Thursday, July 31, 2014
July 31, 2014
The problem with Robin Hood and his merry men robbing the rich in Sherwood Forest is that, pretty soon, the rich stop riding through the forest. Arthur Laffer
It is appropriate that we talk about Arthur Laffer (pronounced laugher) even though the insights he gave us are no laughing matter. The Laffer curve, although initially counterintuitive, refutes one of the holy grails of liberalism – that the government can get more revenue by increasing taxes on the rich.
The Laffer curve is associated with supply-side economics and was popularized by the supply-sider Jude Wanniski in the 1970s, with Wanniski naming the curve after the work of Arthur Laffer. Laffer later pointed out that the concept was not original, noting similar ideas in the writings of both 14th century North African polymath Ibn Khaldun (in his 1377 Muqaddimah) and John Maynard Keynes (yes, you read that name correctly). Amongst others, David Hume expressed similar arguments in his essay Of Taxes in 1756, as did fellow Scottish economist Adam Smith, twenty years later. Even Ali ibn Abi Talib, the first Shi’a Imam and fourth Caliph of the Islamic empire has made an argument along similar lines. Numerous historical precedents exist for its correctness.
At a 0% tax rate, the curve states that no revenue will be raised. At the extreme rate of 100%, the government theoretically collects no revenue because taxpayers change their behavior in response to the tax rate: either they have no incentive to work, find a way to avoid paying taxes, or possibly go to some kind of barter system. There is, therefore, some point between 0% and 100% where tax revenues will be maximized. The debate is over where exactly that maximizing point resides and that debate can never be fully ended since shifts probably often occur. In practice, the shape of a hypothetical Laffer curve for a given economy can only be estimated.
Every person has their breaking point. Each person reaches a point where he decides that the government is taking too much of his earnings and decides to react. There are two consequences of setting tax rates too high. The first is that total revenues to the government will go down. The first consequence is not as devastating as the second. The second consequence is that the taxpayer becomes convinced the government is trying to take his money and will not take risk and expose his assets. The second consequence means that projects will not be undertaken that would normally be undertaken and the economy subsequently suffers. The gap between rich and poor becomes even greater since the poor cannot find work and are thus deprived of an opportunity to advance. The paradoxical effect of raising taxes on the rich is that the gap between rich and poor may actually be widened.
Some examples of the Laffer curve in action:
In 1921 Andrew Mellon was named Secretary of the Treasury by President Warren G. Harding. Andrew Mellon was one of the most brilliant and successful individuals in American history. Mellon had a four part plan for solving the economic problems left by the Wilson administration and World War I: cut the top income tax rate from 77% to 24%, cut taxes on low incomes from 4% to ½%, reduce the Federal Estate tax, and reduce the size of government. Mellon reasoned that if tax rates were set more reasonably, people would have less incentive to avoid paying and revenues would climb. In 1923 he was able to get his program passed. Guess what, it worked! Tax revenues to the treasury increased and from 1923 to 1931 Mellon reduced the national debt from about $26 million to $16 million (in 1920 the national debt was 26 million and in 2020 it was 20 trillion – those crafty socialists.) By 1935 Franklin D. Roosevelt had increased the top rate to 80%, wiping out all those gains. In a politically motivated action, the Roosevelt administration subjected Mellon to intense investigation of his personal income tax returns. The U.S. Justice Department empaneled a Grand Jury, which refused to issue an indictment. A two year civil action initiated in 1935, dubbed the “Mellon tax trial”, eventually exonerated Mellon, albeit after his death. That 80% top tax rate was not a great idea since it helped prolong the Depression for another six years.
In 2009 the state of Oregon attempted to close its budget gap without doing what it should have done, namely, cut spending. Instead in June 2009 Oregon raised its “piggy-back” state income tax on the richest 2 percent of its residents retroactive to January 1, 2009 (sandbagging the residents). Only New York City’s rates were higher than Oregon. Receipts from the new tax fell from $180 million to $130 million in one year. This was primarily due to the number of filings in Oregon dropping from 38,000 to 28,000 as predicted by at least one statistical organization with some objective number crunchers. Gee, 10,000 rich people in Oregon just disappeared or became, as the newspaper article deemed them, “Vanishing Millionaires.” This is merely a replay of America’s “vanishing millionaires” after the first federal income tax went into effect around the time of World War I. The same thing happened again in 2008 when Maryland instituted its own “millionaire tax.” Roughly one-third of Maryland’s millionaire households vanished from the tax rolls after rates went up. Not all these rich people leave their respective states, some just hire tax people to find clever ways to get around the tax. The socialists in the Oregon legislature couldn’t figure out what had happened, so they just blamed the “poor economy.” Yeah, sure. The socialist spin on this disaster was absolutely astounding but we do not have the time, space, or desire to repeat it all here.
Here is another short example, just for good measure. During the Reagan administration the top tax rate was lowered to 50% in 1981 and lowered again to 28% in 1986. When Reagan entered office in 1981 Federal Income Tax Collections for 1980 were $309 billion. When Reagan left office in 1989 Federal Income Tax Collections for 1988 were $549 billion.
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Wednesday, July 30, 2014
July 30, 2014
by James Haste, Staff Writer, Freedom Fighters of America
Now, I love Sarah Palin, I really do. She terrifies the left by existing and willingly draws fire away when lefties attack the right. I admire her – but she got this one wrong.
The democrats, you see are actually praying that Republicans do impeach the President and remove him from office. As things stand Obama is their albatross. He hangs around the neck of the DNC and holds them responsible, in part or in whole, for each and every Obama scandal. His “sins” are theirs.
The only thing that can free them from the albatross is us. I don’t want to and you shouldn’t want to either. Impeaching him would absolve the Democrats of all responsibility for all of his scandals. ALL of his disastrous decisions will no longer matter. Then the Republican Party will once again be the party of racists. This is the only thing that could possibly save the Democrats in 2016.
A few nuts and bolts. It only takes a simple majority of the House of Representatives to impeach. We could do this tomorrow. BUT it requires two thirds of the Senate to remove him from office. That is in fact the only sentence they can hand down. It has never been done. (I swear to God, Clinton enjoyed the process because in the end it was not even a slap on the wrist. He still brags about it.) I think we will get more than half of the Senate seats in 2014, but not two thirds. It doesn’t matter if we succeed or fail to remove him from office, not only do we give up every advantage we have, we will turn Obama into a living martyr. And he is going to live a long time.
You see, no matter how we squirm, it comes back to the fact he is the first black President. The only way to make sure no future President is ever excused for his incompetence by his skin color alone is to have someone to point at and say “Never Again!” Obama will be the guy.
I understand impeachment is an attractive idea. We all want to get that narcissist the hell out of there. But, if we impeach him, the people that put him there will walk away from all responsibility and they will quickly put another idiot in charge. Then we have to do this all over again.
So, Mrs. Palin, I respectfully must disagree with you. We need to leave the Obamatross around the neck of the Democrat Party. Impeaching him is quite simply the dumbest thing we could do.