As an article in the Financial Post noted, if Mitt Romney were Canadian, he’d pay less tax than he does in America.
That’s because most of Mitt Romney’s income is from investments. Much of the world taxes investment income far less than the U.S. does, while taxing consumption more, through a Value Added Tax (VAT). Those countries are more generous to savers, unlike our tax code, which favors spenders.
The belief that the richest 1 percent in Europe and Canada subsidize all of the other 99% is a common delusion on the American Left. It’s the basis for their fantasy that vast new government programs can be paid for simply by taxing the rich. But as Romney’s situation shows, it has no basis in reality.
Europe and Canada finance their more extensive welfare states heavily through VATs, taxes paid mostly by the middle and working classes, since VATs tax consumption, and lower-income people spend a higher percentage of their income than rich people do. Those countries don’t force rich people to pay 90 percent tax rates, as some Democratic lawmakers, like Congressman Jerry McNerney, have recently advocated.
They don’t attempt to tax even wealthy people’s investment income at confiscatory rates, because they have learned from painful experience that doing so discourages people from saving money or starting a business, and lowers investment and economic growth.
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Over at PJMedia, I discuss the technical, economic and political feasibility of what Newt proposes. But as I note there, the hardest part is the politics:
It would be a tough sell to a Congress that is used to directing space funds to its campaign contributors — a prize wouldn’t give them an adequate amount of control over where the money ended up. And even if a President Gingrich could get the support of Congress to establish such a prize, there would be no guarantee that a future Congress wouldn’t rescind it, creating a great deal of uncertainty and risk for someone who wanted to pursue it. A private prize can escrow the funds, but there’s no sure-fire way for a fickle U.S. government to do so, particularly in times of trillion-dollar deficits, because the Constitution doesn’t allow a Congress to commit a future Congress to an expenditure. A prize fund would always be at risk of being raided for some more “worthy” social objective.
But there’s another problem. When Speaker Gingrich proposes that the settlement eventually become a U.S. state, he is implicitly advocating withdrawal from the 1967 Outer Space Treaty, which explicitly prohibits claims of national sovereignty off planet. The treaty can be withdrawn from with one year’s notice (and in fact Bob Bigelow has been warning over the past year that the Chinese intend to do exactly that), but getting the State Department and Senate to go along with abandoning a long-standing treaty that we helped negotiate, and which performs a lot of other vital functions, may be a non-starter politically. Better perhaps would be the approach of the Space Settlement Institute, which proposes to have the U.S. recognize private claims of non-state actors, which could accomplish the goal of allowing property on the moon without the need to withdraw from the OST. It would also provide a tradable market in lunar real estate, allowing private settlement ventures to raise funds without the need for taxpayer money. It wouldn’t be a U.S. state, but it might be a settlement of Americans, with American values, which is probably what the former speaker’s goal is.
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In his State of the Union address, President Obama, a consistent supporter of bailouts and crony capitalism, hypocritically railed against them, proclaiming, “no bailouts, no handouts, and no cop-outs.” Just a couple days later, though, his administration is rolling out a massive multibillion dollar bailout that will enrich speculators. Bloomberg News reports that the Obama Administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners, a tripling of what banks can currently get under the HAMP bailout program. Speculators will benefit, too: they don’t even have to live in a house to get its mortgage principal reduced: “Investors who rent out their properties would be eligible to refinance under the new rules.” In the coming weeks, the Obama administration is expected to roll out an ill-conceived mass mortgage refinancing program that could shrink your 401(k) and increase the cost of mortgage financing for future borrowers.
We previously wrote about the voodoo economics behind the Obama administration’s mortgage bailout ideas, which will cost taxpayers countless billions.
Obama’s State of the Union address also contained false claims about outsourcing and corporate taxes. The Obama administration has used green-jobs money from the stimulus package to enrich foreign green-energy firms and outsource American jobs to countries like China: “79 percent” of all green-jobs funding “went to companies based overseas,” and “the largest grant” it made “went to Babcock & Brown,” a “bankrupt Australian company,” noted the Investigative Reporting Workshop at American University. This just one of the ways the Obama administration used taxpayer money to outsource American jobs to foreign countries.
The most recent dispatch from the Weird, Wide World of Regulation:
- The Anacostia Cab Association is a D.C.-based company that hires willing employees to give rides to willing customers. The city is cracking down on them at their competitors’ behest.
- Both U.S. Senate candidates in Massachusetts want to strictly limit political speech. They believe their campaigns should have free rein, but they don’t want other people to have the ability to publicly express their opinions. Jeff Jacoby has more in a wonderful column titled “Shut Up, They Explained.”
- The 2012 Federal Register is already up to 4,456 pages. It’s still January.
- The most bizarre regulation of the year could well be this Alabama bill “prohibiting the sale or manufacture of food or products which contain aborted human fetuses.” SB 1418 would ostensibly ban stem-cell research in the state.
- A local ordinance in Suffolk, Virginia, prohibits driving motorized vehicles under their own power within city limits.
- The IRS is once again making noises about wanting to do your taxes for you. I’ve written before on why this is a bad idea, but it looks like I may have to explain myself a little more clearly.
In his State of the Union address, President Obama decried skyrocketing college tuition, attempting to take advantage of public anger over the steadily-worsening college tuition bubble. This was ironic, since his own administration has done much to foster rising college tuitions.
For example, it imposed the 90-10 rule, which forced low-cost educational institutions to raise their tuition to comply with a new federal regulation requiring them to charge enough over federal financial aid so that at least 10 percent of education costs don’t come from financial aid. For example, Corinthian College had diploma programs in health care and other fields that can be completed in a year or less. Until 2011, many of those programs had a total cost of about $15,000, which meant that federal grants and loans could cover nearly 100 percent of their cost. In response to the Education Department’s rule, the college raised tuition to comply with the 90/10 rule. The net result of the Obama Education Department’s rule was to “create a perverse, no-win ‘Catch-22’ that could prevent low-income students from attending college,” by encouraging such colleges to raise tuition to outstrip rising financial aid by more than ten percent. Administration allies like Senator Richard Durbin (D-Ill.) are now pushing a new rule, the 85-15 rule, that would require low-cost institutions to further raise tuition so that at least 15 percent of education costs aren’t covered by financial aid. (With this kind of mentality, it is no wonder that college graduation rates have actually “fallen somewhat since the 1970s” “among poor and working-class students.”)
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There has been much waxing in the last few days about how unfair it supposedly is that Mitt Romney was taxed at around 15 percent. And that Warren Buffett supposedly pays a lower tax rate than his beleaguered secretary does.
But as my colleague Trey Kovacs and I pointed out in a Wall Street Journal op-ed this week, these “low” tax rates are a charade. This is because “our tax code layers taxation of dividends and capital gains on top of a top corporate tax rate of 35%—which even President Obama acknowledges [he, in fact, did so in the State of the Union] is one of the highest in the world … The law taxes corporations as if they were separate beings from the shareholders who own them and then levies a separate tax on shareholder payouts and gains. This double taxation brings the effective tax rate on investment income to as much as 44.75%.” In fact if you factor in the estate tax or “death tax,” the rate goes to 64 percent on this income. And that doesn’t even include state and local taxation.
As we note in the op-ed, “The most popular tax reforms—from the “9-9-9 plan” of former candidate Herman Cain to flat tax proposals—all have in common the reduction or elimination of double taxation on investment.”
My friend and mentor the late Richard Nadler found a few years back that polling showed that middle-class investors had “internalized their new role as capitalists” and “display favorable attitudes toward programs that reduce taxes on savings and investment.” New research seems to confirm this middle-class savers still retain these views even after the financial crisis.
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OPINION
ALEX TABARROK: “The Innovation Nation vs. the Warfare-Welfare State”
“We like to think of ourselves as an innovation nation, but our government is a warfare/welfare state. To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision. Innovation, however, is not a priority of our massive federal government. Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security.”
A. BARTON HINKLE: “Virginia Should Fight the Federal Health Care Takeover”
“State lawmakers across the country are debating whether, and how, to set up such exchanges, which are encouraged by the 2010 federal health-care overhaul, or let the feds do it for them. The exchanges will act as clearinghouses where consumers can compare health insurance policies, a bit like the way you can compare travel deals on Expedia.com. Here in Virginia, legislators differ on whether the exchange should be an entity unto itself, or an arm of the State Corporation Commission. The correct answer is: neither. Virginia should not set up such an exchange at all. The commonwealth has nothing to gain by doing so, and a lot to lose.”
SEAN GALLAGHER: “The Fast, Fabulous, Allegedly Fradulent Life of Megaupload Founder Kim Dotcom”
“The man once known as Kim Schmitz (and as Kimble, and as Kim Tim Jim Vestor, and finally as Kim Dotcom), now awaiting extradition from New Zealand to face charges of conspiracy, money laundering and copyright crimes in the US, has enveloped his actual life in a cloud of hype and bluster that echo the worst of the dot-com bubble from which he took his new surname. In 2001, the Telegraph called Schmitz ‘a PR man’s nightmare and a journalist’s dream.’”
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“After spending $55 million of a $118.5 million grant from” the U.S. “Department of Energy, Ener1, an Indianapolis-based maker of batteries,” has just “declared bankruptcy.”
The White House had enthusiastically touted the company, which gave rise to an embarrassing gaffe by Vice President Biden:
Vice President Biden visited Ener1 one year ago, January 26, 2011. . .On several occasions, Biden called the company “Enron one” during his visit, invoking a seemingly unintentional but ultimately prescient reference to the collapse of the energy giant Enron. The company was also ranked number 67 in the White House Report: 100 Recovery Projects that are Changing America.
To some, the bankrupt firm is a “candidate in the increasingly competitive race to become the Next Solyndra.” But in reality, several other recipients of green-jobs subsidies under the stimulus package have already gone broke. CBS News had earlier reported that there were 11 Solyndras — that is, financially-troubled recipients of green-jobs subsidies, five of which had already filed for bankruptcy. After the CBS News report, Evergreen Energy, another green-jobs recipient, filed for bankruptcy.
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Have a listen here.
The state of Georgia recently passed strict new requirements for immigrant farm workers. Immigration Policy Analyst Alex Nowrasteh looks at the results of a new report released by the state. Workers are fleeing to other states, causing a labor shortage. Some farmers find they lose less money by actually letting their crops rot in the fields rather than comply with state and federal rules.
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