Quotulatiousness

March 23, 2025

Tariffs versus income taxes – pick your poison

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 11:29

Walter Block on the pros and cons (from the government’s point of view) of income taxes and tariffs:

Every fiber of my economic being cries out against tariffs. If they are so good, why doesn’t each state in the US have one against the products of all of the other 49? That is, Ohio could “protect” its industries against the incursions from Arizona. This is obviously silly. One of the important reasons America is so prosperous is that we have a gigantic, internal, free trade area.

Donald Trump supports them on the ground that the McKinley administration was prosperous, and relied upon tariffs. But this is to commit the post hoc ergo propter hoc logical fallacy: that since A precedes B, A must be the cause of B. No, America did indeed become rich during this epoch, but that was in spite of tariffs, not due to their benign influence. If you are looking for a historical episode to shed light on this matter, the Smoot-Hawley Tariff of 1930 will do far better: it greatly worsened an already bad recession, plunging our economy into a deep depression.

Our President also claims that the US is victimized by a negative balance of trade: we buy more from Canada and other countries than they purchase from us. However, I have a horrid balance of trade with McDonald’s and Wal-Mart. I acquire several hundreds of dollars’ worth of their products every year, and neither has yet seen fit to reciprocate with any of my economic services (hint, hint!). On the other hand, I have a very strong positive balance of trade with my employer, Loyola University New Orleans. They pay me a decent salary; apart from a few lunches in their cafeteria, my expenditures to them fill their coffers to a zero degree. Should anyone worry about this sort of thing? Of course not. Ditto for international trade. If Country A buys more from B than it sells to it, money will flow from the former to the latter, reducing prices in the former and raising them in the latter, until matters balance out.

Everyone realizes the foolishness of tariffs when it comes to absolute advantage. No Canadian objects to the importation of bananas from Costa Rica. Producing this tropical product in the frozen North would be financially prohibitive (gigantic hothouses). Ditto for maple syrup in the country to the south. The only way they could produce this item would be to place maple trees in gigantic refrigerators. Ludicrous and prohibitively expensive.

But when it comes to comparative advantage, all too many people are out to lunch insofar as the teachings of Economics 101 are concerned. They fear that other countries might be more efficient than we are; with free trade, they would produce everything, we, nothing, and we would all starve to death from massive unemployment.

March 14, 2025

QotD: You can’t cut taxes without disproportionally benefitting “the wealthy”

Filed under: Economics, Government, Quotations, USA — Tags: , , — Nicholas @ 01:00

[Responding to a Robert Reich post against tax cuts because they’ll aid the rich more than the average taxpayer]

Anybody who uses the phrase “tax cuts for the wealthy” to gin up opposition to lowering taxes is either a dupe or a villain.

How do I know this? Do some research. Find a graph of how income taxes paid segregates by wealth of the payer. I’d post one here, but X hates links.

The bottom 40% in income pay effectively nothing in income tax. The “rich” pay such a disproportionately high percentage of it that the tax take of entire states can be significantly affected by a handful of high-net-worth individuals moving out. In Europe this happens to small countries.

Because of this, it is effectively impossible to cut taxes in any way at all without disproportionately benefiting the “wealthy”.

When demagogues like Reich honk about “tax cuts for the wealthy”, what they actually mean is: taxes should never decrease. The state should confiscate and reallocate more and more wealth, forever and ever, amen.

ESR, rel=”noopener”>X.com, 2024-12-05.

March 13, 2025

This explains a lot … IRS employees aren’t issued personal computers (in 2025!)

Filed under: Bureaucracy, Government, Technology, USA — Tags: , , , , — Nicholas @ 10:11

You sometimes read a small item and the information in it is so unexpected, it’s like being suddenly dumped into icy cold water, like this little item from Reason‘s “Morning Roundup” email:

Everything’s computer! But not at the IRS.

“The upheaval at the IRS is already having real impacts,” reports The Washington Post, referring to plans (already underway) to reduce the workforce by half. “Sources familiar with the agency report that its level of phone service is falling, in part because employees are spending their time waiting to use shared computers to respond to [the Department of Government Efficiency’s] requests for weekly emails detailing their work. (Not all IRS employees are issued their own computers.) And they report that taxpayer behavior is already adjusting to the reality of a diminished IRS workforce: IRS receipts — taxes paid already and taxes the agency is scheduled to receive from those who have already filed — are significantly lower than they were at this point last filing season.”

Wait, back up. They don’t have their own computers? And they’re sitting in a queue like schoolchildren in the library, waiting to use a single shared computer to respond to Musk’s five-things-you-did-last-week emails? How long does it take to write those emails? And why don’t they have computers?

Look, I’m worried by the slapdash approach Elon Musk’s Department of Government Efficiency has taken. But the continued federal employee freakout over being asked to justify their jobs by detailing what they’ve done at work makes no sense to me.

I know a girl from college who is a “Work-Life Specialist and Mindfulness Facilitator” at the U.S. Department of Transportation. She leads yoga sessions and “meditation made simple” workshops for federal employees, per her LinkedIn. This is a job I don’t want my taxpayer dollars funding. For Musk to apply scrutiny to this type of thing is a huge win for the American people.

There are lots of legitimate criticisms to make about whether cuts in staffing will actually lead to a better IRS. Taxpayer services will surely suffer if there are fewer people available to answer phone calls and emails; refunds might be delayed, which comes at a real cost to people. Worse tax collection means less revenue for the government, and it’s not like spending is under control — expect the fiscal hole we’re in to get worse if this continues. But “we just can’t figure out how to ration computer use in the year 2025 to craft a bullet-pointed email” is an absurd line that elicits no sympathy, and just leaves me confused about what the hell they’ve been doing all this time. Everything’s not, in fact, computer in the federal government.

March 10, 2025

“I, for one, welcome our new unelected globalist technocratic overlord”

Filed under: Cancon, Government, Media, Politics — Tags: , , , , , — Nicholas @ 05:00

With a resounding 99% 85.9% of the voters whose votes were allowed, Maximum Leader Mark Carney has finally been elected to a position for the first time in his adult life:

With the support of most of Justin Trudeau’s team, Carney has been ushered in to continue on with more of Trudeau’s signature economic policies, the ones Carney has been advising Trudeau on since 2020.

Yes, Carney said that he will scrap the capital gains tax changes that have hurt so many small business owners, but that had to go. He also promised to drop the consumer carbon tax but would also increase the industrial carbon tax, a move that will have the same impact on manufacturing industries like steel as Donald Trump’s tariffs.

Few Canadians will know about the discrepancy in Carney’s plan or any others because there has never been a leader in this country elected to such high office with so little vetting. Carney preferred speeches and rallies over news conferences and interviews with U.S. media outlets over Canadian ones because the interviewer would know little about Canadian politics.

When he wasn’t appearing on The Daily Show or the podcast of Trump’s short-lived spokesman Anthony Scaramucci, Carney preferred to speak to friendly liberal media outlets like CBC. While the media narrative is that Carney has reinvigorated the Liberal party and closed the polling gap with Pierre Poilievre’s Conservatives, neither claim is demonstrably true.

While more than 400,000 people signed up as “registered Liberals” to vote in this nomination process, just over 151,000 actually took the time to vote. This is a chance to pick the next prime minister of our country at a time when we are facing a threat to our sovereignty and a threat to our economic future, yet our next PM was chosen by so few people.

By comparison, the last Conservative leadership race saw more than 400,000 people vote with 295,285 ballots cast for Poilievre alone. Sure, it might have been a longer timeline, but the stakes – becoming leader of the official Opposition with no election in sight – were much smaller.

In the National Post Chris Selley doesn’t seem to be a fan of the new unelected leader of the federal government (assuming that Justin Trudeau will actually step down, of course):

Every speaker of note [at the Liberal leadership hootnanny], from the four leadership candidates to outgoing leader Justin Trudeau to former prime minister Jean Chrétien, who held the room in the palm of his hand for what felt like a day and a half, mentioned the need for Canadians to stand together, united and altogether resolute against the threat of Donald Trump’s tariffs.

At the same time, of course, Liberals were insisting that the Conservatives — who have as much or more support nationwide, and until recently had a lot more — are bent on destroying all that’s good and holy about this country. That isn’t really a unifying message.

“Pierre Poilievre just doesn’t get it,” Carney averred in his victory speech. “He is the type of life-long politician … who worships at the altar of the free market without having made a payroll himself. And now … at a time of immense economic insecurity, he would undermine the Bank of Canada. Poilievre has called for the shutting down of CBC at a time when disinformation and foreign interference are on the march. He insults our mayors and ignores our First Nations.”

“A person who worships at the altar of Donald Trump will kneel before him, not stand up to him,” Carney said of Poilievre, who has been raining invective on Trump just as fast as he can in recent days — and indeed someone whom Trump himself denigrated in recent days as “not a MAGA guy”.

Oh, and Carney said “Pierre Poilievre would let our planet burn” — on the same night he promised to axe the consumer carbon tax as a first order of business.

Other than all that, though, we’re in it together. Okey-dokey.

Dan Knight is even less impressed:

And here’s where it gets even better. The polling — oh, the polling. For months, the Liberals have been sinking. Before Trudeau resigned, they were floundering at 24% support. Then, magically, within days of picking a new leader, they skyrocket to 33%? A 9-point jump in the blink of an eye? Wow, what a coincidence! You mean to tell me that the same Canadians who couldn’t be bothered to sign up for a free membership, the same Canadians who have overwhelmingly turned against this party, suddenly decided they’re on board again — just because the party swapped one out-of-touch elitist for another?

No. That’s not how this works. That’s not how enthusiasm works.

This isn’t some grand Liberal resurgence. This is the Liberal-friendly media manufacturing a comeback narrative because their government subsidies depend on it. The same journalists who screamed for years about the Conservative “far-right” threat are now bending over backwards to convince you that Mark Carney is a fresh outside

And you know what? Maybe if they had actually let Ruby Dhalla into this race, they would’ve stood a chance. Seriously. I had to do a double-take when I looked at her policies — supporting small business, tough on crime, actual immigration regulation — I mean, that’s how you win the center. That’s how you stop a Conservative majority and turn it into a minority government. If they had let her run, we’d be having a very different conversation right now.

But what did the Liberals do? Oh, they disqualified her over — get this — campaign finance irregularities. But guess what? They kept the money. That’s right. The party flagged “violations”, kicked her out, and then conveniently pocketed the cash. If that’s not the most Liberal Party thing I’ve ever heard, I don’t know what is.

Can you feel the Carneymentum? It’s supposed to sweep the land from sea to sea to sea … any minute now.

January 26, 2025

Imperial reparations to India are not economically or historically realistic

Filed under: Britain, Economics, History, India — Tags: , , , , — Nicholas @ 05:00

Apparently the idea of demanding financial reparations from Britain has once again become a talking point among India’s chattering classes. In The Critic, Tirthankar Roy explains why the basis for the demands do not meet economic or historic criteria necessary for the demands to be justified:

The State Entry into Delhi – Leading the 1903 Delhi durbar parade, on the first elephant, “Lakshman Prasad”, the Viceroy and Vicereine of India, Lord and Lady Curzon. Their elephant was lent by the Maharaja of Benares. On the second elephant, “Maula Bakhsh”, the Duke and Duchess of Connaught representing the British royal family. Their elephant lent by the Maharaja of Jaipur. There were 48 elephants of the Main Procession, shown winding its way past the north side of the Jama Masjid.
Painting by Roderick MacKenzie from the Bristol City Museum and Art Gallery via Wikimedia Commons.

Oxfam, in its report “Takers not Makers” claims that imperialist Britain “extracted” $85 trillion from India, “enough to carpet London with £50 notes” four times over. Oxfam took this number from calculations others have done before. The origin of the claim goes back to Dadabhai Naoroji writing 125 years ago, who called the outflow drain. Oxfam uses the number to support a modern movement: a case for reparations that Britain should pay India. With British public finances in a rut, the report’s timing is not ideal. But how good is the case?

[…]

Why did Chaudhuri say drain was “confused” economics? The figure of $85 trillion builds on three bases. First, in the 1760s, as the East India Company started sharing the governance of Bengal with the Nawab’s regime, a part of the taxes of Bengal was used to fund business investment (export of textiles). Second, in the nineteenth century, Indian taxes were used to fund an army that fought imperialist wars to no benefit of India. Third, India maintained an export surplus, which went to fund payments to Britain on mainly four heads: debt service, railway guarantees, pensions to expatriate officers, and repatriated profits on private investment. Naoroji said that these outflows were payment without benefit to India, a drain, and happened because India was a colony. Did he discount the benefits of these transactions?

The Company was a body of merchants who became kingmakers between 1757 and 1765, resulting in a government in Bengal where private and public interests often conflicted. No one knows how serious the conflict was since the Nawab was a partner in the rule. No matter, the case that tax was used for commerce is weak. Within a few years after the transition, the Parliament started taking control of Indian governance, which meant refusing to fund business with taxes. By 1805, the process was complete when Governor Cornwallis declared that “the duties of territorial government [would take] the place of buying and selling”. In between, public finance data are so patchy that it is impossible to find out how much of the Company’s commercial investment was funded by a budgetary grant, borrowings, and profits.

What is the big deal anyway? The Company’s investment of $60 million around 1800 was a tiny 0.06% of India’s GDP. Its textile business generated employment and externalities in India. And the real drain was not the export, but the profits upon exports. We are dealing with an almost invisible transaction, so small it was.

Consider the criticism of the army. British Indian budget, the argument went, paid for the Indian army, which fought wars beyond Indian borders, a subsidy Indian taxpayers paid to the Empire. This claim misreads what the land army really did. The reason it was very big and funded by India was that it was a deterrent to potential conflict amongst the 550 princely states. Interstate conflicts claimed enormous human and economic cost in the late-eighteenth century. The army ended that and effectively subsidised the defences of the princely states. Similarly, the British state subsidised Indian naval capability. Until World War I, the deployment of the army beyond India caused little controversy. The army protected the huge diaspora of Indian merchants and workers. Without the empire’s military might, we would not get Indians doing business in Hong Kong, Aden, Mombasa, or Natal. The War changed the benefit-cost estimates, and in the 1920s, the arrangement ended.

The third point, that export surplus was drain, is the most bizarre. India normally had a commodity export surplus, in effect payment for services purchased by India from Britain. Naoroji thought this was a waste of money. His followers insisted it was. But these claims follow no economic logic. No economics in the world will tell us that an outflow makes a country poor. That assessment depends on what value the payment creates at home. In activist history, there is no discussion of the value, because there is no acknowledgement there could be a value.

January 18, 2025

Incentives matter even to “objective” scientists

Filed under: Cancon, Government, Health, Politics, Wine — Tags: , , , , — Nicholas @ 03:00

A 2019 Canadian “study” ideally illustrates that scientists are just as human as anyone else where they are incentivized to provide “desired” outcomes:

“The Beer Store” by Like_the_Grand_Canyon is licensed under CC BY-NC 2.0

Earlier this year, a major Canadian study on alcohol policy provided an excellent illustration of this. As news headlines across the country reported, 16 scientists and researchers at various universities and institutions had, through their Canadian Alcohol Policy Evaluation, shown that provincial governments are “failing to address alcohol problems”.

The scientists evaluated provincial government policies and assigned a grade in the “D” range to seven of Canada’s 13 provinces or territories, while five received an “F”. The policy evaluation, however, was a curious one. Strangely, the policy evaluation did not evaluate whether government policies were beneficial to those who want to buy or sell alcohol.

Instead, provincial governments were evaluated more favorably if they devoted greater efforts toward afflicting buyers and sellers of alcohol through punitive taxes, price controls, heavy restrictions on the sale and marketing of alcoholic beverages, higher minimum legal drinking ages, and so on.

Even in the most restrictive markets, the researchers found that alcohol was too cheap, or that its purchase was too convenient, or that governments did not do enough to discourage or restrict its sale and consumption.

Predictably, and perhaps exemplifying Berlinski’s point on scientists grasping for government funds, the report authored by 16 scientists whose livelihoods involve raising public alarm about alcohol consumption concluded that there ought to be more government funding for public education on the dangers of alcohol consumption.

The report also advocated more government funding for bureaucracies to discourage drinking, more government funding for a lead organization to implement restrictive alcohol policies, more government funding for independent monitoring of such implementation, and more government funding to track and report the harm caused by alcohol consumption.

Like the CEO of a domestic automobile company insisting that tariffs against car imports — which would cause a massive wealth redistribution from consumers’ wallets into his own and those of the company’s shareholders — are in the national interest, the anti-drinking scientists insisted in the name of public health and wellness upon income redistribution from taxpayers and consumers to their own industry.

January 16, 2025

For some unknowable reason, high-tax states keep losing population to low-tax states

Filed under: Business, Economics, Government, USA — Tags: , , , , , , — Nicholas @ 03:00

It sure is a mystery:

“U-Haul Rental Truck (44601958941)” by HireAHelper is licensed under CC BY 2.0 .

This probably won’t come as a surprise to many readers, but when people move, they tend to prefer migrating to places where, among other considerations, the taxes are lower than in their old digs. Data from the U.S. government as well as from moving companies reveals that — as we’ve seen in the past — high-tax states are losing residents to states that take a smaller bite out of people’s wallets.

“Americans are continuing to leave high-tax, high-cost-of-living states in favor of lower-tax, lower-cost alternatives. Of the 26 states whose overall state and local tax burdens per capita were below the national average in 2022 (the most recent year of data available), 18 experienced net inbound interstate migration in FY 2024,” Katherine Loughead wrote last week for the Tax Foundation. “Meanwhile, of the 25 states and DC with tax burdens per capita at or above the national average, 17 of those jurisdictions experienced net outbound domestic migration.”

Loughead crunched numbers from both the U.S. Census Bureau as well as U-Haul and United Van Lines. The government data tracks population gains and losses across the country while numbers from the private companies is helpful for comparing flows in and out of various states. The results are revelatory, though not unexpected.

“For the second year in a row, South Carolina saw the greatest population growth attributable to net inbound domestic migration” according to Census Bureau figures. The Tax Foundation separately ranks South Carolina at number 9 for tax burden, with 1 being the lowest tax burden among states and 50 the highest. Rounding out the top-10 population-gainers were Idaho (ranked 29), Delaware (42), North Carolina (23), Tennessee (3), Nevada (18), Alabama (20), Montana (27), Arizona (15), and Arkansas (26).

According to census data, Hawaii lost the biggest share of its population to other states; it’s ranked at 48 for the third-highest tax burden in the country. The rest of the top 10 states for population outflow were New York (50), California (46), Alaska (1), Illinois (44), Massachusetts (37), Louisiana (12), New Jersey (45), Maryland (35), and Mississippi (21).

Numbers released this month by U-Haul and United Van Lines showed migration patterns closely, but not precisely, tracking the Census Bureau’s information. Loughead attributes the disparities, at least in part, to the companies’ varying geographic coverage and market share.

December 11, 2024

Norway finds the perfect tool to drive away those pesky entrepreneurs

Filed under: Business, Europe, Government, Technology — Tags: , , , , — Nicholas @ 03:00

Don’t you just hate having all these bothersome start-up companies in your country, creating new jobs and new investment opportunities? Norway sure does, but good news: they’ve found an almost perfect way to not only deter existing entrepreneurs but to punish those who try to leave after they’ve been successful:

Norway is a fantastically beautiful country, but lately they’ve decided they want as few new companies as possible.
“Norway” by Nouhailler is licensed under CC BY-SA 2.0 .

Norway’s entrepreneurs are disappearing. In the past two years alone, 100 of Norway’s top 400 taxpayers, representing about 50 percent of that group’s wealth, have fled the country to protect their businesses.

In Atlas Shrugged, Ayn Rand paints a vivid picture of a dystopian society where government overreach and socialist policies kill innovation and demonize entrepreneurs. Present-day Norway mirrors this scenario in unsettling ways. The Nordic countries have long operated on an egalitarian ideal—citizens pay high tax rates for a generous safety net and effective public services. But Norway has taken the ideal to destructive and bizarre extremes.

Norway spends 45 percent more than Sweden on healthcare per capita with approximately the same health outcomes. Norway spends 50 percent more than Finland on primary and secondary school with worse results. And it splurges on green virtue-signaling with, for example, a $3.2 billion offshore wind project that industry experts believe is financially unworkable. That $3.2 billion, by the way, is roughly equivalent to the total revenue raised by the wealth tax.

To socialist politicians in Norway, entrepreneurs are mere piggy banks to be raided for ever more spending. When confronted with the reality that you can’t pay taxes with money you don’t have, the response is a vague moralism like “those with the broadest shoulders must bear the heaviest burdens.” Any dissent is waved away, deemed invalid because. . . free healthcare.

Earlier this year, instead of scaling back the tax blowout, the government doubled down, not only increasing the wealth tax but adding a vise grip on business owners in the form of an “exit tax” on unrealized gains as well. That means if you move from Norway, you’re immediately liable to pay 38 percent of the market value of your assets. It doesn’t matter if you have no cash on hand, if your assets are risky and could plummet in value, or even if your company fails after you leave—you still owe the tax. (Luckily for me, I left before this tax became law.)

The intent is to corral entrepreneurs inside Norway, impeding them from heading for the exits. The inevitable result: They’ll leave even before starting their businesses. After shooting itself in one foot, the government is now aiming a bazooka at the other one.

December 5, 2024

Ontario’s housing market squeezed by the 35.6% combined tax rate on new builds

Filed under: Bureaucracy, Business, Cancon, Government — Tags: , , , — Nicholas @ 04:00

The housing situation in Toronto and the rest of the province has been very tight for years. Lots of would-be buyers chasing the proportionally smaller number of new houses being built. This drives prices higher, but no matter how much of the final price is the builder’s profit margin, the government gets nearly four times as much on every new house sale:

The National Post previously reported that at least a third of a new home’s sticker price in Ontario was comprised of taxes, but an updated report, courtesy of the Canadian Centre for Economic Analysis (CANCEA), now puts the figure at 35.6 per cent.

(It gets even better when it comes to affordable housing — but more on that later.)

The Increasing Tax Burden on New Ontario Homes: 2024, which was commissioned by the Residential Construction Council of Ontario and released by CANCEA on Tuesday, is eye-opening for reasons beyond the fact that a compendium of largely superfluous taxes and production levies has reached 35.1 per cent of the final purchase price of a new home in the city of Toronto. It’s 35.5 per cent in the outlying 905 region, and 34.5 per cent in Ottawa.

The report needed only 16 pages to elucidate how bureaucratic machinations aren’t just gouging prospective homebuyers, but homeowners, too — especially the estimated 1.2 million whose mortgages, according to the Canada Mortgage and Housing Corporation, are due for renewal in 2025.

Read closely enough, CANCEA’s report makes a strong argument that, effectively, Canadians work for the government rather the other way around.

For example, CANCEA’s report demonstrates that 70 per cent of aforesaid taxes on new homes “consist of direct fees on the home, such as DC (development charges) and other fees”.

“For homes priced at $450,000,” which aligns with median income, “… the tax burden rises sharply to 45.2 per cent,” says the report, which also notes that economics often force developers to build smaller units that are insufficient for families.

December 1, 2024

QotD: Recording and codifying the land that William conquered

Filed under: Britain, Bureaucracy, China, Government, History, Quotations — Tags: , , , , , — Nicholas @ 01:00

I hesitate to recommend academic books to anyone, but I’ll make an exception for James C. Scott’s Seeing Like a State. Subtitled “how certain schemes to improve the human condition have failed”, it’s the best long-form exposition I know of, that explains how process and outcome first deform, then negate each other.

[…]

In brief, Scott argues that the process of making a society “legible” to government officials obscures social reality, to the point where the government’s maps and charts and graphs take on a life of their own. It’s recursive, such that those well-intentioned schemes end up first measuring, then manipulating, the wrong thing in the wrong way, to the point that the social “problem” the process was supposed to address drops out entirely — all you have, at the end, is powerpoint girls critiquing spreadsheet boys because their spreadsheets don’t have enough animation, and vice versa.

Scott doesn’t use the Domesday Book as an example (IIRC from a graduate school class 20-odd years ago, anyway), but it’s one we’re probably all familiar with. The first thing William the Conqueror needed to know is: what, exactly, have I conquered? So he sent out the high-medieval version of spreadsheet boys to take a comprehensive survey of the kingdom. Turns out the Duke of Earl’s demense runs from this creek to that rock. He has five underlings, and their domains run from etc.

The point of all this, of course, was so that Billy C. could call the Duke of Earl on the carpet, point to the spreadsheet, and say “You owe me a cow, three chickens, and two months in the saddle as back taxes.” It worked great, except when — as, it seems, is inevitable — the high-medieval equivalent of the spreadsheet boys did the high-medieval version of “ctrl-c”; just copying and pasting the information over. Eventually the tax situation got way out of whack, as it did for most every pre-modern government running a similar system — one of the reasons declining Chinese dynasties had such fiscal problems, for instance, is that the tax surveys only got updated every two centuries or so, such that a major provincial lord was still only paying 20 silver pieces in taxes, when he should’ve been paying 20,000 (and his peasants were all paying 20 when all they could afford was 2).

In other words: unless the spreadsheet boys periodically go out and check that the numbers on their spreadsheets actually correspond in some systematic, more-or-less representative way to some underlying social reality, government policy is being set by make-believe.

Severian, “The Finger is Not the Moon”, Rotten Chestnuts, 2021-09-14.

November 17, 2024

Nazi Uniforms banned across three States – Rise of Hitler 06, June 1930

Filed under: Germany, History — Tags: , , , , , — Nicholas @ 04:00

World War Two
Published 16 Nov 2024

In June 1930, the Weimar Republic faces escalating tensions as Nazi uniforms are banned in three states to curb political violence. The French withdrawal from the Rhineland marks a major milestone while Saxony’s elections leave the state in political deadlock. Meanwhile, Chancellor Brüning battles to save his government amidst growing financial turmoil and party divisions.
(more…)

October 10, 2024

Trump’s tariff proposals will rival Smoot-Hawley for self-inflicted economic woes

Filed under: Economics, Government, History, USA — Tags: , , , , — Nicholas @ 04:00

J.D. Tuccille explains why Trump’s economic plans are very much a curate’s egg of good and bad ideas, but the proposed tariff plans would more than compensate for any good positive effects from the rest of his proposals:

Willis C. Hawley (left) and Reed Smoot in April 1929, shortly before the Smoot–Hawley Tariff Act passed the House of Representatives.
Library of Congress photo via Wikipedia Commons.

Former president and current Republican presidential candidate Donald Trump wants to extend the tax cuts passed when he was in the White House, which are due to expire next year. That would not just be welcomed by the many Americans who would benefit, it could boost economic activity. But there’s a big problem: The protectionist tariffs favored by Trump would undo the good done by his tax cuts, reducing rather than increasing prosperity.

Tariffs Not Seen Since the Great Depression

“Former President Donald Trump’s proposals to impose a universal tariff of 20 percent and an additional tariff on Chinese imports of at least 60 percent would spike the average tariff rate on all imports to highs not seen since the Great Depression,” warns Erica York of the Tax Foundation.

Trump has actually been a little vague on the size of his universal tariff, first floating it at 10 percent while allowing “it may be more than that”, and then upping the ante to 20 percent. Either way, it’s a cost that ends up being largely paid by Americans in terms of higher retail prices and more expensive imported parts and materials for domestic manufacturing.

The Trump administration’s 2018 “tariffs resulted in higher prices for a wide variety of goods that U.S. consumers and businesses purchase,” the Tax Foundation’s Alex Durante and Alex Muresianu concluded.

Even when tariffs don’t directly affect the cost of imported goods purchased by consumers, they still drive up the prices of many things made in the U.S. The Cato Institute’s Pierre Lemieux points out that “a tariff on an input (say, steel) is paid by the American importer who will typically pass it down the supply chain to his customers and eventually to the consumers of the final good (say, a car)”. Instead of boosting domestic production, that can do harm, instead.

“For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs,” Federal Reserve Board economists found when they researched the 2018 tariffs.

That’s not to say Trump is alone in his protectionism. Last month, Bob Davis noted for Foreign Policy that “the Biden administration is the first since at least President John F. Kennedy’s time to fail to negotiate a major free trade deal, instead embracing tariffs” while Trump pursued both tariffs and trade deals.

September 26, 2024

Glimmers of hope for lower taxes on US taxpayers

Filed under: Business, Government, Media, Politics, USA — Tags: , , , , , , — Nicholas @ 03:00

J.D. Tuccille welcomes the discussion among the Presidential candidates about lowering the taxes Americans have to pay, and points out that the economic distortions of the current tax code (including “temporary” measures introduced during WW2) make everyone less well-off:

Three months after proposing to end federal taxing of tips — an idea promptly confiscated without compensation by Kamala Harris’s campaign — Donald Trump doubled down by saying “we will end all taxes on overtime” if he’s elected president. Without a doubt, millions of Americans who resent government’s ravenous bite out of their paychecks immediately began contemplating just how much of their income they could shield from the tax man that way.

Tips and Overtime for Everybody!

“Can someone get paid in primarily tips and overtime?” quipped the Cato Institute’s Scott Lincicome. “Asking for a few million friends.”

On a more serious note, the Competitive Enterprise Institute’s Sean Higgins thought exempting overtime pay “wouldn’t necessarily be a bad idea … but, overall, it is not likely to make that much of a difference to most workers because overtime isn’t that common”. He’d been more strongly supportive of exempting tips because that “would put more money directly in the pockets of working Americans without either costing employers more or raising prices for customers”. He also liked that freeing tips from taxation would “keep tipping out of the reach of the regulatory state”.

But what if overtime pay becomes more common precisely because it’s not taxed?

The people at the Tax Foundation expect that’s exactly what will happen, just as Lincicome joked. Thinking through the implications of exempting overtime pay from taxation, Garrett Watson and Erica York warned that “exempting overtime pay from income tax would significantly distort labor market decisions. Employees would be encouraged to take more overtime work, and hourly or salaried non-exempt jobs may become more attractive if the benefit is not extended to salaried employees who are exempt from Fair Labor Standards Act (FLSA) overtime rules.”

The Tax Foundation’s Alex Muresianu had a similar reaction to the proposals to exempt tips from taxes from both Trump and Harris. He thinks “the proposal would make more employees and businesses interested in moving from full wages to a tip-based payment approach”. He foresaw “substantial behavioral responses, such as previously untipped occupations introducing tipping”.

Of course, a world in which more Americans receive their pay beyond the reach of the tax man is a welcome prospect to many of us. If politicians want to phase out income taxes, even unintentionally, who are we to complain? Hang on a minute while I set up my virtual tip jar. In fact, there’s precedent for government policy around wages to cause major unintended consequences. Take, for example, employer-provided healthcare coverage.

Government Policy Has Distorted Compensation Before

“One of the most important spurs to growth of employment-based health benefits was — like many other innovations — an unintended outgrowth of actions taken for other reasons during World War II,” according to the 1993 book, Employment and Health Benefits: A Connection at Risk. “In 1943 the War Labor Board, which had one year earlier introduced wage and price controls, ruled that contributions to insurance and pension funds did not count as wages. In a war economy with labor shortages, employer contributions for employee health benefits became a means of maneuvering around wage controls. By the end of the war, health coverage had tripled.”

Given that health benefits became a substitute form of compensation to escape a wage freeze, it’s not difficult to imagine the United States moving toward a situation in which a lot more people receive the bulk of their pay from untaxed tips and overtime pay.

September 12, 2024

QotD: The collapse of early civilizations in Mesopotamia

Filed under: Government, History, Middle East, Quotations — Tags: , , , , , — Nicholas @ 01:00

Early states were pretty time-limited themselves. [In Against The Grain,] Scott addresses the collapse of early civilizations, which was ubiquitous; typical history disguises this by talking about “dynasties” or “periods” rather than “the couple of generations an early state could hold itself together without collapsing”.

    Robert Adams, whose knowledge of the early Mesopotamian states is unsurpassed, expresses some astonishment at the Third Dynasty of Ur (Ur III), in which five kings succeeded one another over a hundred-year period. Though it too collapsed afterward, it represented something of a record of stability.

Scott thinks of these collapses not as disasters or mysteries but as the expected order of things. It is a minor miracle that some guy in a palace can get everyone to stay on his fields and work for him and pay him taxes, and no surprise when this situation stops holding. These collapses rarely involved great loss of life. They could just be a simple transition from “a bunch of farming towns pay taxes to the state center” to “a bunch of farming towns are no longer paying taxes to the state center”. The great world cultures of the time – Egypt, Sumeria, China, whereever – kept chugging along whether or not there was a king in the middle collecting taxes from them. Scott warns against the bias of archaeologists who – deprived of the great monuments and libraries of cuneiform tablets that only a powerful king could produce – curse the resulting interregnum as a dark age or disaster. Probably most people were better off during these times.

Scott Alexander, “Book Review: Against The Grain“, Slate Star Codex, 2019-10-15.

August 28, 2024

1974 – Britain’s nadir

Filed under: Books, Britain, Economics, History, Media, Politics — Tags: , , , , , — Nicholas @ 05:00

In the second part of Ed West‘s appreciation of Dominic Sandbrook’s Seasons in the Sun, Britain was described as “sliding, sinking, shabby, dirty, lazy, inefficient, dangerous, in its death throes, worn out, clapped out, occasionally lashing out” by Margaret Drabble in her 1977 novel The Ice Age, and it certainly seems to fit the bill quite well:

The Times reported in October of that year that London’s West End was in a “sorry state”, with parts of Shaftesbury Avenue and Charing Cross Road “in the sort of condition that, in Birmingham or Manchester, would qualify them for wholesale slum clearance”.

Journalist Clive Irving wrote that London had become “a semi-derelict slum”, a city blighted by “tacky porno shops, skin movies, pinball arcades, and toxic hamburger joints” while “behind neon facades the buildings are flaking and unkempt”.

The capital had lost a million and a half people since its peak in 1939, and would continue its decline for another decade. Whitehall Mandarin Ronald McIntosh declared that “London is evidently losing population quite heavily [and] services are steadily deteriorating, and nobody seems to have the least idea of how to deal with it”.

The country as a whole was haemorrhaging people, and in 1975 its population fell for the first time since records began. In the spring of 1974 applications for emigration to Canada went up 65 per cent, while New Zealand even felt compelled to put restrictions on people fleeing the old country.

Doctors in particular were leaving in droves, and recruitment agency Robert Lee International estimated that the number of professionals wanting to move abroad rose by 35% in just six months, from January and July 1975. Interest was keenest among engineers, accountants, scientists and teachers.

Many high earners were fleeing excessive tax rates, so punitive that even the Bond producer Albert R Broccoli left to make the iconic British movies elsewhere, and Moonraker would be filmed in France.

Gone were the days of the Swinging Sixties; instead, the London of George Smiley was “the city of the Sex Pistols and The Sweeney, not the Beatles and The Avengers; a city of tramps and hooligans, hustlers and muggers, the downtrodden and the disappointed, haunted by the deadly figure of the IRA bomber”.

Britain’s second city was in an even worse state. During Wilson’s first term Birmingham had been hailed as “the most go-ahead city in Europe”. Now the Times admitted it looked like a “large and chaotic building site”.

Travel writer Jonathan Raban described Southampton’s Millbrook estate as “a vast, cheap storage unit for nearly 20,000 people”. The country’s increasing problem with crime, hooliganism, graffiti and drug addiction meant that residents wouldn’t even hang their clothes in communal areas, for fear of theft.

The great architectural feats of the post-war era were beginning to look like a miserable failure, and none more so than the utopian social housing schemes, which had often entailed destroying closely-knit and organic communities in overcrowded and run-down – but rescuable – terraced housing.

Christopher Brooker visited Keeling House in Bethnal Green and found “its concrete cracked and discolouring, the metal reinforcement rusting through the surface, every available inch covered with graffiti”. Here was the story of modern Britain, “the bright, anticipated dream followed by a seedy, nightmarish reality”.

The National Theatre’s Peter Hall visited the New York Juilliard School and upon return home “found it depressing to compare it with our own already run-down, ill-maintained South Bank building”.

“The English apparently no longer care enough about material surroundings,” he wrote: “They even seem to take a positive pleasure in defiling them.”

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