of the time, according to the Treasury Department.

But the IRS doesn't care that you have as much trouble as its own employees when you try to fathom the tax laws. It still imposes penalties, files liens, seizes property and throws people in prison. Unless, of course, they're politically prominent individuals who have been named by the new president to run the IRS.

The Los Angeles Times sees a potential silver lining here. The paper's editorial board says that, in return for us granting him the benefit of the doubt that tax collectors so rarely grant to common people, "we'd like Geithner to do us all a favor in return: lead the fight for a radically simpler tax code that is easier to enforce and harder to evade."

I'm not entirely on board with that, though I agree with simplifying the code. In fact, I think the LA Times misses the point. I'm less concerned about enforcing the code than about figuring the damned thing out, so that evading the wrath of tax collectors can involve more in terms of rational planning and less in terms of high-powered political connections.

As for whether the government should be picking our pockets quite so vigorously as it does ... I'll leave that for another time.


Monday, November 10, 2008

Melissa Etheridge needs to take her tax revolt a little further

Singer Melissa Etheridge is getting a lot of mileage out of her angry promise to withhold taxes from the state of California after the passage of Proposition 8, a constitutional amendment denying recognition to same-sex marriages of the sort briefly allowed after a state supreme court decision earlier this year. Her anger is understandable, since the constitutional change leaves her relationship with Tammy Lynn Michaels in legal limbo as people wait for the courts to hash out the impact on thousands of existing gay and lesbian marriages.

Writing for The Daily Beast, Etheridge said:

Okay. So Prop 8 passed. Alright, I get it. 51% of you think that I am a second class citizen. Alright then. So my wife, uh I mean, roommate? Girlfriend? Special lady friend? You are gonna have to help me here because I am not sure what to call her now. Anyways, she and I are not allowed the same right under the state constitution as any other citizen. Okay, so I am taking that to mean I do not have to pay my state taxes because I am not a full citizen. I mean that would just be wrong, to make someone pay taxes and not give them the same rights, sounds sort of like that taxation without representation thing from the history books.

No doubt, Etheridge penned her words in a rage and could probably be forgiven were she to reconsider and step back from her threat. After all, governments are capable of letting almost anything slide except challenges to their flow of revenue. Nothing gets officials to reach for the battering rams and handcuffs with greater enthusiasm than a tax case.

But what if ...

What if Melissa Etheridge were to join with other high-profile gays, lesbians and their friends and supporters to turn a quixotic bird-flip to the social conservatives who passed Proposition 8 into an organized movement? A tax revolt by one celebrity is a one-way ticket to Wesley Snipes country. But a mass tax revolt by gays and lesbians across the state could turn into a serious problem for California and a useful lesson to the majority about the consequences of restricting the rights of a minority.

There's a lot of anger out there, just waiting to be harnessed. Melissa Etheridge could be in a powerful position to remind Californians that a majority vote to abuse people may be an invitation to a world of grief.

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Wednesday, November 5, 2008

My record at the polls -- not so great

With my track record at the polls, you'd think I'd just get the pretense over with, hire a dominatrix, and get my abuse the old-fashioned way: with whips and ball-gags. But no, I tried my hand at another election cycle, and look what I have to show for it.

OK, I didn't expect Bob Barr to win, but I was hoping for a vote total that could credibly be said to exceed that attributable to simple statistical error. He pulled 0.6% in Arizona and something rather less nationally. All because of the oh-so attractive candidates put forward by the major parties, I'm sure.

My congressional district (but certainly not me) is now represented by business-bashing, anti-immigrant, drug-warrior Democrat Ann Kirkpatrick. I already miss the corrupt, graft-hungry son of a bitch she replaces.

Prop. 100, which forbids new taxes on the sale or transfer of homes, was a bright spot. It passed with better than three-quarters of the vote.

Prop. 101, which would have blocked the government from imposing socialized medicine, failed by a heartbreakingly slim margin: 49.9% to 50.1%. That's less that 2,200 votes out of 1.7 million total.

Prop. 102, the repulsive "Arizona doesn't like queers" measure, passed with 56.5% of the vote.

Prop. 201, a scam to turn every home sale into a legal free-for-all, thankfully failed with 77% against.

And state legislators won't get a raise, since Prop. 300 went down to easy defeat.

I'm happy to say that the campaign season is now over, and I can get back to the important business of bashing politicians and government officials without worrying about electoral outcomes.

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Tuesday, November 4, 2008

How I voted, in case you care

Who did Tooch anoint with his much-coveted vote this year? Which issues won his all-important nod? Read on and find out.

President: Bob Barr. He's a moderate libertarian with a conservative bent, which means he and I disagree on some issues. But his overall platform is one that expands liberty instead of contracting it. That's a rare thing in this day and age, and makes him unique on the presidential line of the Arizona ballot. I didn't have to agonize over this at all.

By the way, I do find his conversion convincing. Nobody abandons conservatism for libertarian ideas, works with the Marijuana Policy Project and consults for the ACLU in order to gain political advantage. And we need to welcome converts -- the future of libertarianism lies in one-time authoritarians who have seen the light.

Congress: Sydney Hay. Yes, Hay is a social conservative, but she's savvy on economics and very pro-free-market (she sat on the board of the Goldwater Institute). That'd be an important quality in a House that has engaged in serial ineptitude for years when it comes to economic issues. Democrat Kirkpatrick is sounding the economic populism bell and touting her drug warrior credentials, so to Hell with her. Libertarian Thane Eichenauer is on the ballot and would be my choice if Hay's economic credentials weren't so impressive and important.

County Attorney/Sheriff: After the Dibor Roberts affair, I was very much looking forward to voting against Sheriff Steve Waugh and County Attorney Sheila Polk, who rallied behind the thuggish Sergeant Jeff Newnum and prosecuted Roberts. Unfortunately, the ballot is Soviet-style for these offices -- their names, with no alternatives. I wrote in Dibor Roberts for Sheriff and her husband Merrill for County Attorney.

Prop. 100, barring new taxes on property sales and transfers: Yes

Prop. 101, blocking state officials from imposing socialized health care: Yes

Prop. 102, barring the recognition of same-sex marriages: No, goddamnit

Prop. 201, basically abolishing contract law and turning home sales into a litigious free-for-all: No

Prop. 300, raising state legislators' salaries: No

That's not everything, of course. Some of the races I took a pass on, several offices were uncontested (or contested only by a nice old lady whose memory has been slipping for a few years), and a few propositions were make-the-best-of-a-bad-choice situations. I also voted against a jail tax.

You think you did better? Bring it on.

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Thursday, September 18, 2008

What's patriotic about paying taxes?

Handing your hard-earned money to some organized-crime syndicate called "the government" is patriotic? Really?

OK, here's a clue: patriotism means "devotion to one's country." Note, that says "country," not "government." They're not the same thing. A country can survive the collapse of a government, the creation of a new government, or (we can hope) the total abolition of government.

Of course, some people who have never held a real job -- a non-parasitic one outside the government -- might not understand that. Oh, that's right, Biden has worked his entire adult life in one government job or another, hasn't he?

Hmmm. Patriotism actually might actually call for starving a parasite that's feeding off the country, don't you think? You might do that by ... not paying taxes ...


Thursday, July 24, 2008

Phoenix: Not so free, not so unfree

Phoenix isn't a terrible place when it comes to personal freedom. It's not so great either, despite Arizona's overstated Wild-West reputation.

Reason magazine's Radley Balko raised a fuss in Chicago with his column in the Chicago Tribune taking that city to task for "treating its citizens like children" with a variety of nanny-state interventions into everything from sex laws to booze restrictions to firearms regulations that are designed to turn local politicians' obsessions and bugaboos into punishable offenses.

The full article from which Balko drew, rating 35 cities according to semi-scientific rankings of the various city governments' treatment of personal freedom, is available on Reason's Website. The cities are assessed on the environment they provide for personal autonomy in the areas of: Sex, Tobacco, Alcohol, Guns, Movement, Drugs, Gambling and Food/Other.

Chicago came in dead last, setting itself up for its public excoriation. Las Vegas, with a generally laissez-faire attitude toward matters that draw political and legal attention elsewhere, ranked first.

I note that Phoenix, the metropolitan behemoth of Arizona, ranks a mediocre 14. With its middle-of-the-road status, the city doesn't even rate a full text analysis of its advantages and disadvantages. The magazine merely notes: "If harassment of suspected illegal immigrants were measured in this list, the stomping grounds of Maricopa County Sheriff Joe Arpaio would rank dead last."

I've written plenty about Sheriff Joe's shenanigans, so I can't disagree.

Reason's rankings are a welcome tool for assessing the livability of America's many and various jurisdictions by a variety of criteria. Measures of economic freedom are relatively easy to come by, but attempts to assess local openness to gays and lesbians, personal choice on smoking, drug laws, the ability to defend yourself within the law and other measures of the breathing room to live in a given area according to your own preferences are rare.

In fact, it's interesting to cross-reference, say, the Pacific Research Institute's U.S. Economic Freedom Index (full document here in PDF format) with Reason's rankings. Chicago's miserable last-place personal freedom ranking correlates depressingly with Illinois's overall 46 (out of 50) rank among the states for economic liberty.

Las Vegas, the top dog for personal-freedom, is located in pretty-good twelfth-ranked Nevada for economic liberty.

But the best bargain may be Denver, ranked third for personal freedom, and nestled comfortably in second-place Colorado, for economic liberty.

(Phoenix, ranked a mediocre 14 out of 35 for personal freedom, does a bit better on economics, given Arizona's slot at 11.)

Of course, rankings are only snapshots; you need to see what direction a jurisdiction is going, or you're at risk of moving to a garden of freedom just in time to watch it transform into a gulag. As David Harsanyi notes in Reason's write-up of Denver:
Often the relevant question isn’t where you are but where you’re headed. And Denver, alas, is moving in the same godforsaken direction as the rest of the country. Safety, economic and social “justice,” the children, the environment, the pets (unless we’re talking about pit bulls, a breed banned from city limits)—all of them trump individual freedom. ...

Denver is one of the freest cities in the country? That’s dreadful news for the rest of you suckers.

Oh well. Reason is going to have to repeat these rankings on a regular basis, so we have a better idea of how our homes, current and prospective, fare. It just might be better to stay in a town ranked at 14 that stays at 14 than it would be to move to a burg that starts off good and then slides, heartbreakingly, down the scale.

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Thursday, July 10, 2008

Don't expect Obama and McCain to recognize fiscal reality

Steve Chapman of the Chicago Tribune takes note of the two leading presidential candidates' promises to impose fiscal discipline on the federal budget -- and blows wet raspberrys at their empty rhetoric.

The latest proof came when McCain unveiled his economic plan, in which he vows to eliminate the deficit in four years. His plan to balance the budget is simple: He plans to balance the budget. Exactly which programs he will trim to reach that goal are anyone's guess.

For someone with a reputation as a fearless foe of congressional earmarks and pork-barrel waste, McCain is amazingly timid in taking on the rest of the budget. About his only specific proposal is a one-year freeze in those discretionary programs that don't involve defense or veterans.

McCain doesn't say how much that would save, but it wouldn't be a lot. Those expenditures amount to only 17 percent of all federal outlays. Eighty-three percent of the budget would keep on growing. After a year, so would the other 17 percent. ...

When it comes to spending, though, Obama is even worse. The National Taxpayers Union Foundation added up all the promises made by the two candidates and found that McCain's would cost taxpayers an extra $68 billion a year. Obama's add up to $344 billion a year.

The Illinois senator's pledge to get tough on unnecessary expenditures is as solid as cotton candy. Among his vows is to "slash earmarks to no greater than what they were in 2001," but earmarks make up less than 2 percent of the budget. Trying to restore fiscal discipline by cutting earmarks is like trying to lose weight by adopting an exercise program for your left index finger.
As Chapman mentions, the National Taxpayers Union has tallied up both candidates' promises -- and found them poised to break the bank. Details on John McCain are here (PDF) and on Barack Obama are here (PDF).

The NTU estimates that Senator McCain voted for $8.8 billion in increased spending in the most recent Congress, while Senator Obama gave his thumbs-up to $40.5 billion of additional demands on the taxpayers.

How to pay for this spending binge?

It's popular now to call for higher taxes -- a "fair share" -- on "the rich" (whoever they are). But high-income earners are already paying a staggering share of the nation's tax burden. According to the IRS (XLS format), the top 1% of income earners paid over 39% of the total income tax burden in 2005, while taking in about 21% of adjusted gross income.

And the share has been going up. In 1986, the top 1% paid about 26% of income taxes; in 1996 it was 32% of income taxes. The latest figures are expected to put top earners' share at over 40% for the first time.

By contrast, the bottom 50% of income earners paid 3% of income taxes in 2005, down from a bit over 6% in 1986.

Importantly, almost a third of people filing tax returns pay no taxes at all.

Now, I'm not a fan of taxes and I think that keeping the tax burden low is a good thing (although it should be low for everybody), so long as expenditures match. But, when half of the population pays little or nothing for government services, it's exceedingly easy for them to demand ever-more goodies from politicians, because those demands are essentially free. And it's all too easy for them to pass the actual costs on to "the rich," a constituency wealthy in terms of taxable cash and assets, but poor in votes to offer politicians as a counter to demands to soak anybody who achieves a bit of financial success.

And the numbers show that those costs have been passed on increasingly over the past twenty years, while much of the population has seen its tax burden drop even as its demands for goodies increase. Whatever your definition of "fair share," high-earners have been paying more of it every year.

So new calls to make "the rich" pay a "fair share" of taxes, as if they haven't been paying a huge and growing portion already, look like blatant efforts to buy votes by handing bribes to a large part of the population and making a minority foot the bill.

Unfortunately, there's little in those numbers to provide incentives for professional politicians like Barack Obama and John McCain to face up to fiscal reality and propose realistic plans to balance the budget by cutting spending -- that is, by cutting the flow of free goodies. In fact, doing so would probably be political suicide.

Chapman is certainly right that "[t]here is a fiscal asteroid on course to pulverize us, and no one is coming to the rescue." I have to say, I can't conceive of a scenario under which anybody will.

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Sunday, June 29, 2008

Chicago, where you do what you're told

The windy city gets raked over the coals for its poor treatment of personal freedom in a Chicago Tribune OpEd written by Reason magazine's Radley Balko. A taste:
Chicago reigns supreme when it comes to treating its citizens like children (Las Vegas topped our rankings as America's freest city). Chicagoans pay the second-highest cigarette tax in the country, and the sixth-highest tax on alcohol. Chicago has more traffic-light cameras than any city in America (despite studies questioning their effectiveness), restricts cell phone use while driving, and it's quickly moving toward a creepy public surveillance system similar to London's.
Don't miss the multitude of comments attached to Balko's article,  many belonging to two general threads: one applauding the restrictions because they make Chicago more in tune with the poster's values and preferences (my taste, now mandatory); the other pointing out that a heavily regulated city gives the folks in charge unparalleled opportunities for shaking downs folks who violate or want to violate the rules.

The column is based on an upcoming Reason article assessing 35 American cities on how they "balance individual freedom with government paternalism. We ranked the cities on how much freedom they afford their residents to indulge in alcohol, tobacco, drugs, sex, gambling and food. And, for good measure, we also looked at the cities' gun laws, use of traffic and surveillance cameras, and tossed in an 'other' category to catch weird laws such as New York's ban on unlicensed dancing, or Chicago's tax on bottled water."

Chicago, by the way, comes in dead last. Las Vegas is first.

There are plenty of assessments of various jurisdictions' economic freedom rankings, but this is the first I'm aware of  that actually tries to rank cities based on their overall respect for personal freedom. I look forward to seeing the full piece.

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Tuesday, June 17, 2008

Arizona taxpayers may fund theme park boondoggle

Via an email from Tom Jenney of the Arizona Federation of Taxpayers comes a warning about SB1450, a bill that would subsidize the construction of a theme park -- and leave Arizona taxpayers on the hook for the cost:

Dear Arizona Taxpayer:

Right now, members of the Arizona Senate are considering whether or not to award a private company the privilege of issuing $750 million in tax-free bonds, so that it can build a rock music theme park in Eloy.

If the project turns out to be a flop, and if tourists fail to come to Eloy in sufficient numbers, the state could have to pay back creditors, or it could jeopardize its bond rating, making it more expensive in the future to borrow money for traditional projects, such as road construction.

But the economic downsides of the Decades Theme Park deal are not nearly as important as the question of principle at stake: whether or not the government should not be handing out special privileges to chosen companies. The answer to that question is clearly, “NO.” The government should not be in the business of picking winners and losers in business.

Like so many bills, SB1450 doesn't explicitly say who it's intended to benefit. Instead, it allows the creation of a "regional attraction district" by "a city with a population of more than ten thousand but less than twenty thousand persons that is located in a county with a population of more than two hundred fifty thousand persons but less than three hundred fifty thousand persons." That's pretty carefully crafted for a targeted beneficiary. Once established, the regional attraction district will have "all of the rights, powers and immunities of municipal corporations."

Writing about the theme park scam in the Tucson Citizen, Byron Schlomach, director of the Center for Economic Prosperity at the Goldwater Institute, said:
In a nutshell, this private business would be financed as if it were a municipality, county or the state, getting all the tax benefits that come along with that. Needless to say, most businesses in Arizona don't get these sorts of benefits.

The adoption of this proposal would allow the state to favor one business by lowering its investment costs and not doing so for other businesses. Arizona's constitution has several provisions to prevent these types of deals. The Goldwater Institute has filed a lawsuit against the city of Phoenix to prevent it from offering a sweetheart deal to a mall developer.

This project also does present a risk for all Arizona taxpayers.

If Decades' owners default on their "government" bonds, Arizona's legitimate government bond ratings could suffer. All of these creative financing schemes for private businesses that cities around the state continue to offer beg one question: If we are so desperate to help businesses open in Arizona, why don't we lower costs for everyone? If costs are too high, then cutting business taxes is the way to address the problem.

Since the state senate is considering this scam right now, it's a good time for my Arizona-based readers to contact their senators with the message that theme parks really should sink or swim on their own merits, using their owners' money.

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Monday, June 16, 2008

Missing the point on the underground economy

Massachusetts Governor Deval Patrick has launched something of a jihad against the state's growing underground economy. Patrick recently established the Joint Task Force on the Underground Economy and Employee Misclassification, headed up by former prosecutor Michael Bradley. The reason for the effort is simple: tax dollars. About $152 million is kept out of the hands of Bay State tax collectors each year simply by illegally classifying workers as independent contractors who then underreport their income, according to a 2004 Harvard study (PDF). That study found that 13% of Massachusetts employers were misclassifying workers in 2001-2003. That represents an increase from 8% of employers in 1995-1997.

Writing for AllBusiness, Keith Girard knows who to blame, and his thinking seems to be in synch with the of Massachusetts officials. Says he, the trouble is lax regulation and those damned foreigners.

Better enforcement of wage and hour laws, for example, would be a good place to start. But unless more rational, workable policies on immigration are adopted and enforced, the underground economy will only get bigger.

To put it mildly, that seems to be missing the point. The fact is, when researchers look at underground economic activity, the big motivators for people to operate in the shadows are always the same: troublesome regulations and onerous taxes.

In his 2006 study, Shadow Economies of 145 Countries all over the World: What do we really know?, Prof. Friedrich Schneider, of the University of Linz, defined the underground economy:

The shadow economy includes all market-based legal production of goods and services that are deliberately concealed from public authorities for the following reasons:
(1) to avoid payment of income, value added or other taxes,
(2) to avoid payment of social security contributions,
(3) to avoid having to meet certain legal labor market standards, such as minimum wages, maximum working hours, safety standards, etc., and
(4) to avoid complying with certain administrative procedures, such as completing
statistical questionnaires or other administrative forms.

More specifically, with regards to taxes, Schneider writes, "In almost all studies it has been found out, that the tax and social security contribution burdens are one of the main causes for the existence of the shadow economy... The bigger the difference between the total cost of labor in the official economy and the after-tax earnings (from work), the greater is the incentive to avoid this difference and to work in the shadow economy."

So what about those laws that Girard like so much? Can those help?

Not so much.

Says Schneider, "The increase of the intensity of regulations (often measured in the numbers of laws and regulations, like licenses requirements) is another important factor, which reduces the freedom (of choice) for individuals engaged in the official economy. One can think of labor market regulations, trade barriers, and labor restrictions for foreigners. ... Regulations lead to a substantial increase in labor costs in the official economy. But since most of these costs can be shifted on the employees, these costs provide another incentive to work in the shadow economy, where they can be avoided."

When Massachusetts officials accuse employers of "misclassifying" workers and so allowing their employees to escape the full reach of the income tax, that should be a clear indication that taxes are high enough to fuel a demand by employees as well as employers for off-the-books work. Of course, the lower costs achieved by going underground then make some companies more competitive than than others, spurring further shadow activity.

And when Girard (and Sen. John Kerry) call for vigorous enforcement of labor regulations as a means to combat the underground economy, they're actually setting the stage for more workers and businesses to move into the shadows and so escape expensive and intrusive regulation. That's especially the case when we're talking about targeting illegal immigrants, who then must, of necessity, work beyond the notice of the law.

More enforcement may trim some underground activity at the margins, but Massachusetts isn't the first jurisdiction to come up against this challenge -- and fail. As it is, Massachusetts has a relatively small "problem" since the U.S. underground economy, equaling about 8.4% of official GDP, is just about the smallest in the world. Canadian officials, by contrast, have been unable to put their shadow 15.2% of official GDP within reach of tax collectors and regulators.

Strictly speaking, an underground economy isn't a problem in itself -- it's an indicator that a big chunk of the population perceives taxes as too high and regulations as too oppressive. Those taxes and regulations are the problem. You may disagree and have a fine justification for each law and an outstanding purpose for each levy, but it's the opinions of the people who slide under the radar that matter.

Massachusetts officials are in for some unwelcome revelations.

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Thursday, May 22, 2008

Hauser's law, the Laffer curve and pissed-off taxpayers

Can governments collect as much tax revenue as they they think they need simply by tweaking tax rates? Or was Arthur Laffer correct when he said that raising rates beyond a certain average level causes revenue to actually fall?

The debate over Laffer's theoretical insight hotted-up this week after the Wall Street Journal published a column by David Ranson touting economist Kurt Hauser's claim (Hauser's Law) that tax revenue sticks pretty close to 19.5% of GDP no matter where the government sets marginal tax rates.
What makes Hauser's Law work? For supply-siders there is no mystery. As Mr. Hauser said: "Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation."

Putting it a different way, capital migrates away from regimes in which it is treated harshly, and toward regimes in which it is free to be invested profitably and safely. In this regard, the capital controlled by our richest citizens is especially tax-intolerant.
Several tax-happy critics promptly set out to debunk Ranson and Hauser -- inadvertently reaffirming Hauser's Law in at least one case. But the biggest criticism of Hauser's Law seems to be the 100-mile-high view he takes of the economy. What's actually going on there and how can we know that it really prevents taxes from increasing as a share of the GDP?

Fortunately, Hauser's take on the matter isn't the only one out there. A 2006 report (PDF) by Louis Levy-Garboua, David Masclet and Claude Montmarquette for Quebec's Centre Interuniversitaire de Recherche en Analyse des Organisations (CIRANO) looked at the behavior of individuals subject to varying tax rates. What they found is that the Laffer curve doesn't kick in when tax rates are perceived to be "exogenous" -- dispassionate and impersonal, like gravity. But when tax rates are experienced as unfair products of human calculation, the Laffer curve kicks in in spades.
We do not observe the Laffer curve phenomenon in our simplified setting when tax rates are randomly imposed on working taxpayers. However, we observe it in a Leviathan state condition in which an experimental tax setter in flesh and blood is given the power to maximize tax rates to his own benefit. ...

The fact that tax responsiveness of work is substantially greater when tax rates are set by another subject in flesh and blood than by nature is taken as evidence that workers respond strongly and emotionally to unfair taxation, which is consistent with the history of tax revolts. To be more specific, taxpayers want to punish the tax setters who intentionally violated the norm of fair taxation. ... We also find evidence of affective responses (Zajonc 1980) to unfair taxation by angry taxpayers who lost their temper and were ready to incur a net cost to hurt norm violators, and these turn out to be the ultimate cause for the Laffer curve phenomenon.
What constitutes "unfair" taxation? Whatever the taxpayers say it is. In the study, the maximum rate before revolt kicked in was 50% (this is a Canadian study, after all). Ultimately, though, it seems obvious that the trigger point will depend on the expectations of the specific taxpayers who are affected.

The researchers conclude that "fiscal policies that serve macroeconomic purposes" are unlikely to trigger a revolt, but that "[i]n order to produce a Laffer effect, fiscal policies need to be felt as intentional, discriminatory and especially hurtful by a group of taxpayers."

So, if we can get God or Plato's philosopher-kings to take over tax policy, taxes might be raised nearly forever without consequence. But we live in a world in which taxes are inherently political, and tax rates are often used to reward or punish. Does anybody really experience changes in tax rates as dispassionate acts of nature? Or are they understood, more or less universally, as the arbitrary choices of whoever happens to be in power?

The currently popular craze to increase taxes on people considered wealthy is especially problematic since, say Levy-Garboua, Masclet and Montmarquette, "The initiators of tax revolts are usually found among the most productive, high-earning, and hard-working group of taxpayers." This point squares, of course, with Hauser's and Ranson's insight that "the capital controlled by our richest citizens is especially tax-intolerant." Try to soak the rich too much and, more than any other group, they'll skate their money out of the country, drop into the underground economy or stop being productive even if it hurts them to do so.

This, then, is likely why Hauser's Law seems to hold true. Taxpayers view tax rates as the outcomes of political decisions by human beings with axes to grind. Taxpayers will tolerate tax hikes up to a certain point -- but then, no more. In the modern-day United States, with expectations as they are, that has confined tax revenues in recent decades to roughly 19.5% of GDP.


Tuesday, April 15, 2008

Sorry, but 'civilized society' shouldn't cost so much

Inevitably, pro-government pundits at this time of year trot out that hoary old supposed Oliver Wendell Holmes Jr. quote to the effect that "Taxes are what we pay for a civilized society."

But, assuming that Holmes was being sincere, that was a statement made at a time when the burden of government rested much more lightly on people's shoulders than it does now. In 1920, total government spending consumed 12.8% of GDP, with federal spending at 7.7%. By 2005, that figure was 35.9%, with federal spending at 20.2%. Are we really getting more civilization for that money? Or are we just getting mugged a tad more vigorously?

In a column for the Christian Science Monitor that has since been syndicated elsewhere, Walter Rodgers not only quotes (misquotes, really) Holmes, but adds that "Paying taxes is an exercise of civic virtue akin to supporting one's country in time of war." But even Holmes might have balked at the bill we're currently paying for our "civilized society." And plenty of us might prefer the status of conscientious objectors -- or even draft dodgers -- when it comes to ruinous taxation as well as government's seemingly endless appetite for military aggression.


Thumbs up for tax resisters

It's April 15, the day on which Americans ritually submit to a mugging by federal and state governments. It's an especially painful day for those people who not only resent being deprived of their hard-earned money, but have to watch as the cash is then spent on programs they bitterly oppose -- which, in their opinions, do harm rather than good. Prominent among this segment of the population in these days of seemingly eternal war are people who oppose the government's military adventures. Democracy Now! has a timely interview with Pat and John Schwiebert, a Portland, Oregon, couple who refuse to pay federal income tax in protest of military expenditures.

AMY GOODMAN: Well, it’s good to be back here. John, how long haven’t you paid taxes?

JOHN SCHWIEBERT: Well, it’s been over thirty years. I’m not exactly sure. I think it was 1977 when we stopped paying.

AMY GOODMAN: Talk about your decision thirty years ago.

JOHN SCHWIEBERT: I think we just pretty much together came to the realization that we’re conscientious objectors to war, and if you object to war, you don’t participate. The only way we could participate at our age at the time is by refusing to support it. And so, we just said, well, we won’t send in the military portion, the military percentage of our taxes.


AMY GOODMAN: And in terms of the percentage, what are you calculating, for example, this year, the percentage that would go to the military? What percentage aren’t you paying?

JOHN SCHWIEBERT: Actually, we’ve gotten to the point we’re so upset by the direction the country has taken and the demise of democracy in this country, that after the Iraq war broke out we completely stopped cooperating. So we’re paying nothing now. So the percentage that’s estimated by the War Resisters League is more like 50 percent. But I haven’t paid any attention to it this year, because we—

PAT SCHWIEBERT: We don’t care.

JOHN SCHWIEBERT: —we just didn’t give anything. We’re in total non-cooperation with the federal government.

There are other reasons to hate taxes, of course, and other harmful government programs funded by the money raised through taxation. But whatever their reasons, I think it's worth saluting folks who go out of the way to avoiding feeding the beast.

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Monday, April 14, 2008

If history is any judge, speeding cameras will be crooked

With Governor Janet Napolitano touting automated speeding cameras along the state's highways as an effective way of closing Arizona's yawning budget gap, it's worth paying attention to recent reports about how various local governments have fiddled the implementation of red-light cameras.

In the single court case that has occurred thus far, Chattanooga's city traffic engineer John Van Winkle testified that the yellow signal light should be (and was) turned on for the 3.9 seconds necessary to meet basic safety standards. The judge in question ordered the claim verified, and discovered that the light was only set for 3s—significantly less than the 3.9 second minimum. ...

In Dallas, yellow lights at the city's revenue generators camera-enforced intersections were timed for just 3.15 seconds, or 0.35 seconds less than the Texas Department of Transportation minimum. In this case, a third of a second may make a substantial difference in revenue—theNewspaper reports that most (80 percent) red light tickets are issued less than one second after the light has turned to red. ...

Springfield has a similar story. There, residents voiced concerns last spring after the city announced its intention to slash yellow lights by one second at multiple intersections. Again, evidence from the investigation indicated that longer yellow lights actually reduce the number of accidents at busy intersections. The only problem is, long yellows also have a negative impact on revenue, which can make the cameras cost more than they're worth.

Adding urgency to tales of the corruption inherent in the implementation of red-light cameras is a report from the Florida Public Health Review that the cameras are actually dangerous and counter-productive.

"The rigorous studies clearly show red-light cameras don’t work," said lead author Barbara Langland-Orban, professor and chair of health policy and management at the USF College of Public Health.

"Instead, they increase crashes and injuries as drivers attempt to abruptly stop at camera intersections. If used in Florida, cameras could potentially create even worse outcomes due to the state’s high percent of elderly who are more likely to be injured or killed when a crash occurs."

Why is the fiddling of red-light cameras relevant to proposals to dot the state's highways with radar-activated speeding cameras? Because officials who are capable of trimming yellow lights to manufacture "red-light runners" are equally likely to jimmy speeding cameras so that they'll record folks as traveling at just a few miles per hours faster than their (untampered) speedometers indicate.

The temptation is obvious: money. While traffic cameras have often been sold as safety measures, they've been very openly embraced as revenue generators by government officials unwilling to cut spending and equally leery of openly embracing higher taxes. Governor Napolitano has explicitly pushed speeding cameras as a means of raising money that the state government doesn't have, but wants to spend anyway. The existing speeding cameras along Loop 101 are generally described in terms of the funds they generate.

While photo enforcement vendors and government agencies have stressed the program is about safety and not money, it has brought in revenue to both the city and the state.

The freeway program has collected $5.4 million in state surcharges, $2 million for the city's general fund and nearly $1 million more for Scottsdale's court enhancement fund, according to city figures through February.

Speeding cameras won't succeed as revenue generators if they actually deter speeders. They'll meet revenue goals only if drivers continue to speed and get caught -- or can be tagged as violators, anyway, no matter the speed at which they actually drive.

If the urge to pick pockets is strong enough to drive officials to tinker with traffic-light timers, it will certainly inspire them to set radar cameras a little ... err ... "creatively."

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Thursday, April 10, 2008

Who knew people would dodge taxes?

Let's see, New York schemes to boost its cigarette tax by $1.25 a pack to a whopping $2.75 a pack -- the highest in the nation. New York City residents pay another $1.50 in tax on top of that. What could be the possible result? Hmmm ... Think ... Think ...

Oh, I think I know. Could it be an increase in clever tax dodging? Says the New York Times:

Millions of dollars worth of counterfeit tax stamps were seized and a Jordanian man arrested as part of a major undercover investigation into tobacco smuggling in New York, authorities announced Wednesday.

The fake stamps would have allowed unscrupulous cigarette dealers to evade nearly $6.1 million in state and city taxes, authorities said.

This shouldn't be too much of a shock. The New York Sun reports that "27% of city smokers and 34% of upstate smokers sometimes bought 'under-taxed' cigarettes in 2006. These smokers avoided the tax by buying cigarettes from other states, ordering cigarettes over the Internet, and purchasing cigarettes at Indian reservations." That's before the latest hike in taxes.

I think I see a business opportunity here. Does anybody have a printing press? Or just a truck?

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Tuesday, April 8, 2008

Bay State targets underground economy

Ever-tightening business regulations and rising taxes inevitably drive a growing share of economic activity beyond the easy reach of regulators and tax collectors. People desiring to hold on to a larger share of their income than allowed by law, or fearful that rules and regulations make business activity next to impossible, are forced to look to operating in the shadows as a reasonable alternative to being bled dry or ceasing operation entirely. So, in this age of heavy regulation as well as a slowing economy, expect to see more stories like this one from Massachusetts:

Businesses who operate under-the-table and employers who break employment laws will be the focus of a task force Gov. Deval Patrick is poised to create on Wednesday.

Patrick plans to sign an executive order establish a Joint Force on the Underground Economy and Employment Misclassification, according to a State House source briefed on the announcement.

Advocates for tightening penalties against businesses engaging in illegal activities say so-called underground economy businesses drain the state’s economy through fraudulent practices.

Mark Erlich, executive secretary treasurer of the New England Regional Council of Carpenters, called the measure “long, long, overdue.”

“State budgets are tight. Here is an opportunity to raise revenues without raising taxes,” said Erlich.

A 2004 report (PDF) produced by Harvard University scholars found that simply "misclassifying" workers as independent contractors rather than employees allowed those workers to keep $152 million out of the hands of the state government. Plenty more money escapes the state coffers through other clever dodges -- or simply through the practice of operating businesses beneath the government's radar.

Nationally, the underground economy is estimated (PDF) as equivalent to 8.4% of GDP -- just about the smallest in the world. A heavily regulated and taxed jurisdiction like Massachusetts almost certainly has an underground economy closer to European proportions, ranging anywhere from Switzerland's 9.4% of GDP to Greece's 28.2% of GDP.

I'm sure the heads of the European Union wish Governor Patrick better luck than they've enjoyed so far.

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Monday, March 10, 2008

Learning to love the tax man

Every year, as we approach tax day, we are subject to a round of scolding OpEds telling us how lucky we are to be paying such a sizable chunk of our income to support such a wonderful government. Peter L. Bernstein was ahead of the rush with his February 10 missive in the New York Times admonishing us:

We should have a sense of reward for helping to finance government. Yes, I know that government has serious faults, many and varied. But if we were to restrict our check-writing to parties without serious faults, we might as well throw away the checkbook.

Bernstein wins extra Pollyanna points for citing Justice Oliver Wendell Holmes Jr.'s over-used comment that "[t]axes are the price we pay for civilization" without pointing out how the size of government in the 1920s compares with the metastasized modern product or giving equal time to Holmes's point that "[s]tate interference is an evil, where it cannot be shown to be a good."

Whenever I see a column like Bernstein's I wonder if, perhaps, the author is blowing the head of the local IRS office, or just owes the tax collectors a favor. I'll be charitable, though, and assume that Bernstein is sincere in his claim that "[p]aying taxes is the only way to have public goods that benefit all of us."

Let's look at the examples that Bernstein believes are so worthy of our support.

We want an army to defend our country, but who will stand up and say, “O.K., I will take on the army as my personal responsibility”? Who would even want such an arrangement?

The same arguments apply to the local police departments around the nation. Or, when it comes to education, can anybody expect me to pay on my own for the schooling of millions of other people’s children across the country? I spent plenty to educate my own children. We have to do this together as taxpayers.

Would that be the same army that is currently deployed to Iraq, occupying a country where it is unwelcome, killing and being killed, all to the tune of some $500 billion to $3 trillion?

I could skip that, thank you. How about (to be moderate) we replace it with a militia and, maybe, a small professional navy and air force? That would get us that all-important defense at much lower cost. I'm not sure what the savings would be, but I'll bet it would shave a few bucks off my tax bill (and keep a few folks out of the cold, cold ground).

Local police departments? Those would be the law-enforcement agencies acquiring military-style tactics, weapons and attitudes for use against the common citizens of these United States -- mostly to enforce a doomed and oppressive effort to prohibit certain disfavored intoxicants. Too many professional law-enforcers carry over their army-of-occupation attitudes to even the most trivial encounters with the people they supposedly protect.

You can pull that from my bill too.

Education? That means the public schools, right? Oh no. Not the floundering, politicized holding pens that could be so much worse if they weren't so thoroughly incompetent. That's a pity about the government schools' complete inability to reverse declining literacy despite sky-rocketing per-pupil expenditures. Yeah, that's tempting, but I think I'd rather teach my kid ... ummm ... any other way.

Strike that line on the tax bill too.

To his credit, Bernstein allows that "entitlements like Social Security and Medicare, or even unemployment insurance" and farm subsidies are maybe not so clearly deserving of tax support. He admits that there are grounds for debate here, unlike over the war, drug prohibition and compulsory illiteracy line items. That's kind of him, but perhaps a bit short of admitting that the whole subject of a tax-subsidized leviathan legitimately rubs many of us the wrong way.

In fact, Bernstein goes on to concede that "[m]uch government spending on public goods involves waste, and sometimes corruption, and is often badly executed." Well, yes, that's true. That's a big part of why many of us would prefer to choose our own services and pay for them directly. If somebody we hire falls down on the job, we can fire them without much fuss or muss. If we try to withhold payment from the IRS over the poor quality or unwanted nature of what we receive ... well ... things get unpleasant.

I think it's charming that Mr. Bernstein is so pleased with what he's receiving in return for his annual mugging. Taking pleasure in your abuse makes the whole experience so much more pleasant. In a sick way.

But we don't all feel that way. Many of us see what's taken from our paychecks, compare that to what's being done with the money, and bitterly resent the involuntary transaction. It's not just that we're left with so little money to seek superior alternatives; we also often actively oppose the things being done with our tax dollars.

I see little relief on the horizon, though. With the Congressional Budget Office projecting that federal expenditures will rise from roughly 18% of GDP today to almost 40% of GDP in 2075 -- mostly because of Social Security, Medicare, and Medicaid -- high(er) taxes are bound to be with us for a while.

That's why I hold out such high hope for rising noncompliance with the tax laws and the growing underground economy. I suspect that living in the shadows is going to become an increasingly attractive proposition in the years to come.


Monday, March 3, 2008

Arizona on the fiscal brink

Arizona's government seems to have painted its way into a corner with a bucket of red ink. Says the Phoenix Business Journal:

An analysis by the liberal Center for Budget & Policy Priorities shows Arizona with the worst budget deficit in terms of the shortfall's percentage of state spending.

Arizona's estimated $1.7 billion deficit is 16.2 percent of state spending, according to CBPP.

That is higher percentage than California (15.4 percent and a $16 billion deficit) and Nevada (7.8 percent and a $565 million deficit).

The problem, as usual, is that spending has been wildly out of control for the past several years, seriously outstripping growth in population and inflation.

As Tom Jenney, Director of the Arizona Federation of Taxpayers/Americans for Prosperity points out, "Arizona’s budget really got out of control in 2006 and 2007, when the size of state government as a portion of the state economy exceeded 6.5 percent—levels of spending not seen since the early 1990s."

The end result is that Governor Napolitano and her co-conspirators in the state legislature have seriously overcharged Arizona's figurative credit card.

Arizona actually has a spending limit of sorts, capped at 7.41% of state personal income. As the current situation demonstrates, however, our spending-mad representatives are perfectly capable of making plenty of mischief well before running afoul of that limit. Jenney's organization and the state GOP both support HCR 2038, legislation that would lower the spending cap to 6.4% of state personal income, a limit that would have actually made a difference in recent years (although it should be noted that Republican lawmakers were part of the spending problem). The cap could be lifted by a two-thirds vote -- a potentially dangerous provision, but probably a politically necessary one to satisfy the folks who believe the world will come to an end if the government isn't wallowing in stolen cash.

As it is, Arizona's government faces either massive budget cuts of the sort that make politicians squeal, or massive tax hikes bound to make taxpayers shriek. That may well provide further impetus for the growing movement to roll back property taxes (I signed the petition last month), if only to save some of our wallets' contents from the beast's maw.

It's better to limit spending now and avoid even nastier fights in the future.

Note: Thanks to AFT/AFP for the graph.

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