Sunday, April 22, 2012

Eat The Rich

A witticism enjoyed by "fairness" advocates goes, "You can tell Monopoly is an old game because there’s a luxury tax and rich people can go to jail."

Ah, but there was a luxury tax not all that long ago, more than a half century after the creation of Monopoly. George Will tells the story.

The Omnibus Budget Reconciliation Act of 1990 was the budget agreement by which President Bush broke his "read-my-lips" vow not to agree to new taxes. The act was, as omnibus bills tend to be, an eye-of-newt-and-hair-of-toad brew of this and that and some other things, and it included--in the name of fairness, of course--a stern tax on "luxury items."

Those items included automobiles, aircraft, jewelry and furs over certain prices. And yachts costing more than $100,000.

In 1990 there were no luxury excise taxes, all of them having been repealed in 1965. But perhaps every quarter-century or so government--it cannot help itself--must go on a "fairness" bender, the memory of the hangover from similar misadventures having faded.

In 1990 the Joint Committee on Taxation projected that the 1991 revenue yield from luxury taxes would be $31 million. It was $16.6 million. Why? Because (surprise!) the taxation changed behavior: Fewer people bought the taxed products. Demand went down when prices went up. Washington was amazed. People bought yachts overseas. Who would have thought it?

According to a study done for the Joint Economic Committee, the tax destroyed 330 jobs in jewelry manufacturing, 1,470 in the aircraft industry and 7,600 in the boating industry. The job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. So the net effect of the taxes was a loss of $7.6 million in fiscal 1991, which means the government projection was off by $38.6 million.

This illustrates the shortcomings of "static analysis." Concerning which, consider an imaginary case.

It has been calculated that if the federal government imposed--in the name of fairness, of course--a 100 percent tax on all the earnings, from the first penny, of all millionaires, which is to say if the government confiscated all their earnings, the sum would suffice to run the government for just six weeks. The problem with that calculation is that it reflects "static analysis." That is, it does not allow for behavioral changes the tax would provoke: No one would earn the one-millionth dollar, thereby triggering the confiscation, so the revenue yield from the 100 percent rate on millionaires would be zero.

But back to reality. "Practical politics," Henry Adams famously said, "consists in ignoring facts." But facts are famously stubborn things, particularly when they involve unpleasantness for one's constituents. In 1993 Congress repealed the excise taxes on boats, aircraft, jewelry and furs. It also indexed, phased down and scheduled the expiration of the tax on cars.

The delicious irony of this story is that the tax was pushed hard by liberal New England senators (Ted Kennedy, George Mitchell, et al) and it was their constituency (northeastern boatbuilders) that suffered most by its passage. Passed with great fanfare, the tax was repealed quietly with its former sponsors favoring its demise.

Fast forward to today's current "fairness" fetish - the "Buffett Rule". The Buffett Rule would raise at most $5 billion a year over the next 10 years - less than 1 percent of the $1.2 trillion federal deficit gap this year.  This calculation, of course, is a "static analysis" as explained by Will. The actual effects of the Buffett Rule would include a slowing of the economy and job destruction and an increase in the deficit. No matter. Liberals support it in the name of fairness. 

As for the second part of the Monopoly quote – no argument there. Rich people are difficult to incarcerate these days. One example - Tim Geithner, who not only remains free but was appointed by President Obama to head the agency (Treasury) which is responsible for preventing, investigating and prosecuting the very crime that he committed (tax evasion).
And of course there's Bill Clinton, who committed perjury testifying to a Federal Grand Jury (a felony) and not only was not jailed but didn't even lose his job.  

Saturday, April 7, 2012

Ryan's Response

In his latest column, George Will advises Mitt Romney to choose a running mate with a high level of policy expertise rather than targeting a swing state or demographic group. Such expertise will be necessary to counter the lies and distortions that have already begun to spew from the Obama re-election campaign. Will suggests that either Rep. Paul Ryan (Wis.) or Gov. Bobby Jindal (La.) would meet his criterion nicely. Will supports his case by citing Ryan's point by point dismantling of Obama's recent attack on the 2012 House (aka Ryan's) budget plan.

Tuesday, April 3, 2012

Carbon Emissions Are Good

Robert Zubrin (NRO) argues that, contrary to conventional wisdom, increasing levels of atmospheric carbon dioxide is beneficial for the environment.

By enriching the carbon-dioxide content of the atmosphere from its impoverished pre-industrial levels, human beings have increased the productivity of the entire biosphere — so much so that roughly one out of every seven living things on the planet owes its existence to the marvelous improvement in nature that humans have effected. Through our CO2 emissions we are making the earth a more fertile world.

...There is no reason to fear a more clement climate. A thousand years ago, the world was significantly warmer than it is today. A thousand years ago, the snow line in the Rockies was a thousand feet higher than it is now, and Canadian forests flourished tens of kilometers farther north. A thousand years ago, oats and barley were grown in Iceland, wheat in Norway, hay in Greenland, and the vineyards of England produced fine wines as far north as York. These warm temperatures were no disaster. On the contrary, persisting through the twelfth century, they are believed by historians to have contributed materially to the significant growth of population and prosperity in Europe during the High Middle Ages (roughly the years 1000 to 1300).

...During the 1970s, the earth experienced a short-term cooling trend, and as a result many of the current cast of global-warming alarmists then predicted an icy doom unless human industrial and population expansion (which they blamed for the phenomenon) could be brought under strict control. This history has exposed them to some mockery, but in fact their previous stand was more to their credit. The global-cooling doomsayers of the 1970s may have been wrong, but at least they were yelling about something that, had it been real, would have been bad. Global cooling would indeed have been a disaster, leading to a drier, more sterile planet. Had the threat of another ice age actually been valid, a forceful government effort to avert such a catastrophe might well have been justified. But as the blame for global cooling could not be conclusively assigned to humanity, the case held little of enduring interest to humanity’s prosecutors.

Real Healthcare Reform

It took Congress 2700 pages to amplify the dysfunctions of our current health care system and make it worse. John Cochrane explains the causes of the system's problems and outlines solutions, all in a concise 914 word WSJ column.

A couple of excerpts.

The country can have a vibrant market for individual health insurance. Insurance proper is what pays for unplanned large expenses, not for regular, predictable expenses. Insurance policies should be "guaranteed renewable": The policy should include a right to purchase insurance in the future, no matter if you get sick. And insurance should follow you from job to job, and if you move across state lines.
Why don't we have such markets? Because the government has regulated them out of existence.

...The main argument for a mandate before the Supreme Court was that people of modest means can fail to buy insurance, and then rely on charity care in emergency rooms, shifting the cost to the rest of us. But the expenses of emergency room treatment for indigent uninsured people are not health-care's central cost problem. Costs are rising because people who do have insurance, and their doctors, overuse health services and don't shop on price, and because regulations have salted insurance with ever more coverage for them to overuse.
If we had a deregulated, competitive market in individual catastrophic insurance, that market would be so much cheaper than what's offered today that we would likely not even need the mandate.