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Posts Tagged ‘flat tax’
August 8th, 2012 at 1:36 pm
Bloomberg: Obama Can Win Sweeping Victory by Raising Everyone’s Taxes
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Yes, you read that right. New York City Mayor Michael Bloomberg (who, let’s be honest, is the most irritating politician in America) has an ingenious campaign strategy for Barack Obama that’s totally going to spellbind the room at his next cocktail and caviar soiree. From a phone interview Bloomberg gave to the Huffington Post:

“What Obama should do is say he’s going to veto any change to the end of the expiration of the Bush era tax cuts for everybody, and I feel very strongly about the everybody because you don’t want to split the country — that’s not what America is all about,” said Bloomberg.

“Obama would win this election going away if he’d stand up and say, ‘I’m gonna do this,’ and then turn to Republicans and say, ‘You know, you didn’t want any more revenues … I just outfoxed you. Now work with me on cutting expenses, and we’ll actually balance the budget in 10 years, and we’ll do it responsibly.'”

Bloomberg here reminds me a bit of Walter Mondale, who thought it was utter genius to declare in his 1984 acceptance speech at the Democratic Convention that he would raise taxes (Newt Gingrich, who was part of a Republican rapid response team during that convention, has noted that his group decided to pack up and go home after Mondale’s declaration, figuring they couldn’t damage him any worse than he had himself). Mondale’s theory was that both he and Reagan would end up hiking taxes, but that voters would give him points for being honest about it (for a thorough understanding of the truth of Reagan’s tax record, by the way, this Matt Lewis piece is indispensable). Later, after losing 49 states in the Electoral College, he probably thought better of that.

Here’s the foundational error in both cases: the tax argument is about substance, not style. Mondale thought he’d be rewarded for being honest about the fact that he was going to take more money away from the American people. But we don’t generally reward honesty when it’s a truthful admission of nefarious intent. Similarly, Bloomberg seems to think that “unity” is more important than tax rates, and that the American people will reward Obama if he makes clear that he’s going to put the screws to all of them with equal force. But, to paraphrase Obama from 2008, no one much cares what shade of lipstick you apply to a pig. The equal distribution of suffering is not a compelling campaign rationale (although it might be the most honest slogan Obama could devise).

There’s another irony at work here, of course: if Bloomberg thinks that tax rates should be harmonized in order to avoid “splitting the country,” the most logical step he could take would be to promote a flat tax. But that probably wouldn’t fly at the open-bar receptions of the Upper East Side.

March 1st, 2012 at 5:21 pm
Democrats: Tax Relief Requires Campaign Contributions
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A nefarious trend coming out of Washington, as reported by Politico:

Democrats on K Street are warning their corporate clients: Give to Republican challengers in the 2012 election, and you’ll regret it come tax reform time.

Lobbyists are getting that message from allies of powerful Democrats such as Senate Finance Chairman Max Baucus (D-Mont.), who is closely watching support for Rep. Denny Rehberg, a Republican challenging Sen. Jon Tester (D-Mont.). Baucus supporters fear that if Rehberg ousts Tester, Baucus could be next to face a serious Republican challenge in the state.

One K-Streeter close to the Baucus operation said the senator considers a gift to Rehberg a contribution against him. Another Democratic lobbyist told a client to take his name off a Rehberg fundraising event because it would be hurtful to his company, according to sources.

The case K-Streeters are making to their clients: It will be a hard sell next year to get Baucus’s support on business-friendly tax perks set to expire or the Bush-era tax cuts that must get through his committee.

Old D.C. hands that they are, the folks at Politico are quick to note that this is routine procedure on Capitol Hill, where the nexus between campaign contributions and favorable policy outcomes is an implicit rule of the game. That’s all true, of course, and Republicans have committed precisely these kinds of sins in the past. It doesn’t follow, however, that we have to accept it.

One of the most heartening aspects of the rise of the Tea Party has been the fact that there is now a powerful political coalition organized around a philosophy rather than a pecuniary interest. That philosophy is stripping power from Washington. And it’s precisely what’s needed here.

These kind of abuses are a powerful argument for the sagacity of a flat tax. Conservatives generally tend to focus on the economic benefits of a single income tax rate (which, because it eliminates so many distortions, are legion), but they may not pay enough attention to its virtues as a matter of political science. Having a single, across-the-board rate would keep politicians from turning the tax code into a byzantine apparatus meant to subsidize their friends and persecute their enemies. At that point, our elected officials might actually have to find an alternative to scaring their constituents into submission.

October 27th, 2011 at 9:57 pm
Re: Businesses Are Scared to Death
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Quin writes below, quite sensibly, that, when it comes to reforming the tax code, changing corporate rates should take precedence over reforming individual rates, reasoning that the economic anemia in private sector business is one of the largest obstacles to renewed growth. I find that analysis completely salutary, although I differ with him on a few particulars in the post.

First, Cain, Perry, and Gingrich all have corporate tax reform as a part of their plans. Cain, of course, would reduce it to 9 percent (although his addition of a federal sales tax would offset some of those savings). Perry would drop it to 20 percent, while Gingrich would take it down to 12.5 percent. As Quin notes, Santorum’s plan is quite good too, although I recoil a little at the fact that he eliminates the tax only for the manufacturing sector. There’s not a particularly good economic rationale for such differential treatment of industries under the tax code (not to mention that it’s a kissing cousin to the “picking winners and losers” criticism that the right has correctly embraced of late — although at least in this case it’s about who gets rewarded the most, not punished).  This leads me to believe that this section of the plan is politically motivated, aimed at boosting Santorum with blue-collar voters of the type that are essential to winning elections in labor-heavy states like his native Pennsylvania.

I’m also not convinced that passing personal income tax reform would be a heavier legislative lift than corporate tax reform, for reasons that Quin lays out. Personal rates are visceral and instantly understandable. Because there are several intellectual steps one has to go through to understand the effect of corporate rates on personal income, I think that may be the harder sell.

These are extraordinarily minor differences in the big picture, however. We all agree on the broad thrust of the argument: without flatter, fairer, more transparent taxes, America will be unnecessarily suppressing the ingenuity that could lead to an economic renaissance. But that change won’t come unless the keys to the White House change hands in January 2013. That’s just one more reason why next year’s election is so vitally important.

January 19th, 2011 at 12:29 pm
CFIF’s Troy Senik Gets Tough on California

Following up on a previous diagnosis of all that ails California, CFIF Senior Fellow Troy Senik is out today with a prescription for the Golden State to get back on the road to recovery.

Senik’s piece in City Journal doesn’t hold out much hope for newly elected Governor Jerry Brown, but the author does shed light on one proposal that might garner enough votes for a simplified tax code:

California would therefore do well to take the advice of economist Arthur Laffer, not just because of his status as one of the authors of Reaganomics but because he is an example of the state’s woes, having packed up his California-based fund-management business in 2006 and relocated to Tennessee. By Laffer’s estimates, if California abandoned its current, highly progressive income-tax system in favor of a statewide flat tax of no more than 6 percent on personal income and net business sales, it could completely abolish all property taxes, state gas taxes, and state payroll taxes, as well as all current state and local sales taxes, without losing revenue. And that’s without factoring in the increased economic activity that such a dramatic change to the tax code would almost certainly generate. This change would once again require the support of a two-thirds majority in the legislature, but its appeal just might be broad enough to attract such a coalition.

Read the entire article here.