More from Veronique de Rugy on The Corner:None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues.
Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this "Hauser's Law."
Over this period there have been more than 30 major changes in the tax code including personal income tax rates, corporate tax rates, capital gains taxes, dividend taxes, investment tax credits, depreciation schedules, Social Security taxes, and the number of tax brackets among others. Yet during this period, federal government tax collections as a share of GDP have moved within a narrow band of just under 19% of GDP.
Why? Higher taxes discourage the "animal spirits" of entrepreneurship. When tax rates are raised, taxpayers are encouraged to shift, hide and underreport income. Taxpayers divert their effort from pro-growth productive investments to seeking tax shelters, tax havens and tax exempt investments. This behavior tends to dampen economic growth and job creation. Lower taxes increase the incentives to work, produce, save and invest, thereby encouraging capital formation and jobs. Taxpayers have less incentive to shelter and shift income.
Tuesday, November 30, 2010
There's No Escaping Hauser's Law
Friday, November 19, 2010
Charles Krauthammer - Don't touch my junk
We pretend that we go through this nonsense as a small price paid to ensure the safety of air travel. Rubbish. This has nothing to do with safety - 95 percent of these inspections, searches, shoe removals and pat-downs are ridiculously unnecessary. The only reason we continue to do this is that people are too cowed to even question the absurd taboo against profiling - when the profile of the airline attacker is narrow, concrete, uniquely definable and universally known. So instead of seeking out terrorists, we seek out tubes of gel in stroller pouches.
The junk man's revolt marks the point at which a docile public declares that it will tolerate only so much idiocy. Metal detector? Back-of-the-hand pat? Okay. We will swallow hard and pretend airline attackers are randomly distributed in the population.
Charles Krauthammer - Don't touch my junk
We pretend that we go through this nonsense as a small price paid to ensure the safety of air travel. Rubbish. This has nothing to do with safety - 95 percent of these inspections, searches, shoe removals and pat-downs are ridiculously unnecessary. The only reason we continue to do this is that people are too cowed to even question the absurd taboo against profiling - when the profile of the airline attacker is narrow, concrete, uniquely definable and universally known. So instead of seeking out terrorists, we seek out tubes of gel in stroller pouches.
The junk man's revolt marks the point at which a docile public declares that it will tolerate only so much idiocy. Metal detector? Back-of-the-hand pat? Okay. We will swallow hard and pretend airline attackers are randomly distributed in the population.
Thursday, November 18, 2010
Tuesday, November 16, 2010
House panel finds Rangel guilty on 11 ethics charges
A congressional ethics panel found Rep. Charles Rangel guilty Tuesday on 11 counts of violating rules of the House of Representatives and is now weighing how to punish the New York Democrat.
A special eight-member bipartisan panel of the House Committee on Standards of Official Conduct announced its findings against Rangel after deliberating for hours behind closed doors following a rare trial.
"We have tried to act with fairness, led only by the fact of law," said Rep. Zoe Lofgren, D-Calif., the chairman of the full committee. "And I believe we have accomplished that mission."
Rangel, 80, was accused of failing to report hundreds of thousands of dollars in income and assets, improper use of several rent-controlled apartments in his district, questionable fundraising efforts for a college center in New York that bears his name, and failing to pay taxes on property he owns in the Dominican Republic.
Rangel, who was elected to a 21st term earlier this month, could face expulsion from the House, censure or a reprimand. Congressional experts say that he'll likely be reprimanded, the mildest form of punishment.
Rangel, the former chairman of the powerful House Ways and Means Committee, which writes tax law, wasn't present when Lofgren read the ethics panel's findings. He refused to participate in the proceedings after it declined his request Monday for a postponement because he didn't have - and couldn't afford - legal representation after already spending $2 million on his defense.
GOP Senate leader McConnell backs down, agrees to earmark ban
>
>> “There is simply no doubt that the abuse of this practice has caused Americans to view it as a symbol of the waste and out-of-control spending that every Republican in Washington is determined to fight,” McConnell said Monday in a speech on the Senate floor.
>> “And unless people like me show the American people that we’re willing to follow through on small or even symbolic things, we risk losing them on our broader efforts to cut spending and rein in government,” he said.
Monday, November 15, 2010
The ever-expanding Obamacare escapee list
The list of most recently approved refugees is here. Make no mistake: Team Obama isn’t granting the waivers out of bleeding-heart compassion for the affected workers, but out of a panicked urgency to avoid a public relations disaster.As I’ve boiled it down before:Old Democrat promise: Everyone gets to keep their health insurance.New Democrat promise: You can keep your health insurance…if you BEG hard enough for an Obamacare waiver.Yep: The only way for hundreds of thousands of workers to keep their health insurance is to exempt them from the government-imposed “fix.”
Saturday, November 13, 2010
A 'Separate But Equal' Whip for the Democrats
> A source close to Clyburn said one of his "primary concerns was maintaining a diversity in leadership that reflected" the makeup the Democratic Caucus. Clyburn gets the honorary diversity post without any official duties. He'll need a big office and a staff to develop new diversity programs for the Democrats who survived Pelosi's speakership. I didn't notice any Blue Dogs getting a diversity appointment but I'm sure the new minority leader will deal with them soon enough.
Friday, November 12, 2010
Government Salaries Soar Under Obama
In the last five years, the number of federal employees making $150,000 or more per year increased tenfold, according to an investigation by USA Today. Those high wages increased by twofold under the Obama administration. "The biggest pay hikes have gone to employees who have been with the government for 15 to 24 years," the paper reports. "Since 2005, average salaries for this group climbed 25% compared with a 9% inflation rate."
Thursday, November 11, 2010
Deficit Commission proposal
Putting aside all the minutiae and detail, the crux of the proposal comes down to two points: capping federal government expenditures at 22% -- and eventually 21% -- of GDP, and capping revenues at 21% of GDP. And each of these represents a BIG problem. The first is on the spending side. Except for the anomalous stimulus/bailout/recession years of 2009-2011, federal government expenditures haven’t reached 21% of GDP since the collapse of the Soviet Union – and since World War II only exceeded 21% of GDP during the Reagan-Bush military buildup of the 1980s and early 90s. For virtually all of the Clinton and G.W. Bush years – and during all the Kennedy/Johnson/Nixon years – federal expenditures ranged between 18 and 20% of GDP. So while the 21% figure represents something of a cut versus the out-year projections of the President’s most recent budget, it leaves plenty of headroom to establish and make permanent even more government than we had in the immediate pre-Obama years.
The more important problem is on the revenue side. According to Office of Management and Budget figures, federal revenues have NEVER reached 21% of GDP. In fact, only in Bill Clinton’s final year in office – and during WW II – did revenues even exceed 20% of GDP. During the whole time from 1960 through 2008, federal tax revenues almost always fell between 17 and 19% of GDP, only occasionally rising above 19% (chiefly in Clinton’s second term) or below 17% (G. W. Bush’s first term). Even President Obama’s FY 11 Budget has federal revenues rising only to around 19% of GDP by 2015. So the 21% “cap” represents two full percentage points of GDP above what we have experienced even during historically “high” tax environments.
By way of comparison, the last time we had a “balanced” federal budget – FY 2001 – revenues were 19% of GDP and expenditures 18%. The Commission’s draft, in effect, proposes solving our deficit problem by allowing the federal government to grow 15-20% larger than it was under Bill Clinton, then raising taxes as much as necessary to pay for it. It institutionalizes President Obama’s expansion of the role of government – maybe not quite as much as he and Nancy Pelosi would like – and lays the burden squarely on the shoulders of American taxpayers.
Earmark Myths and Realities - By Sen. Tom Coburn
As Senate Republicans prepare to vote on an earmark moratorium, I would encourage my colleagues to consider four myths and four realities of the debate.
Our founders anticipated earmark-style power grabs from Congress and spoke against such excess for the ages. James Madison, the father of the Constitution said, “With respect to the two words ‘general welfare,’ I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”Thomas Jefferson, in a letter to James Madison, spoke directly against federally-funded local projects. “[I]t will be the source of eternal scramble among the members, who can get the most money wasted in their State; and they will always get the most who are the meanest.” Jefferson understood that earmarks and coercion would go hand in hand.
Tuesday, November 09, 2010
What Happens When a State Goes Bankrupt?
[T]here is no obvious mechanism for state bankruptcies, even if there are some procedures, I believe, for municipal bankruptcies. This is a ticklish issue because states are sovereigns and it is a frightening prospect to think that when mired in bankruptcy, they could not discharge their essential functions because they could not pay their pension obligations, among others. So the battle over the form of bankruptcy will be acute, and I have no idea how this would play out -- except badly.
[...] I don’t think that full-fledged bankruptcy is a realistic prospect as of now. I think that the much more sensible approach is to side-step the bankruptcy proceedings and find ways to attack the union pension obligations directly, given their enormous size. It is odd that these days the only sacred contracts are those which the state enters into with unions for the benefit of their members.
I doubt that any state could actually go bankrupt. Where would they file in the first place? They might default on bonds and debts, but the creditors will not be able to collect anything without the cooperation of the state. I can't imagine the Feds telling California to pay up ... or else? Maybe they might threaten to withhold highway funds. That's really going to scare Jerry Brown! It's much more likely that the Feds will decide that California is too big to fail, so the rest of us must pitch in with our federal tax dollars to bail them out. There will be harsh words and demands for reform, but the money will be air-dropped before chaos breaks out. Eventually everyone will forget how the state got into such trouble in the first place, and re-elect Jerry Brown, who did such a wonderful job of dealing with the federal government to save California.
Wednesday, November 03, 2010
Jim DeMint: Welcome, Senate Conservatives
Lastly, don't let your re-election become more important than your job. You've campaigned long and hard for the opportunity to go to Washington and restore freedom in America. People will try to convince you to moderate conservative positions and break campaign promises, all in the name of winning the next race. Resist the temptation to do so. There are worse things than losing an election—like breaking your word to voters.
At your swearing-in ceremony, you will, as all senators do, take an oath to "support and defend the Constitution." Most will fail to keep their oath. Doing these five things will help you maintain a focus on national priorities and be one who does.
Tuesday, November 02, 2010
Sowell: Spending Money Does Not Work
uess who said the following: “We have tried spending money. We are spending more than we have ever spent before and it does not work.” Was it Sarah Palin? Rush Limbaugh? Karl Rove?G
Not even close. It was Henry Morgenthau, secretary of the Treasury under Franklin D. Roosevelt and one of FDR’s closest advisers. He added, “after eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!”
This is just one of the remarkable and eye-opening facts in New Deal or Raw Deal?, a must-read book by Prof. Burton W. Folsom Jr. of Hillsdale College.
