Category Archives: Cato Institute

Lessons to Obama on how to prosper from selected states

April 23, 2012 – 12:37 pm

https://i0.wp.com/www.freetochoosemedia.org/production/POC/presskit2/milton-president-reagan.jpg

Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1

Today President Obama is telling us that we must raise taxes in order for us to prosper and grow our economy. I have heard that before and it has never worked!!!!

Liberals like Ernie Dumas and Max Brantley who write for the Arkansas Times have always bragged on the 7% state income tax that Dale Bumpers raised in 1971 and how Arkansas has grown economically since then. However, the facts are quite different.

Ernie Dumas in his article “Arkansas” A tax myth-maker too,” Arkansas Times, April 13, 2011 asserts:

Until Gov. Dale Bumpers raised income-tax rates and other taxes in 1971, Arkansas had by far the lowest per-capita state and local taxes in the United States. Afterward, we were still 50th but within shouting distance of 49th.

Here are the real facts  according to Greg Kaza of the Arkansas Policy Foundation:

(June 2006) Democratic Gov. Dale Bumpers and the General Assembly raised Arkansas’ top income tax rate to “broaden the tax base” in 1971(1). Yet Arkansas’ per capita income, expressed as a percentage of the U.S. total, has barely improved, moving from 71 (1971) to 77.7 percent (2005) over the 34-year period, according to data from the U.S. Bureau of Economic Analysis. The 1971 income tax increase reversed a decades-long strong growth trend and left Arkansas with the highest income tax rate among bordering states (Mississippi, Missouri, Louisiana, Oklahoma, Tennessee and Texas).

Income Stagnation: The 1930s
One has to turn to the 1930s-the decade of the Great Depression-to find weaker income growth than in recent years.

Arkansas per capita personal income was 44 percent of the U.S. in 1929, the first year data was compiled in the BEA time series. The Great Depression started that year, and by the time it ended in 1933 Arkansas per capita income had fallen to 41 percent of the U.S. By decade’s end (1939) it had returned to 44 percent.

Growth Decades: The 1940s, 1950s & 1960s
Arkansas per capita income increased as a percentage of the U.S. in the next three decades.
In 1941, at the onset of World War II, Arkansas per capita income was 47 percent of the U.S. It was 59 percent at war’s end in 1945 and again in 1949. It was 56 percent in 1950, 62 percent a decade later in 1960, and 68 percent in 1969. If this growth rate had continued Arkansas would have exceeded 100 percent of the U.S. average in the current decade (2000-2009).

To summarize, Arkansas per capita income increased from 44 to 71 percent of the U.S. total between 1939 and 1971.

Anemic Income Growth (1971-2005)
The trend in recent decades is anemic growth in Arkansas per capita personal income. Fiscal policy changes effect economic behavior with a time lag. Arkansas per capita income was 71 percent of the U.S. in 1971 and 76 percent in 1973. Income growth stagnated for the rest of the decade, reaching 77 percent of the U.S. in 1979. It fell to 75 percent in 1989, and was 76 percent in 1999. Today, Arkansas per capita income, at 77.7 percent of the U.S., is barely above its high point of the 1970s.

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We can look at other states and see what their experience is too.

I’ve done a couple of posts comparing Reaganomics and Obamanomics, mostly based on data from the Minneapolis Federal Reserve on employment and economic output.

I even did a TV interview on the subject, which generated some comments on my taste in clothing, and also cited a Richard Rahn column that got Paul Krugman and Ezra Klein upset.

Some of the best evidence about high tax rates vs. low tax rates comes from inside America. Art Laffer (yes, that Art Laffer) and Steve Moore have a great column in today’s Wall Street Journal. It’s sort of Reaganomics vs. Obamanomics, looking at evidence from the states.

Barack Obama is asking Americans to gamble that the U.S. economy can be taxed into prosperity. …Mr. Obama needs a refresher course on the 1920s, 1960s, 1980s and even the 1990s, when government spending and taxes fell and employment and incomes grew rapidly. But if the president wants to see fresher evidence of how taxes matter, he can look to what’s happening in the 50 states. In our new report “Rich States, Poor States,” prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It’s like comparing Hong Kong with Greece… Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.

Tax rates also lead people to “vote with their feet.” Laffer and Moore look at migration patterns.

Over the past decade, states without an income tax have seen 58% higher population growth than the national average, and more than double the growth of states with the highest income tax rates. …Illinois, Oregon and California are state practitioners of Obamanomics. All have passed soak-the-rich laws like the Buffett Rule (plus economically harmful regulations, like California’s cap-and-trade scheme), and all face big deficits because their economies continue to sink. Illinois has lost one resident every 10 minutes since hiking tax rates in January. California has 10.9% unemployment, having lost 4.8% of its jobs over the past decade. …Every time California, Illinois or New York raises taxes on millionaires, Florida, Texas and Tennessee see an influx of rich people who buy homes, start businesses and shop in the local economy.

Competition among the states is leading some states to make further improvements. Some are even trying to get rid of their income taxes.

Republican governors in Florida, Georgia, Idaho, North Dakota, South Carolina, Ohio, Tennessee, Wisconsin and even Michigan and New Jersey are cutting taxes to lure new businesses and jobs. Asked why he wants to reduce the cost of doing business in Wisconsin, Gov. Scott Walker replies: “I’ve never seen a store get more customers by raising its prices, but I’ve seen customers knock down the doors when they cut prices.” Georgia, Kansas, Missouri and Oklahoma are now racing to become America’s 10th state without an income tax.

I like the quote from Governor Walker. He seems to know what he’s talking about, so it will be interesting to see whether he survives the upcoming recall election. I guess it depends whether voters understand that big government and high tax rates is a recipe for continued decline.

Some states, such as Illinois and California, are filled with voters who refuse to recognize reality. Think of them as the Greece and Spain of America, perhaps because the number of tax-consumers is greater than the number of tax-producers.

And even though parasites should understand it doesn’t make sense to kill their host animals, this cartoon illustrates how the welfare states lures a growing number of people to ride in the wagon. And this cartoon shows the consequences of too many moochers and not enough producers.

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Take a look at all the Milton Friedman clips that I have posted today. These liberals I mentioned above have truly forgotten how powerful the market is if not interferred with by the government.

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 2

Related posts:

 

Why do people move to other states to avoid Arkansas’ high state income tax? (If you love Milton Friedman then you will love this post)

Milton Friedman served as economic advisor for two American Presidents – Richard Nixon and Ronald Reagan. Although Friedman was inevitably drawn into the national political spotlight, he never held public office. Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 1 Mike Huckabee recently moved to Florida? Why? The answer […]

Milton Friedman’s Free to Choose (1980), episode 1 – Power of the Market. part 3

By Everette Hatcher III | Also posted in Milton Friedman, President Obama, Taxes | Tagged | Comments (0)

Churches, not the government, have traditionally helped the poor in the long history of the USA

April 23, 2012 – 6:03 am

If you look at the first 150 years of our nation’s history you will find practically no welfare or assistance to the poor coming from the government. In fact, most of the help came from local churches. During the last few decades the government had created the welfare trap that robs people of responsibility to better themselves. Many in the welfare trap feel they are being treated like children.

With all that in mind I found this article below very helpful.

U.S. Conference of Catholic Bishops and Spending Cuts

Posted by Tad DeHaven

House Budget Committee chairman Paul Ryan (R-WI) and Speaker John Boehner (R-OH) are pushing back against criticism from the U.S. Conference of Catholic Bishops over the GOP’s proposed cuts to domestic spending programs. They should.

The USCCB’s criticism comes at a time when it’s appropriately fighting the Obama administration’s mandate that Church-affiliated employers must provide health insurance that covers birth control. As a Catholic, it pains me that the bishops apparently do not recognize that a central government that is big and powerful enough to spend billions of other people’s dollars on housing, food, and health care programs, which the bishops support, is inevitably going to shove its tentacles into areas where they’re not wanted. In other words, if you play with fire, there’s a good chance you’re going to get burnt.

The bishops have now sent four letters to Congress that call on policymakers to “create a ‘circle of protection’ around poor and vulnerable people and programs that meet their basic needs and protect their lives and dignity.” Oh please. Even if it were the proper role of the federal government to fund such programs, the government’s efforts have been inefficient and often counterproductive. If anything, the massive federal welfare state that has sprung up over the past five decades has stripped countless Americans of their dignity by making them reliant on the cold hand of the bureaucrat.

Note this paragraph from a USCCB letter that argues against cuts to housing programs:

As bishops, we see firsthand the pain and suffering in our communities and in our parishes caused by homelessness and lack of affordable housing. The Catholic community is one of the largest private providers of housing services for the poor and vulnerable in the country. We shelter the homeless, develop affordable housing for families and people with disabilities, counsel families at risk of foreclosure, and provide housing and care for those at the end of life. At a time when the need for assistance from HUD programs is growing, cutting funds for them could cause thousands of individuals and families to lose their housing and worsen the hardship of thousands more in need of affordable housing. 

The responsibility for addressing such concerns properly belongs to the Church and other organizations that possess that “firsthand” view of the struggles many people face. I won’t get into a discussion on Catholic social teaching, but it’s impossible for me to imagine that the perpetual mess that is the Department of Housing & Urban Development comports with the principles of subsidiarity.

The Catholic Church could do a lot more for the poor if its parishioners were able to put more into the collection plate instead of rendering it unto Caesar. Thus, it’s pretty sad that the bishops see this as a “time when the need for assistance from HUD programs is growing” rather than a time for the Church to reassert its traditional role in taking care of those in need—a role that is hindered by the welfare state that the bishops embrace.

By Everette Hatcher III | Also posted in spending out of control | Comments (0)

Dan Mitchell of the Cato Institute takes on liberals on PBS

April 22, 2012 – 5:50 am

You want the rich to pay more? Dan Mitchell observed:I explained that “rich” taxpayers declared much more income and paid much higher taxes after Reagan reduced the top tax rate from 70 percent to 28 percent.

Liberals don’t understand good tax policies.

With the clock ticking ever closer to the tax-filing deadline, this is the time of year we should be especially cognizant of America’s awful tax system.

Disdain for the corrupt tax code certainly motivates me. As such, even though the panel was stacked against me with three proponents of Obama’s class warfare approach, I hope I did a decent job of defending good tax policy against the statists in this debate on government-subsidized TV.

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Dan Mitchell Battling against Tax Hikes and Class Warfare on PBS

Published on Apr 12, 2012 by

No description available.

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My most effective moment (I think) was when I explained that “rich” taxpayers declared much more income and paid much higher taxes after Reagan reduced the top tax rate from 70 percent to 28 percent.

I also had a couple of good lines when discussing the value-added tax.

Nonetheless, I think I was disadvantaged by the editing process since many of my comments from our hour-long taping got cut out. If you are sufficiently masochistic, you can listen to the entire program at this link.

I’ll close with an observation. If you support freedom and liberty and work in public policy, you better get used to being outnumbered. When I testified to the Ways & Means Committee about the VAT, I was a lone voice against this pernicious tax while the other four witnesses supported making America more like Greece.

And when I appeared on an English-language French TV program to debate tax havens, I had to battle three statists.

But at least I have truth on my side, so that compensates.

By Everette Hatcher III | Also posted in President Obama, Taxes | Comments (0)

Dan Mitchell demonstrates how socialism does not work in classroom setting

April 21, 2012 – 10:08 am

Another great article from Dan Mitchell (an updated version is also posted).

I posted a video making this point earlier in the year, and I also posted a version of this joke back in 2010, but here’s another version that’s worth sharing because of the five lessons to be learned at the conclusion.

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An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy.

When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.
It could not be any simpler than that.

There are five morals to this story:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

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I’ll make one final point. There are five morals to the story, but there are dozens of nations giving us real-world examples every day.

Sort of makes you wonder why some people still believe this nonsense?

By Everette Hatcher III | Comments (0)

Projected Federal spending caused U.S. credit downgrade

April 19, 2012 – 11:39 pm

Everyone wants to blame the Tea Party for the downgrade, but a Tea party approach is needed to get on the right tract.

 

The Debt Ceiling and the Balanced Budget Amendment

Posted by David Boaz

The Washington Post editorializes:

A balanced-budget amendment would deprive policymakers of the flexibility they need to address national security and economic emergencies.

A fair point. Statesmen should have the ability to “address national security and economic emergencies.” But the same day’s paper included this graphic on the growth of the national debt:

National Debt

Does this look like the record of policymakers making sensible decisions, running surpluses in good year and deficits when they have to “address national security and economic emergencies”? Of course not. Once Keynesianism gave policymakers permission to run deficits, they spent with abandon year after year. And that’s why it makes sense to impose rules on them, even rules that leave less flexibility than would be ideal if you had ideal statesmen. Indeed, the debt ceiling itself should be that kind of rule, one that limits the amount of debt policymakers can run up. But it has obviously failed.

We’ve become so used to these stunning, incomprehensible, unfathomable levels of deficits and debt — and to the once-rare concept of trillions of dollars — that we forget how new all this debt is. In 1980, after 190 years of federal spending, the national debt was “only” $1 trillion. Now, just 30 years later, it’s sailing past $14 trillion.

Historian John Steele Gordon points out how unnecessary our situation is:

There have always been two reasons for adding to the national debt. One is to fight wars. The second is to counteract recessions. But while the national debt in 1982 was 35% of GDP, after a quarter century of nearly uninterrupted economic growth and the end of the Cold War the debt-to-GDP ratio has more than doubled.

It is hard to escape the idea that this happened only because Democrats and Republicans alike never said no to any significant interest group. Despite a genuine economic emergency, the stimulus bill is more about dispensing goodies to Democratic interest groups than stimulating the economy. Even Sen. Charles Schumer (D., N.Y.) — no deficit hawk when his party is in the majority — called it “porky.”

Annual federal spending rose by a trillion dollars when Republicans controlled the government from 2001 to 2007. It has risen another trillion during the Bush-Obama response to the financial crisis. So spending every year is now twice what it was when Bill Clinton left office. Republicans and Democrats alike should be able to find wasteful, extravagant, and unnecessary programs to cut back or eliminate. They could find some of them here in this report by Chris Edwards.

In the Kentucky Resolutions, Thomas Jefferson wrote, “In questions of power, then, let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution.” Just so. When it becomes clear that Congress as a body cannot be trusted with the management of the public fisc, then bind them down with the chains of the Constitution, even — or especially — chains that deny them the flexibility they have heretofore abused.

President Obama’s Statement on Credit Downgrade

Uploaded by on Aug 8, 2011

The President assures Americans that, “we will always be a triple-A country.” August 8, 2011.

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By Everette Hatcher III | Also posted in President Obama, spending out of control | Tagged , , , , | Comments (0)

“People sitting on the couch waiting for their next government check”

April 19, 2012 – 4:16 am

Milton Friedman – The Welfare Establishment

Uploaded by on Apr 22, 2011

Professor Friedman looks at the dynamics of the welfare state.
http://www.LibertyPen.com

Source: Milton Friedman Speaks
Buy it: http://www.freetochoose.net/store/product_info.php?products_id=152

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Are we heading to Greece? It seems that a lot of people in Greece just sit around and wait for their government check to come in.

Christie the Prophet

by Michael D. Tanner

Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Added to cato.org on April 18, 2012

This article appeared in National Review (Online) on April 18, 2012.

New Jersey governor Chris Christie recently warned that America is in danger of becoming a country of “people sitting on the couch waiting for their next government check.” Predictably, the Left was outraged, but Governor Christie wasn’t far off the mark.

During the 2011 debate over raising the debt ceiling, President Obama reminded Americans that the federal government sends out 70 million checks every month. That is probably an underestimate. According to the Washington Post, the president’s number included Social Security, veterans’ benefits, and spending on non-defense contractors and vendors, but not reimbursements to Medicare providers and vendors or electronic transfers to the 21 million households receiving food stamps. (Nor did he include most spending by the Defense Department, which has a payroll of 6.4 million active and retired employees and, on average, cuts checks for nearly 1 million invoices and 660,000 travel-expense claims per month.) The actual number might be closer to 200 million checks every month.

Of course it would be unfair to lump everyone who receives a check from the government in with the people Governor Christie was talking about (though it does say something about the size of government) but, nonetheless, we are becoming a society that relies on government to care for us.

[T]oday, every problem in society prompts calls for government action, response, or funding.

In 1965, just 22 percent of all federal spending was transfer payments. Today it has doubled to 44 percent. That means that nearly half of all federal spending is simply government taking money from one person and giving it to another.

Or look at it another way: In 1965, transfer payments from the federal government made up less than 10 percent of wages and salaries. As recently as 2000, that percentage was just 21 percent. Today, transfer payments are more than a third of salary and wages. Worse, if one includes salaries from government employment, more than half of Americans receive a substantial portion of their income from the government.

Conservatives often criticize transfer payments to the poor, and for good reason. At the federal and state levels combined, we spend nearly $1 trillion per year on anti-poverty or means-tested programs that do more to promote a permanent underclass than to eliminate poverty. But the modern welfare state is much more than programs for the poor. It includes middle-class welfare, such as Social Security and Medicare, which are the real drivers of our future national insolvency. We think of Medicaid as health care for the poor, but as much as two-thirds of Medicaid spending goes to pay for long-term care such as nursing homes for the elderly, much of it for middle-class people sheltering assets. And the modern welfare state also includes corporate welfare, the military-industrial complex, and others living off the taxpayer’s dime. The Export-Import Bank is as much welfare as TANF.

This is the road we are now on. The welfare state started with small programs targeted toward a small number of genuinely needy people. But as politicians figured out the electoral benefits of expanding programs and people realized they could let others work on their behalf, those programs grew until the point at which, today, every problem in society prompts calls for government action, response, or funding.

At the same time, as Governor Christie also noted, this implicitly tells people, “stop dreaming, stop striving.” We demonize those who do succeed, damning them as part of the evil “1 percent.”

This is the real danger of the welfare state. It’s not that it will bankrupt us — though it will. It is that it slowly and insidiously destroys our national character, saps our will to be great, and makes us content with the way things are rather than how they could be. We have seen where this road ends. As Governor Christie warns, it “will not just bankrupt us financially, it will bankrupt us morally.”

Biblical exegesis tells us that the Israelites needed to wander for 40 years in the desert after being released from bondage in Egypt because they couldn’t begin to build a new nation until a new generation grew up that hadn’t been raised in bondage. Those raised in slavery were not trained to think for themselves; they had become dependent on their masters to provide for them. Indeed, when they encountered hardships, many cried for a return to bondage.

Just look to Europe today. The welfare states of Europe are imploding, collapsing under the weight of promises that can no longer be met. Their citizens riot in the streets at the prospect that their government benefits might be reduced.

If anyone wants to know what this next election is really about, Governor Christie just told us.

By Everette Hatcher III | Also posted in President Obama, spending out of control | Comments (0)

Obama is wrong about about Buffett Rule

April 18, 2012 – 6:12 am

Matt Welch Discusses the Buffett Rule and His Favorite Beatles Songs on Varney & Co.

Here he goes again with the class warfare.

NPR, Obama, and the Misleading ‘Buffett Rule’

Posted by David Boaz

NPR says that President Obama will propose that millionaires pay income taxes “at the same rates as average working Americans.” On the 9:00 a.m. hourly news.)

That would be good news for most millionaires:

To be sure, NPR’s longer stories on Obama and the “Buffett rule” are more precise, as in Tuesday’s story that said the proposed law “would require anyone making a million dollars a year or more to pay at least 30 percent in taxes.” Even there, though, the sentence went on to say “- about twice what some millionaires pay now.” And as the charts above show, that’s quite misleading. The Congressional Budget Office reported in 2010,

The overall federal tax system is progressive—that is, average tax rates generally rise with income. Households in the bottom quintile (fifth) of the income distribution paid 4 percent of their income in federal taxes, while the middle quintile paid 14 percent, and the highest quintile paid 25 percent. Average rates continued to rise within the top quintile, with the top 1 percent facing an average rate of close to 30 percent.

By Everette Hatcher III | Also posted in President Obama, Taxes | Comments (0)

An open letter to President Obama (Part 59)

April 17, 2012 – 2:15 pm

 

President Obama c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is going on out here.

Dan Mitchell of the Cato Institute shows why your plan to tax the rich will not solve our deficit problem.  

Explaining in the New York Post Why Obama’s Soak-the-Rich Tax Policy Is Doomed to Failure

April 17, 2012 by Dan Mitchell

I think high tax rates on certain classes of citizens are immoral and discriminatory. If the government is going to collect revenue, all taxpayers should be treated equally, with something akin to a simple flat tax.

But most people don’t seem to care about having the law apply the same to all people, so I make a strictly utilitarian case for low tax rates in today’s New York Post. Here some of what I wrote.

Whether it’s through the Buffett Rule, higher income-tax rates or double taxation of dividends and capital gains, President Obama often demands that “rich” taxpayers and big corporations send more money to Washington. But…trying to get more money from upper-income taxpayers is like playing whack-a-mole. So long as tax rates are high, rich people will figure out ways to protect their income.It doesn’t take a tax genius; any rich person can make a phone call or hit a few computer keys and shift his or her investments to tax-free municipal bonds. It’s not good for the economy when capital gets diverted to help finance the excess spending of Detroit or California, but it’s an effective way of stiff-arming the IRS. Or the rich can play the green-energy scam, getting all sorts of credits to offset their tax liabilities. …Even if lawmakers abolished the various tax-code distortions, they might still be disappointed. The one sure way for rich people to lower their tax bills is by generating less income. …This isn’t some sort of modern-day revelation. Andrew Mellon, a Treasury secretary during the 1920s, noted that “the history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.”

I then provide a specific example, looking at how Reagan’s lower tax rates resulted in a lot more revenue from the rich.

Unlike the rest of us, the rich have a great ability to alter the timing, amount and composition of their income. That’s because, according to IRS data, those with more than $1 million of adjusted gross income get only 33 percent of it from wages and salaries. The super-rich (those with income above $10 million) rely on wages and salaries for only 19 percent of their income. In 1980, when the top tax rate was 70 percent, rich people (those with incomes of more than $200,000) reported about $36 billion of income; the IRS collected about $19 billion of that amount. So what happened when President Ronald Reagan lowered the top tax rate to 28 percent by 1988? Did revenue fall proportionately, to about $8 billion? Folks on the left thought that would happen, complaining that Reagan’s “tax cuts for the rich” would starve the government of revenue and give upper-income taxpayers a free ride. But if we look at the 1988 IRS data, rich people paid more than $99 billion to Uncle Sam. That is, because rich taxpayers were willing to earn and report much more income, the government collected five times as much revenue with a lower rate.

I also included above, for readers of this blog, a table with the raw numbers from the IRS. Feel free to click for a larger image and see how the “rich” responded to better tax policy.

I then close with a warning about Obama’s class warfare policy.

Obama wants to run the experiment in reverse. He hasn’t proposed to push the top tax rate up to 70 percent, thank goodness, but the combined effect of his class-warfare policies would mean a big increase in marginal tax rates. That might be good for workers in China, India or Ireland, because American jobs and investment would migrate to those places. But it’s not the right policy for the United States.

In other words, even if you’re a leftist and your main goal is giving the government more revenue, higher tax rates are a bad idea. The rich will simply figure out ways to protect their earnings while the rest of us suffer because the economy loses some of its dynamism.

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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

By Everette Hatcher III | Also posted in President Obama, spending out of control, Taxes | Comments (0)

Dan Mitchell on the Buffett rule

April 17, 2012 – 6:47 am

Dan Mitchell Debating the Buffett Rule on CNBC

Published on Apr 10, 2012 by

No description available.

Mike Brownfield

April 16, 2012 at 2:22 pm

President Obama says his “Buffett Rule” — which imposes higher taxes on wealthy Americans and job creators — will help “stabilize our debt and deficits for the next decade.” But if you compare how much money his policy raises with how much he’d like to spend, you get a much different picture.

The Buffett Rule would impose a minimum 30 percent tax on businesses and families earning $1 million. That would bring in $47 billion in revenue in ten years. Next to the President’s budget, which adds $6.7 trillion to the national debt, you can see that Obama’s answer to America’s budget woes isn’t much of an answer at all. Do the math, and you’ll find that the Buffett Rule would cover just 0.7% of all of Obama’s debt and .1% of Obama’s spending.

As you can see, that’s a small drop in a very large bucket.

By Everette Hatcher III | Also posted in President Obama, Taxes | Comments (0)

Unemployment benefits do not stimulate economy

April 16, 2012 – 11:35 pm

President Obama is wrong again.

Unemployment Insurance System Fosters Unemployment

Posted by Tad DeHaven

The Wall Street Journal reports on rising state and federal unemployment taxes at a time when unemployment remains high. Keynesian economists keep telling us that unemployment benefits have a stimulative “multiplier effect” on the economy. Unfortunately, that sticky little problem of the government having to suck resources out of the economy to pay for this alleged stimulus keeps getting in the way:

The higher tax tab could discourage hiring. ‘It’s just one more cost to add,’ said Douglas Devnew, vice president for finance and administration at Trumpf Inc., a Farmington, Conn., manufacturer. ‘Companies like ours are going to think that much harder if we need more folks.’

Yes, that’s only an anecdote. But I find anecdotes to be considerably more indicative of reality than, say, the fancy economic models favored by the White House that continue to erroneously predict growth and reduced unemployment if the government spends more of the private sector’s money.

If anecdotes aren’t your thing, check out this excellent Cato essay on the unemployment insurance system. Critics of a government administered unemployment insurance system are often accused of being callous toward the plight of those seeking work. But the essay’s examination of the history of unemployment insurance, and the ill-effects and failures of the government-run system indicate that it’s the supporters of the government-run system who should be on the defensive.

By Everette Hatcher III | Tagged , , , , | Comments (0)