The Statutory Middle Class Tax Rate is Over 70%

There is an interesting post at Zero Hedge arguing that the statutory tax rate on the middle class in high tax states (read: blue states) is 75%.  This might be slightly high but I think it’s basically accurate.

Above a rather modest $34,600 in taxable income and up to around $106,000, the [statutory] middle class tax burden in high-tax American locales is 75%:

Social Security and Medicare: 15.3%
Federal income tax: 25% (28% above $83,600)
State income tax: 5% (mid-range)
Healthcare insurance: 15%
Property tax: 15%

The Social Security, Medicare and federal income income tax rates are indisputable.  They add up to 40%-43% but let’s stick with 40%.

State income taxes vary but in looking at charts of state income tax rates by income, 5% is a reasonable approximation for the middle class.  But even if someone insists this is too high, it would only drop the statutory tax burden by a percent or two.  So, the total is up to 45%.

Pegging the property tax rate at 15% is arguably a bit high.  As an example, let’s take the median property tax ($7,500) and the median income ($67,000) for New Jersey.  That’s about 11% of income.  However clearly 15% is quite likely depending on exactly what a person’s income/tax bill is.  But let’s go with the exact median, 11%, and the total comes to 56%.

Now we come to healthcare.  I’m sure this is the one that will get the biggest push-back.  However, I say tough luck, lefties.  You won the ObamaCare policy fight and you now own the healthcare system.  We now have (partly) private ownership of health insurance with government control.  HHS will effectively determine through minimum coverage requirements (read: by fiat) what the cost of health insurance will be for all of us.  We no longer have the option of purchasing a cheap policy.  Plus, ObamaCare places enforcement of the insurance mandate with the IRS and the Supreme Court declared it a tax.  So, lefties, you broke it; you bought it.  Health insurance is a mandatory expense required of us by the federal government. It is a tax and the math is as follows.  For 2011, the U.S. median income was $51,400. The average healthcare cost for a family of 4 was $19,400 of which $8,000 was paid out-of-pocket.  $8,000 is is 15% of the median income.  Using the out-of-pocket expense only, frankly, is playing it very conservative.  Now that health insurance is a federal requirement, it is reasonable to argue the employer portion should be counted as well (just like the Social Security tax).

That brings the total statutory tax rate for the middle class to 71%, if you take my more conservative property tax calculation.  If you agree with the Zero Hedge calculation it’s 75%.

Plus, this does not include sales taxes, excise taxes, investment taxes, local wage taxes and the cost of regulatory compliance, which are passed on to taxpayers.

I can already hear the lefties shrieking that nobody actually pays a 71% tax rate. I will acknowledge that this is only the statutory tax burden and the effective tax rate is lower.

However, this is a story that still matters a lot.  First, is that the left feels it is somehow morally justifiable to claim a prior right through coercion to 71% of a family’s income.  Second, the only reason the effective tax rate is 71% is through deductions, credits and exemptions that have proliferated in the past few decades, primarily at the federal level.  But it is much easier to change these tax modifiers than it is to change the actual rates.  When our debt crisis hits, who knows what will happen with the tax code.  If the availability of tax modifiers are reduced, the left will simply argue that they tax rates are unchanged and they did not raise taxes.  No doubt the luminaries in the legacy media would happily shill for them.

This is something we need to be shouting from the roof tops.

The Obama HealthCare Tax Will Raise Costs

As I previously mentioned, ObamaCare the Obama HealthCare Tax will prove to be temporary.  It is not fiscally sustainable.  When our inevitable fiscal crisis hits in full, ObamaCare the Obama HealthCare Tax will have to be gutted if it is still around.

The left can blather all it wants about how it’s going to save money, but it is plainly untrue.

We’re not going to save money by requiring everyone to have gold-plated health coverage.  Before ObamaCare the Obama HealthCare Tax, you could buy more or less expensive health coverage, with the big cost differences being driven by what’s covered, what the out of pocket share will be, etc.  Under ObamaCare the Obama HealthCare Tax, HHS will be requiring much more extensive coverage than is now required.  That will raise the cost of healthcare, not lower it.

We’re not going to save money by covering more people because people who have coverage consume more healthcare services.  For example, when Massachusetts expanded coverage to nearly everyone ER usage went up, not down.  Furthermore, being covered does not save money in itself.  Consider two people, one insured and one not insured, who suffer the same injury and receive $10,000 of care in the ER.  The insured person’s $10,000 bill goes to the insurance company.  The uninsured person’s $10,000 bill goes to the uninsured person.  There’s a $10,000 bill either way.  Okay, you say, but the insurance company can negotiate a discounted rate.  True, but cash-paying patients have tremendous leverage to negotiate discounts as well.  There is no savings here either.  But what if the uninsured person does not pay?  Won’t the cost of the care be passed along to everyone else?  Yes, some of it will.  But there is still $10,000 of care being consumed.  Whether it is paid for by a private insurance company, an uninsured person, a tax-payer funded plan, or the cost is eaten by the healthcare provider or cost-shifted to everyone else’s insurance premiums, it does not change the fact that healthcare services were consumed.  Covering more people does not reduce healthcare spending.

And we’re not going to save money through prevention programs because, in aggregate, prevention programs cost more money than they save.  Most people in a prevention program would not have developed the condition the program is intended to prevent.  Money is saved on the minority of individuals who the prevention program succeeds on.  But in aggregate the costs of the programs generally exceed the savings.  This is an open secret in the healthcare industry.  Prevention programs may be worthwhile for other reasons but it is not because they save money.

ObamaCare The Obama HealthCare Tax will raise the cost of healthcare, not lower it.

Refining My Comments on the New HealthCare Tax

The left managed to save the ObamaCare Obama HealthCare Tax.  But do they even realize what a price they paid to accomplish this?

There’s a new precedent for striking down statutes on federalism grounds.  There’s a new precedent expressly limiting the scope of the commerce power.  There’s a new precedent limiting the use of the necessary and proper clause.  To the extent there is any new taxing power created (which is debatable), it is one that (1) will result in future uses being labeled as taxes, and (2) creates taxes which cannot be shifted to “the wealthy” and must apply to all tax payers.

ObamaCare The Obama HealthCare Tax is bad policy.  There is no doubt about that.  But, if it has not been clear from my comments thus far, I have been much more concerned about the potential impact of the commerce power/necessary and proper arguments.  The left was soundly defeated on those points.  They saved their law in the short term at the price of new constitutional limits on their schemes.

The Left’s Constitutional Loss

The left won on the policy issue.  ObamaCare still stands (but shall now be rebranded the Obama Healthcare Tax).  But I think the left won the battle but lost the war.

There were three arguments for the individual mandate:

  • commerce power
  • necessary and proper clause
  • taxing power

The first two are constitutional issues.  But, as argued, the third was not.

On the constitutional issues, the left lost big.  The court expressly foreclosed on the left’s attempt to expand the federal government’s power.  The very argument that left alternately ridiculed and ignored for 3 years, in fact, won: the commerce power has real limits and does not allow Congress to compel commerce in order to regulate it.  Don’t underestimate how rare it is for the modern court to limit the commerce power.

In upholding the individual mandate as a tax, the court moved the decision out of the constitutional realm.  It was pretty clear that if the individual mandate could be interpreted as a tax, it was constitutional.  The question was whether, as a matter of interpretation of existing precedent, it could be construed as a tax.  While I think the court got that wrong, it’s not earth shattering as a matter of law.  It literally is something that, if written differently, could have been accomplished and we would never have been able to challenge it.

The left gained nothing in managing to save a policy that they could have had anyway. But in the process, they made constitutional arguments that crashed and burned.  The court has now placed a rare hard limit on the power of Congress to regulate commerce.  Constitutionally, this case was all lose, no win for the left.

But look at the bright side, in the end the Obama Healthcare Tax is just temporary.  It will have to be repealed or rewritten when our debt crisis hits.

ObamaCare Survives

The Supreme Court held that the individual mandate is valid as a tax.  But it also specifically held that the individual mandate would violate the commerce power.

Chin up, libertarians.  That’s a huge win.  Congress is going to be significantly boxed in.

As one of the live bloggers at SCOTUS Blog put it:

The rejection of the Commerce Clause and Nec. and Proper Clause should be understood as a major blow to Congress’s authority to pass social welfare laws. Using the tax code — especially in the current political environment — to promote social welfare is going to be a very chancy proposition.

Plus, Obama is now going to have to campaign on “remember how I said I wasn’t going to raise your taxes…”

UPDATE: As I think about this more, the lefties may want to rethink their excitement.  This may be the worst possible outcome for them.  Since the law was upheld, the base won’t be riled up in November.  But the the court squarely rejected the left’s commerce power, and necessary & proper arguments, which were by far the most threatening to our freedom.  Now the Dems look ridiculous like liars because the provision they said wasn’t a tax has been declared a tax by the court.  Obama and crew are on the hook for a middle class tax increase when they said they weren’t going to raise taxes on the middle class.

So, let’s review.  They’re saddled with a tax that they said wasn’t a tax, and a tax increase that they said they wouldn’t do.  They lost big on the most important constitutional issues and won only on a constitutional route that will sharply limit their ability to do anything like this in the future.  And, oh by the way, the law that was upheld by the court is really unpopular.  Good luck in November!

The Cruelty of Welfare

Progressives like to think they are kind and humane for wanting to expand the welfare state.  I say they are cruel.

Think about the working life of a typical person.  When a person first enters the workforce, his experience, skills and not surprisingly his earnings are the lowest they will ever be.  But over time, as he refines existing skills, develops new skills, builds seniority, proves he’s a valuable employee, gets promoted or accepts a new position at another company, his earnings grow.

Notice this is entirely independent of wage growth for the population as a whole.  This isn’t about the median income.  This is about one person’s income growth over time.

So what happens when someone is on welfare?  There’s no skills being refined or developed.  No seniority accrues.  He proves nothing to employers, gets no promotions or new jobs.  In short, a person on welfare is robbed of the experiences that increase income and improve the lives of his employed peers.

A life on welfare starts poor and ends poor.  It is cruel to wish that on anyone.

Free Market Capitalism Works

It has long seemed to me that progressives acted like there was a fundamental law of nature that guaranteed economic growth.  They seemed to believe they could do virtually anything to the economy and our lives would still improve.

They are clearly mistaken but it isn’t always easy to come up with historical economic data since systematic economic record-keeping is a very modern practice.  So I was excited to find some great data in The Road to Freedom by Arthur Brooks.  It’s devastating to the progressive viewpoint, or it should be if progressives were honest enough to tackle it head-on.

Before 1800, children could not expect a better life than their parents, grandparents, or any ancestors, for that matter.  World GDP per capita actually fell slightly from AD 1 to 1000, and grew just 47 percent from 1000 to 1820.

And

[In the U.S.], per capita GDP increased 2200 percent from 1820 to 1998.

What changed?  The West embraced commerce and industry.  It loosened controls on commerce and people, recognized property rights for all, and replaced an economy dominated by the aristocracy with an economy defined by a meritocracy.

The effect, if not the intent, of the left’s policies is to roll back many of the advances we have made.  What are cronyism, special interest legislation and professional licensure if not a modern form of aristocratic privilege?  Progressivism is so 500 years ago.

Double Range Day

The semester is finally over.  To celebrate, Mrs. Manifesto and I spent an awesome day together on Friday.  First we went to the driving range to practice our not-so-impressive golf skills.  Then we went to pistol range to put some lead down range.  As the saying goes, he who has a golf-playing, gun-shooting wife is a lucky man.

Second Degree Murder

So, George Zimmerman has been charged with second degree murder in the death of Trayvon Martin.  Unless the prosecutor has some additional information that hasn’t been released to the public (like the ballistics analysis), it seems to me the prosecutor has overcharged Zimmerman.

Here is how Florida defines second degree murder.  § 782.04(2) reads:

The unlawful killing of a human being, when perpetrated by any act imminently dangerous to another and evincing a depraved mind regardless of human life, although without any premeditated design to effect the death of any particular individual, is murder in the second degree.

And here is the key part of the Florida standard jury instructions for second degree murder, which are a useful tool for understanding what the prosecution needs to prove:

An act is “imminently dangerous to another and demonstrating a depraved mind” if it is an act or series of acts that:

1. a person of ordinary judgment would know is reasonably certain to kill or do serious bodily injury to another, and

2. is done from ill will, hatred, spite, or an evil intent, and

3. is of such a nature that the act itself indicates an indifference to human life.

The facts I’ve seen don’t match this at all.  Is it possible the prosecutor is overcharging Zimmerman to keep the mob satisfied while implicitly recognizing it’s unlikely Zimmerman will be convicted?  That’s cynical even by my standards.

Lessons of the ObamaCare Debate

Regardless of how the Supreme Court rules on ObamaCare, the debate has highlighted some of the worst characteristics of Progressives, particularly their arrogant, dismissive, and disrespectful attitudes.

For two years conservatives have been arguing that the individual mandate is unconstitutional.  And for two years the left has derided us as a bunch of lunatics.

Conservatives have been openly and expressly asking a single fundamental question about the individual mandate: if the federal government can do this, what can it not do?  While the inner details of the arguments have been refined, the fundamental question has been the same.

For two years, the left has refused to address this question.  They arrogantly dismissed the constitutional challenge.  They heaped scorn on us as a bunch of rubes and suckers.

In debates, when proponents of ObamaCare were asked how this would not create a general police power for the federal government, the typical response was along the lines of “we’re not claiming a general police power.”  This, of course, is a dodge and a total non-response.  It may be a satisfactory response among their lefty peers but it is a non-starter before the Supreme Court.

For two years, they have been on notice of the fundamental question and they refused to engage it.  They had two years to find an answer that would satisfy someone who didn’t share their worldview.  If they had paid the slightest attention and given the slightest respect to our arguments, our academics, our commentators, our grassroots, they would have been prepared for it.

Instead, they showed up at the Supreme Court and were blind-sided by Justice Kennedy asked them the fundamental question and they did not have a coherent answer.

For two years, they seem to have believed the individual mandate was an obvious slam dunk for them.  For two years, they slandered us as a bunch neanderthals for daring to challenge their precious law.  For two years, they argued that the legal precedents for their unprecedented exercise of federal power were clearly and unambiguously on their side.

And now it looks like the Supreme Court may well rule that the individual mandate is unconstitutional.  As Glenn Reynolds asks, “who’s the rubes and suckers now, rubes and suckers?”

If the left was at all capable of self-reflection or able to ask itself how the “tolerant and open-minded” side, who are self-evidently so much more intelligent and sophisticated than those awful knuckle-dragging conservatives, could be so spectacularly and insultingly wrong, then they might be able to learn from the experience.  But that’s not going to happen.  If the court strikes down ObamaCare, we’ll here the usual drivel: the court is corrupt, conservatives are evil, conservatives want poor people to die, conservatives are waging a war on women.  Adherents to totalitarian ideologies aren’t the self-reflective sort.

More Flexibility

  • Stimulus Bill
  • GM Bailout
  • Cash for Clunkers
  • Bows to foreign monarchs
  • Denigrates allies
  • Supports Iranian dictators over Iranian people
  • ObamaCare
  • Contraception mandate
  • Scraps missile shield
  • Defense cuts
  • Supports violence-filled Occupy protests
  • Demands higher tax rates
  • Cancels oil leases
  • Cancels Keystone Pipeline
  • $5 trillion in new debt and rising

Obama: “After my election, I have more flexibility.”

Let’s hope he doesn’t get the opportunity.

Unsurprising Fact of the Day

80% of longterm poverty occurs in single parent households.

Jennifer Marshall of the Heritage Foundation

Bad and Badder

The opposite of Democrat is not Republican.  But opposing the Democrats often requires supporting the Republicans.

Yes, the Republicans suck but at least there’s a strong limited-government contingent. Even if it fails to live up to its own standards, the Republican party at least acknowledges that government should be limited in its scope.  And need I point out that without Republicans, the Second Amendment would be long gone?

There is no small government group among the Democrats because there is no principled limit on the power of government within Progressivism Regressivism.  There may be individual policies where Regressives choose to limit government but as far as I can determine, those do not derive from principles, just political choices. There is a big difference.

Yes, the Republicans suck.  But they suck a lot less than the Democrats.

The HHS Rule Compromise

Obama has offered a “compromise” on the recent HHS decision to require church-affiliated institutions to include contraception.  The “compromise” is that the church-affiliated institutions won’t have to pay for the coverage.  The insurers will have to provide the coverage for free to the subscribers.

Normally, I’d say this “compromise” is pure politics.  Given the bipartisan attacks on the HHS rule, the politics are very clear.  But I can’t quite get over the possibility of another factor.

Is it possible that Obama doesn’t actually understand that coverage of any kind isn’t ever “free”?  And in this case, that the institutions and their employees are still paying for the coverage, not the insurer?

The fact that it wouldn’t shock me that the President of the United States is economically illiterate is shocking in itself.

So Tolerant and Open-Minded

I had an exchange online with an old friend and a few people he knows.  I am posting the text of it, anonymized with a couple minor edits, because the debate and what happened after is such a great snapshot of the left.

Old Friend:

Westerners are not taught that the hoarding of wealth is an act of evil. Many other cultures, however, do understand this concept. We need to learn it.

Mr. Manifesto: ‎

“Hoarding” money, better known as saving, is what enables investment, which is what allows new products and companies to come into existence. That would include things like Facebook which would not have survived without VC money. If you use things like computers, the internet and cell phones you can thank the people who saved and invested the money that made them available for your use. When that money is taken away, future growth and innovation is taken away as well, and everyone is made poorer as a result.

Is there a particular culture you have in mind?

Other Person 1:

Mr. Manifesto I think you missed the point …. saving is different than hoarding … saving some thousands to cover a rainy day mis fortune is a needed thing …. when the numbers turn to millions and billions and trillions .. thats hoarding and it only serves the hoarder at the expense of many … and thats wrong

Old Friend:

Hoarding money is not equal to saving. Hoarding money is when your wealth is so vast that it deprives millions of people the ability to live a life of basic human dignity. Such as the ability to get a basic education, or to see a doctor without declaring bankruptcy. If you accept the idea that the good of the many outweighs the good of the few or the one, then you must agree that hoarding of money is wrong. If you do not accept the idea that the good of the many outweighs the good of the few or the one, then there’s nothing more I can say to you.

Mr. Manifesto:

Sorry, guys, but this is pretty elementary economics. One person’s wealth does not deprive anyone of an education, dignity, etc. Wealth doesn’t sit in someone’s basement. It is invested and produces jobs and growth. Facebook, for example, would not exist without millionaires.

If you confiscated all the money from people above, say, $10 million and give it away to the poor of the world, you would see two things. First, there would still be poor people now. Second, there would be more (not fewer) poor people in the future because this act of “kindness” would suck away the funding from future companies, products and jobs.

It is not an accident that collectivist societies invariably impoverish and oppress their citizens. It isn’t kindness to condemn the poor to lives of poverty, which is what collectivism does. There is only one force that has lifted millions of people out of poverty - capitalism.

But I’d like to repeat my previous question: do you have a culture in mind that practices your no-hoarding-of-wealth philosophy?

Other Person 2:

Have you considered that “hoarding” isn’t as direct a thing as you think it is? Influencing an entire political body to work in favor of you keeping a greater majority of your wealth that could otherwise be spent on social programs that help the poor is in itself a sort of hoarding. Or at least the mentality behind that sort of thing is the same as traditional “hoarding”.

Other Person 1:

I do but not for large random numbers …. I am also aware of the the concept that given an even start and an equal amount of money eventually some would amass most of the wealth … as we see it today …. that doesn’t make it right or the best thing to do it just makes it where we are now…. history illustrates this time and time again … it also shows that eventually the despots crash and are eventually replaced first by a benevolent society which is eventually over come by a despot and things recycle … today we have an opportunity to break this cycle by creating a new model …. something where the wealth has greater restrictions, where the middle class is the major part of society and the impoverished also have restrictions. I enjoy watching China struggle with this delemna as well. The real truth of that situation seldom gets here, I use my contacts and family reports to get a more accurate picture.

Mr. Manifesto:

Other Person 2 - When government spends trillions of dollars annually and grants itself more and more power, it should come as no surprise that people spend a lot of time and money to get in on the action. They are looking for 3 things: (1) a piece of the action; (2) to avoid being crushed by regulation; and (3) to use regulations to crush their current and future competition. It is the wealthy and big business that has the resources to do this, of course. Progressivism is good to the wealthy and to big business (see, for example, Solyndra and the rest of Obama’s green energy program).

If you want to keep the wealthy from being to powerful politically, the only solution is small, constitutionally constrained government. We used to have that and it actually worked quite well.

As for social programs, there are two kinds of poor people in the U.S. - the temporarily poor and the underclass. For the temporarily poor, the safety net works. They are unemployed briefly and then back on their way.

For the underclass, government programs have been a well-intentioned disaster. They have made things worse for the most part. We now have areas of the country where the out-of-wedlock birthrate is around 80%, made possible only because of government programs intended to “help.” The problem, however, is that a single mother is virtually certain to be poor or very close to poor (even with the safety net). And her children are more likely to underachieve in school then drop out, more likely to commit crimes, more likely to be poor as adults, and more likely to repeat the cycle by having their own children out of wedlock.

People who finish high school, then get a job, then get married before having children have a poverty rate in the single digits. Government programs that simply shovel money at the poor prevent them from following this all-but-certain path out of poverty.

Mr. Manifesto:

Other Person 1 - I’m not sure about your history. Most of human history, certainly the last 2,500 years anyway, has featured despotism and little else. There have been a few outbreaks of liberty but they have been outliers. It took our ancestors hundreds of years to establish the right of the individual to live in freedom, to make his own way and to have a representative government.

This process pushed western Europe from being a bass-ackwards, illiterate, collection of petty monarchs to being an economic and military powerhouse. People forget that western Europe was nothing special compared to the rest of the world, including Africa, until just a couple hundred years ago. But we embraced liberty and capitalism when the rest of the world stuck with the usual routine - despotism. Now it seems that too many people are trying to forget this.

But I’d like to hear what your new model is. I’m particularly interested in hearing how the middle class will be sustained in it.

Old Friend 1:

I’m fascinated that all you want to talk about is welfare programs when I’m talking about how there’s no money for the education of our youth, and that it has been made a crime-punishable-by-financial- ruin to become sick or injured. Tax the rich, tax the rich, tax the rich. They have been waging and winning a war on the poor and middle class for the past 30 years. This is not an opinion, it is a fact demonstrated by a mathematical tally of who owns what percentage of the wealth in our country, and how that distribution has changed over the past 30 years.

Other Person 3:

And how, pray tell, does the accumulation of wealth by one person prevent another from accumulating it? That is absurd. Read all of the above carefully — Mr. Manifesto was cogent and well reasoned. The counter replies were not. Round goes to Mr. Manifesto.

Old Friend:

Other Person 3 - Rich don’t pay taxes. No money for public education. Uneducated people are forever shut out from financial opportunity. That his how the accumulation of wealth by one percent robs millions from their own chance for financial well being. Booya.

Old Friend:

Ugh. I’m so tired of this. We’ll never agree. I’m pro human rights, you’re pro property rights. We are what we are….I’m not gonna have these conversations with you anymore. I’m still marveling at your earlier comment in defense of the glories of despotism. We are what we are.

That’s when Old Friend unfriended me.  I could not even post the detailed response I had been writing.

It’s a perfect encapsulation of the real nature of many on the left: angry, unhinged, intolerant, lacking in facts, unable to analyze coherently and only wanting hear things they agree with.

So, I sent Old Friend an email.

Hey Old Friend,

So you unfriended me on Facebook.  Such is life - I’m disappointed but not insulted.

You had long ago lost your status as one of my preferred debating opponents because you confused anger and passion with insight.  I have many lefty friends who actually debate in good faith because they recognize that their own arguments are made sharper by having them tested against people who disagree.  They have not pushed themselves into self-imposed intellectual ghettos like you.  It’s your loss.  So, the next time you rage against “intolerance,” just remember today.  You responded to facts with anger, to reason with hate, to dissent by cutting off debate.  Congratulations on becoming what you hate.

Anyway, I don’t hold grudges, particularly not against old friends.  If you change your mind at any point in the future (months, years, decades) feel free to get in touch.  I am always up for a worthwhile debate.

Mr. Manifesto

Why Taxing the Rich Hurts the Rest of Us

In tonight’s State of the Union address, Pres. Obama called on Congress to raise taxes on the wealthy.  He wants them to “pay their fair share.”  Set aside the moral issues of redistributive taxes (it is a form of slavery to assert ownership over the value of someone else’s economic output - but that’s for another day), let’s look at the economics involved.

Taxing the rich reduces innovation, jobs and economic growth.  How?  Look at a company that started small and got big - Facebook.

When Facebook began it was just a couple people.  But once it got going, that didn’t last long.  They needed programmers.  The programmers needed computers, desks, offices, and office supplies.  The programmers’ computers had operating systems and development tools and databases.  Facebook also needed servers, data centers, back up power sources, server racks and cooling systems.

Facebook could buy those things because rich people had the money to invest in a risky start up.  Those things were available for Facebook to buy because other people previously invested in capital-intensive companies to make those things.  Computers, software, desks, lamps, servers, data centers, office buildings, etc. don’t build themselves.  They require allocation of existing capital.

When government raises taxes (on any group, but particularly the wealthy), it reduces the pool of money available to build computers, software, desks, and lamps, or to invest in new, innovative ideas like Facebook.  That means goods that are never built, innovative companies that die for lack of investment and jobs that are never created.

Of course the rich have the money to pay higher taxes.  But it’s the rest of us that pay the price.

Investment Taxes Too High

Jim Pethokoukis on why Mitt Romney’s 15% tax rate is actually too high:

We shouldn’t tax what we want more of. And the real problem with the capital gains tax isn’t the rate or how it is structured, but what is taxed: gains on investments, which are savings put to work. Economists of all stripes have been saying Americans have consumed too much and invested too little over the past decade. So why would we want to tax investment even heavier, as the Obamacrats want to do?

Or put another way, you can use your money to consume goods now, paying a 6%-or-so sales tax in the process, or you can risk your money by investing it and then pay a 15% tax capital gains tax, plus the metaphorical “inflation tax” followed by a 6%-or-so sales tax when you use the money to consume goods. That is raw deal for investors.

Another Yummy Serving of Fail for the Gun Controllers

Homicide has dropped of the list of the top causes of death in the U.S. at the very time that gun ownership is expanding.  Want some antacid on the side, guys?

Stupid Government Tricks

It seems the geniuses in Philly’s city council plus Mayor Nutter have decided a really good way to make Philly more competitive is to make it more expensive to hire people.  They have decided to prohibit companies from asking about an applicant’s criminal history until after their first interview. The only exception is for law enforcement position.

Here’s a quote from the city’s FAQ.

even where such mandates [federal or state background check requirements] exist, most employers will be able to comply with both Ban the Box and the state or federal law by waiting until after the first interview to make criminal history inquiries; unless the state or federal law specifically requires that the inquiry be made on the employment application or during the first interview, employers are required to comply with Ban the Box.

Translation: even if you are required by law to perform a background check for a position where a criminal conviction will be an absolute disqualifier, you have to spend the money to process the application and perform an interview before you can ask whether the applicant has a criminal record.  Of course, this won’t actually stop an employer from refusing to hire someone with criminal conviction.  It will only raise the cost of doing business in the city.  Brilliant.

Progressivism Inevitable Failure

A government, like a family or a corporation, can support some number of economically unviable undertakings.  But at some point, no matter how pleasurable or good intentioned they are, piling on too many economically unviable endeavors threatens those that are viable.  The problem with Progressivism is that it cannot, even in theory, limit itself to a non-damaging number of unviable undertakings.

One of Progressivism’s foundational beliefs is that “experts” should manage the economy and people’s lives by regulating, restricting, encouraging and subsidizing some things but not others, based on what the “experts” deem to be in the best interests of the nation.  This means, of course, that decisions will be made for political and ideological reasons rather than economic ones (even granting the benefit of good intentions and the absence of corruption other than the intellectual variety).

Assume for the moment that this management of people and the economy is initially inefficient but sustainable, by being of limited scope.  What happens?  The corporations and individuals involved in activities favored by the “experts” gain an advantage and thus begin to accumulate wealth and power in a proportion greater than they would have otherwise.

This has two effects.  First, it attracts more companies and individuals to the favored activities in search of money and power.  Second, is that it encourages the already powerful and connected, in addition to those seeking to gain wealth and power, to demand that the scope of things being managed by the “experts” be expanded so they can capture the advantages for themselves.

And so the death spiral begins.

Over time, decisions are increasingly made by “experts” without regard to their economic viability.  The expansion of the scope of the “experts’” control quickens.  Money and power flow to the well connected.  Soon enough the “experts” in one part of government are encouraging things that “experts” in another part of government are discouraging.  The taxes needed to support the system suck money from the independent private sector and flow to the “experts”, the bureaucrats and their cronies in the parasitic private sector (those favored by the “experts”).

As the economically unviable activities expand, they begin to crowd out the viable ones, producing calls for more action, which further accelerates the death spiral.  At some point, the economically viable activities in the independent private sector are simply unable to keep pace with the demands of the unviable endeavors required by the “experts” and collapse becomes inevitable.

By collapse, I don’t mean society falls apart and it’s every man for himself.  What I mean is: Greece and the rest of Europe (which will be us before long).  The bill comes due, the debt has to be paid, government austerity becomes a requirement, the cronyism and unviable projects have to be unwound.  In short, Progressivism has to be undone.  To the previously favored, the cronies of Progressivism, it is shocking and painful.

Because Progressivism has no internal ideological check, there is no line within it that says “here and no further” in its drive to regulate and manage.  In other words, once Progressivism takes root it will inevitably destroy itself.