Posts tagged ‘tax policy’

George R. R. Martin: Why Good Intentions Don't Necessarily Make For Good Rulers

Via Alex Tabarrok

A major concern in A Song of Ice and Fire and Game of Thrones is power. Almost everybody – except maybe Daenerys, across the waters with her dragons – wields power badly.
Ruling is hard. This was maybe my answer to Tolkien, whom, as much as I admire him, I do quibble with. Lord of the Rings had a very medieval philosophy: that if the king was a good man, the land would prosper. We look at real history and it’s not that simple. Tolkien can say that Aragorn became king and reigned for a hundred years, and he was wise and good. But Tolkien doesn’t ask the question: What was Aragorn’s tax policy? Did he maintain a standing army? What did he do in times of flood and famine? And what about all these orcs? By the end of the war, Sauron is gone but all of the orcs aren’t gone – they’re in the mountains. Did Aragorn pursue a policy of systematic genocide and kill them? Even the little baby orcs, in their little orc cradles?

In real life, real-life kings had real-life problems to deal with. Just being a good guy was not the answer. You had to make hard, hard decisions. Sometimes what seemed to be a good decision turned around and bit you in the ass; it was the law of unintended consequences. I’ve tried to get at some of these in my books. My people who are trying to rule don’t have an easy time of it. Just having good intentions doesn’t make you a wise king.

Thoughts On Election Spending

It is pretty standard to read lamentations about how high spending was in the most recent election.  However, it strikes me that election spending was irrationally low.  With stakes literally in the trillions (differences in tax policy, crony protection of certain industries and groups, etc.), it is a wonder to me that more money is not spent.

Political spending is rising because we have given the government insane powers over, well, everything.

Pretty Brazen, Even for a Politician

I have often described this statist feedback loop:

  • Create government program
  • Government programs messes up certain aspects of the market
  • Blame such messes on "failure of markets" or capitalism or even the rich, rather than the government program
  • Create new government program to fix problem created by last program
  • Repeat

Obama's new political strategy seems to be even more brazen

  • Democrats pass new program over Republican objections
  • New program has unseemly subsidies for rich people
  • Blame subsidies on Republicans, to the point of using subsidies as example of bankruptcy of Republican party

Specifically, tax breaks for corporate jets:

The chief economic culprit of President Obama’s Wednesday press conference was undoubtedly “corporate jets.” He mentioned them on at least six occasions, each time offering their owners as an example of a group that should be paying more in taxes.

“I think it’s only fair to ask an oil company or a corporate jet owner that has done so well,” the president stated at one point, “to give up that tax break that no other business enjoys.”

But the corporate jet tax break to which Obama was referring – called “accelerated depreciation,” and a popular Democratic foil of late – was created by his own stimulus package.

Which is not to say that the losers in the Republican party would not likely have supported the same plan had it been their idea.

By the way, this is nearly exactly what Obama has been doing with those so-called special subsidies for oil companies.  This subsidies are in fact the identical tax breaks that all manufacturers receive that allow them to accelerate expensing of capital investment.  This is a tax policy that has enjoyed bipartisan support and no one is suggesting should be eliminated in general -- just eliminated for industries that have bad PR.

Show Us Your Lightsaber Or You Will Be Fined

This year, US oil refiners will pay more than $6 million in fines to the EPA for not using a product that doesn't exist.   Refiners are required to blend at least 6.6 million gallons of cellulosic ethanol this year, or pay a fine to the EPA of $1 per gallon of this target not met.

But here is the funny part - no cellulosic ethanol exists for refiners to buy, even by the EPA's own analysis.  The product simply does not exist in any more than pilot plant / experimental volumes.  But that is not stopping the EPA from imposing the fines, which will get passed on into gasoline prices.

Here is the saddest part, from a defender of the cellulosic mandates:

Next-generation ethanol advocates say that small-scale commercial production of the fuel is just around the corner. When the EPA proposal was released yesterday, one advocate blamed the oil and gas industry for slow progress.

“America’s advanced and cellulosic ethanol industry is rapidly progressing with many technologies proven and biorefinery projects shovel-ready. Yet, advanced biofuel producers continue to sail into a head wind created by tax policy favoring oil and gas,” said Brooke Coleman, executive director of the Advanced Ethanol Council, in a statement.

What in the hell are they talking about?  Their plants get their construction subsidized with public financing, the oil industry is required to buy their product, trade barriers exist to limit foreign competition.  These guys are not fighting a headwind, they are trying to hit a golf ball downwind in a hurricane and they still can't clear the lady's tee.

But What Happens if People Actually Change Their Behavior?

The Senate health care bill relies for much of its funding on a tax on so-called "Cadillac" health care plans.  But what happens when employees and employers inevitably change their behavior in the face of different incentives?

History teaches us that tax policy has a huge effect on behavior.  Witness the fact in health care the non-nonsensical fact so many people rely on their employer for health care.  As we see today, this is a really bad idea, but it was hatched because tax law provided incentives for paying compensation in the form of health insurance premiums, since these are not subject to either income or payroll taxes.

Already, employers are offering employees what are effectively buy-outs of health care -- higher pay in return for reduced health care benefits.  For employers, the upside risk on health care costs now outweigh the tax advantages of health insurance as a compensation tool.  Given this trend, what do you think will happen when employees suddenly have the same incentive, to roll back health care coverage to get under whatever bar is set for an insurance package Congress thinks is too rich (hint:  wherever the bar is set, it will be below the health insurance Congress provides itself).  Employers and employees are now going to have a shared incentive to back off on health care benefits in exchange for more cash.  Think of the sharp minds on both sides of a UAW contract negotiation - does anyone really think that these guys won't figure out a win-win to avoid paying the surtax?

Three to five years from now, even before the system goes bankrupt from inevitably expanding costs  (you didn't really buy that stuff about the operator of Amtrak and the Post Office improving the industry's efficiency, did you?), we are going to be talking about the gross shortfall in tax revenues to support these programs, all because people change their behavior in the face of changing incentives.

Hair of the Dog

Isn't this exactly the type of government policy that helped promote the housing bubble and in turn led to our current recession?

WASHINGTON (AP) "” The Senate voted Wednesday night to give a tax break of up to $15,000 to homebuyers in hopes of revitalizing the housing industry, a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Barack Obama's recovery plan.

Republicans:  We want to prove we can do stupid, populist sh*t too!

Update: Via TJIC, more hair of the dog:

Fannie Mae, the mortgage-finance company under U.S. government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing.

Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases"¦

Most Pathetic Interview Ever

I don't know if this has made the blog rounds yet (I have been out of touch and have not gotten through me feed reader today) but this is perhaps one of the most ridiculous things I have ever heard.  It's a 40 second interview with a woman named Geri Punteney in Iowa about Barack Obama on the left of this page  (ironically, NPR makes you listen to a brief commercial before you hear the clip).

You really, really need to take the time to listen.  I will include an excerpt below, but you won't get the full effect of the woman absolutely in tears through the statement, crying because she had gotten to touch someone she had seen on TV.

A few weeks ago, at the home in Oelwein, Iowa, she shares with her mother, Punteney said she'd been inspired to see Obama when he came to the area.                        

"I'd seen the commercials," she said. "And he just seemed sincere, like he's for people like my mom, my brother and me."                        

Many people feel politicians may not be the first place to turn when in dire need of help. But Punteney said she was confident Obama could do something to make her feel better.                     
"I never had anyone pay attention to me and my needs "” and he held my hand," she said.

He can do something to make me feel better?  Barf.  Can it really be that my future freedom and prosperity depend on how this woman votes?  Have we really given this woman so much power over the rest of us?  Have we really throttled back the most productive in society so this woman can feel like she is keeping up?  Have I really become the sacrificial lamb to this woman's need to feel better?

And, oh by the way, in case I have not gone off on this rant in the last five minutes or so, Obama can care because he can promise you whatever you desire, and then he can force me to pay for it.  Unlike people in private life who really do care, politicians don't actually pay for their promises because they can force other people to do it for them.  Worse, politicians like Obama reap the praises of women like this for being caring, while vilifying people like me who are productive and make his caring possible.  It just makes me sick.

Oh, and how much did Obama really care?  Not much, it seems:

I brought a tape recorder to Punteney's house and played her moment
with Obama back for her "” and his suggestion that he'd write her
brother a note. He never did.                        

"He
didn't have time, I guess," she said. "I understand. You know, he was
bombarded by so many people. But just knowing he knows "” that's more
important than a note."

So here it is:  Cares enough to spend Coyote's money:  Yes.  Cares enough to actually expend some effort himself:  No way.

Indeed, Punteney seemed to get just what she wanted from Obama. She got noticed.

How about a trade, Ms. Punteney?  If I promise to get you to an Oprah show, will you promise not to ever vote?

Update: Yeah, I know, her brother has leukemia, which is sad.  The lack of portability of his health insurance is also pain, a result of WWII wage control policy and subsequent tax policy that encouraged the practice.    Sorry, but this need to be touched and noticed by a second or third term Congressman is pathetic. 

Obama's Tax Mess

Like most of the Democratic presidential candidates, Obama has proposed a real mess in the place of coherent tax policy.   Chris Edwards has a first look.  No real surprises - more taxes on the productive, more handouts to key Democratic voting blocks.

Another Leftish Howler on Government Health Care

From Kevin Drum, who I consider one of the smarter folks on the left (but not this time):

A few days ago, during an email exchange with a
friend, I mentioned that I don't usually tout cost savings as a big
argument in favor of universal healthcare. It's true that a national
healthcare plan would almost certainly save money compared to our
current Rube Goldberg system, but I suspect the savings would be
modest. Rather, the real advantages of national healthcare are related
to things like access (getting everyone covered), efficiency (cutting down on useless -- or even deliberately counterproductive -- administrative bureaucracies), choice
(allowing people to choose and keep a family doctor instead of being
jerked around everytime their employer decides to switch health
providers), and social justice (providing decent, hassle-free healthcare for the poor).

Name one industry the government has taken over in a monopolistic fashion and subsequently increased efficiency or individual choice?  Anyone?  Buehler?  In fact, I am not sure I can name one government program that even provides the poor with decent, hassle-free services. 

Lets take the most ubiquitous government monopoly, that on K-12 education. 

  • Efficiency?  My kid's for-profit secular private school has a administrator to student ratio of at least 1:15.  How many assistant principals does your public school have?  Many public schools are approaching 1 administrator for every 1 teacher.
  • Choice?  That's a laugh.  The government and its unions fight choice in education tooth and nail.  In fact, in the context of education, Drum and others have effectively argued that choice is the enemy of his last point, social justice, so it is absurd to argue that government monopolistic health care will optimize both.  Yes, people may be frustrated their insurance company does not cover X procedure, but this will only get worse when the government is making the choices for us.  Oh, and by the way, about the evils of those employers running our health plans?  They do so only because of WWII wage controls and decades of federal tax policy that have provided them strong incentive to do so. 
  • Decent, hassle-free service?  Ask a concerned black family in an inner-city school how good their kid's government-provided education is.  In fact, I will bet that most inner city parents get healthcare of better quality today despite the admittedly Rube Goldberg system we have (courtesy of years of silly government interventions) than the quality of education they receive from the government education monopoly.  After all, most of them walk out of the hospital today with their life, while many of their kids are walking out of worthless government schools with no life.

As to the claim that national health care would "almost certainly save money," that is hard to argue with for this reason:  The government, once in charge of health care choices, can simply start denying procedures and care ("rationing").  This is in fact how costs are managed in most socialist medical systems.  So while this statement is technically true, it would be very hard for anyone to really believe that for the same quality and quantity of care, the government could do it cheaper.

A Voice For Businesses in California

California is one of the toughest states in the country to do business in.  Bill Leonard, a member of the California BOE*, takes a refreshingly free market approach for a left-coast politician.  From looking at his site, he and I may not see eye-to-eye on immigration, but he has been a lone voice of sanity on tax and regulatory policy in California for several years.  If you are interested, his email newsletter is generally filled with news and commentary on how California tax and regulatory law is changing and how these changes may affect local businesses.  You can sign up for his newsletter here.

*  You know your state is in trouble when the department of taxation and revenue calls itself the "Board of Equalization", though I am told this originally referred to equalization of tax policy across counties rather than having the redistributive overtones it has today.

On Totally Losing Perspective

I had this turly over-the-top article from Mark Morford in SF Gate forwarded to me via email, with the forwarding comment "This about sums it up..." After today, I will return to more business topics from politics, but this article gives me the excuse to write my own post-election recap.

Its hard to do this article justice in excerpting it, so I encourage you to follow the link above and read the whole thing, but hear are some choice highlights (bold emphasizes some particular passages I will comment on)

And now Kerry's conceded and the white flag has been raised and we are headed toward the utterly appalling notion of another four years of Bush and another Republican stranglehold of Congress and repeated GOP chants of "More War in '04!"

Which is, well, simply staggering. Mind blowing. Odd. Gut wrenching. Colon knotting. Eyeball gouging. And so on.

You want to block it out. You want to rend your flesh and yank your hair and say no way in hell and lean out your window and scream into the Void and pray it will all be over soon, even though you know you're an atheist Buddhist Taoist Rosicrucian Zen Orgasmican and you don't normally pray to anything except maybe the gods of really exceptional sake and skin-tingling sex and maybe a few luminous transcendental deities that look remarkably like Jenna Jameson.

It simply boggles the mind: we've already had four years of some of the most appalling and abusive foreign and domestic policy in American history, some of the most well-documented atrocities ever wrought on the American populace and it's all combined with the biggest and most violently botched and grossly mismanaged war since Vietnam, and much of the nation still insists in living in a giant vat of utter blind faith, still insists on believing the man in the White House couldn't possibly be treating them like a dog treats a fire hydrant....

This election's outcome, this heartbreaking proof of a nation split more deeply and decisively than ever, it simply reinforces the feeling among much of the educated populace: It is a weirdly embarrassing time to be an American. It is jarring and oddly shattering and makes you rethink what it really means to be a part of this country. The answer: It doesn't mean much at all. Not really. Not anymore...

Maybe we're not all that sophisticated or nuanced or respectable a nation as we sometimes dare to dream....

Maybe, in fact, we're regressing, back to the days of guns and sexism and pre-emptive violence, of environmental abuse and no rights for women and a sincere hatred of gays and foreigners and minorities. Sound familiar? It should: it's the modern GOP platform....

So then, to much of Europe, Russia, Asia, Canada, Mexico, the Middle East -- to all those dozens of major world nations who want Bush out almost as much as the educated people of America, to you we can only say: We are so very, very sorry. We don't know how it happened, either. For tens of millions of us, Bush is not our president and never will be. That's how divisive. That's how dangerous. That's how very sad it has become.

We are not, with another four years of what we just endured, headed toward any sort of easing of bitter tension, a sense of levity, or sexual openness, or true education, or gender respect, or a lightness of spirit and of step.

It is important to recognize that this article is insane. Not slightly over the top or humorous exaggeration, but a truly insane loss of perspective.

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