Wednesday, May 6, 2009

More Flawed Tax Policy

BHO is unhappy with our federal tax code. He notes that we have a tax code
"that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York."
The 17,000 pages of the U.S. Tax Code say lots of other things even goofier than this. I would recommend that BHO read the tax code, but that would be cruel and unusual punishment. Even lawyers can't stand to read the tax code, much less understand what it says.

If Obama really wanted to get serious about tax reform, he could embrace HR 25, the Fair Tax Bill. He could also visit the web page of Americans for Fair Taxation for easy to read explanations of why the Fair Tax would solve the corporate income tax problem he lamented about a few days ago. Adoption of the Fair Tax would solve a lot of other problems as well.

Better still, he could read the open letter sent to all members of Congress, the Senate, President Bush, and Bush's now forgotten tax reform commission. BHO could really give us change we can believe in by asking Congress to pass HR 25. That letter, signed by about 90 professional economists, provides a nice summary of the Fair Tax and why it's the right thing for America.

Will BHO do any of these? Let's just say I will be stunned if he does. After all, our President clearly wants more federal control of practically everything. Our convoluted U.S. Tax Code fits into that vision all too well.

The original Americans who ratified the Constitution would have been horrified had someone suggested that the federal government should withhold an income tax from the paychecks of Americans. In fact, the first Americans explicitly prohibited collection of an income tax in the first place, never mind withholding the tax from paychecks.

What's your personal average federal income tax rate? Don't forget payroll withholding taxes (i.e., Social Security and Medicare taxes). If it's 30%, then the 545 have declared that they own 30% of your labor. If it's 50%, then the 545 say they own 50% of your labor. You don't own all of your own labor services; it's the law. And you thought we were all free people, right?

Can we do away with federal taxation? No; that would be impossible, since we all seem to want something from government. But that doesn't mean we can't do a better job of taxing ourselves. The Fair Tax offers a completely practical way to improve the tax code. Give it a look.

Monday, May 4, 2009

Contract? Who Cares About Contracts?

Here, Brenner and Hume explain how the four largest banks in the country have a huge stake in courts revoking contract law in the case of mortgages.

But what about simple principles of contract law and keeping one's word? If courts force owners of mortgages to accept cram downs of principle or interest in a mortgage contract, that's compulsion---unless, of course, fraud was involved when the mortgage was written.

But mostly, no one is alleging fraud. People who won't or can't pay their mortgage can walk away. That's what foreclosure is all about. So who is that is lobbying Congress and the courts to modify mortgage contracts?

Liberty Loses A Champion

We lost a lover of liberty on Saturday with the passing of Jack Kemp. From the WSJ today,
Along with Senator William Roth of Delaware, Kemp proposed a 30% across-the-board tax cut. Though the Democrats who ran Congress combined with Old Guard Republicans to defeat it during the Carter Presidency, a GOP candidate by the name of Ronald Reagan liked what he saw. Reagan largely adopted Kemp-Roth as his own, campaigned on it in 1980, and the proposal eventually became the basis for the 25% income-tax cuts that finally took effect in 1983 and became the most successful domestic policy achievement of the modern era. The Kemp-Reagan policy mix of lower taxes to lift incentives, sound money to break inflation, and regulatory relief to unleash entrepreneurs became the foundation for the prosperity of the 1980s and 1990s.

Kemp's ideas and legacy continue to be relevant for today's Republicans, even if few of them seem to recognize it. The financial meltdown and recession have given President Obama a chance to revive a policy mix of higher spending and taxes, intrusive regulation and easy money. If those policies don't result in a sustainable expansion -- and history argues that they won't -- then Americans will again be looking for other ideas. Full article here
Kemp was a Republican, but his ideas were not about politics. He understood the value and morality of voluntary exchange markets. He understood that taxing away the income of the people to finance the schemes of the 545 leads to economic morass and concentration of power in the hands of the few.

Isn't it strange that BHO and his partisan supporters decry voluntary exchange markets, claiming that markets concentrate economic power in the hands of capitalists? Yet, all we have to do is look around to see that just the opposite is true. Voluntary exchange is, after all, voluntary. Government power is achieved through threat of and use of force. Which sounds moral to you?

Voluntary exchange markets are the most egalitarian, liberating, field-leveling social institutions ever devised. Barred by law from use of compulsion, markets require that buyers compete with other buyers to get what they want. Sellers must compete with other sellers to get the business of buyers. Voluntary exchange markets require that participants vote with their offers to buy and sell each and every time, offering value for value to get what they want.

Contrast voluntary exchange with politics. Politicians compete only in a tightly controlled game every few years for the votes of people who have extremely limited choices---choices from among those anointed by the major party power brokers. Politicians---funded by taxing the income of people who are productive--- concentrate economic power in the hands of the very few, the 545.

Jack Kemp understood that voluntary exchange coupled with lower taxes returns power and prosperity to the people. BHO and his supporters are evidently oblivious to this simple, historical truth.