Tag Archives: tax

Quick Thoughts on the Health Care Ruling

The Supreme Court upheld the health care bill, as you’ve no doubt heard by now. Over at the Daily Caller, I add a few quick thoughts about how Randy Barnett’s Commerce Clause argument also applies to Congress’ taxation power, on the Court’s reluctance to check the other branches’ excesses, and how happy rent-seeking insurance companies must be right now.

Read the whole thing here.

CEI Podcast — December 28, 2010: IRS as Tax Preparer?

Have a listen here.

Fellow in Regulatory Studies Ryan Young looks at the IRS’ proposal to save you time by doing your taxes for you. Because you would be liable for any of the IRS’ mistakes, you would still have to check over your return. This negates much of the time savings. It could also cost employers as much as $5 billion in increased reporting requirements. Then there is the conflict of interest between your collector also being your tax preparer.

The Correct Capital Gains Tax Rate Is Zero

Cato’s Dan Mitchell gives a quick primer on the capital gains tax in the latest short video from the Center for Freedom and Prosperity.

President Obama wants to raise the rate from 15 percent to 20 percent. Dan gives six reasons why he should lower it to zero:

-Taxing saving and investment more means there will be less of it.

-Entrepreneurs will take fewer risks since higher capital gains taxes lower their return on investment. Why bother to innovate?

-America’s high capital gains tax rate makes us less competitive than other countries that have a lower tax rate – or no tax at all.

-IRS busybodies nosing around in our investment portfolios is hardly conducive to protecting privacy.

-Investment creates jobs. The capital gains tax lowers investment, and therefore job creation.

-A capital gains tax is inherently unfair. Tax laws should not penalize people based on how they earn, spend, or save their income. Taxes should be as neutral as possible.

Value Added Tax? Bad Idea

Today’s Daily Caller has an article by Wayne Crews and I making the case against the VAT, which is becoming a popular idea in this age of trillion-dollar deficits. Our main points:

-It would require roughly doubling the size of the IRS. Enough said

-VATs are untransparent. Sales taxes show up on receipts. VATs don’t. Knowing how much we are taxed is a fundamental right that preserves our ability to challenge excess government in a constitutional republic. A VAT would take that away.

-VATs increase over time. At least they have in 20 of 29 OECD countries that have VATs.

-VATs are prone to special-interest abuse. Politically incorrect goods are easily hit with punitive rates. In Denmark, people pay roughly triple sticker price for cars, for example.

Regulation of the Day 132: Fire Sprinklers

The U.S. tax code stands at well over 100,000 pages. All but the hardiest of souls hire professionals to do their taxes for them. Cries for simplification grow every year.

How does Congress respond? By introducing legislation to “amend the Internal Revenue Code of 1986 to classify automatic fire sprinkler systems as 5-year property for purposes of depreciation.”

Regulation of the Day 94: Plastic Shopping Bags

Retailers have traditionally provided free shopping bags to their customers as a courtesy. Washington, DC’s city government – known for being less than courteous – is now requiring stores to charge customers five cents for each plastic bag they use at checkout.

The tax is environmentally motivated. Since the city is acting so urgently on shopping bags, that implies that they must be the most urgent environmental threat facing DC. If that’s the case, then DC must be a veritable ecological paradise, or else its priorities are misplaced. One or the other must be true.

There were 84 unsolved murders in DC in 2009, by the way.

In lieu of plastic bags, the city is urging people to buy reusable cloth bags. But those have an environmental footprint nearly 100 times larger than a plastic bag, according to Sierra Club data. They have to be used many, many times before they cause any savings. They are also a haven for bacteria if not regularly washed. And washing them adds to their footprint.

Washington, DC has a lot of problems. Expensive but inferior schools, crime, violence, high taxes and spending – the list is long. The epidemic of plastic bags littering the streets is right at the bottom of that list. It should be prioritized accordingly. The regressive plastic bag tax should be repealed.

Against a Value Added Tax


Over at Investor’s Business Daily, Wayne Crews and I make the case against a Value Added Tax. Policy makers have been flirting with the idea as a way to reduce the $1,400,000,000,000 budget deficit.

We argue that a VAT is:

-Complex; it would require roughly doubling the size of the IRS.

-Untransparent; most VATs don’t show up on receipts the way sales taxes do. Taxpayers are clueless as to how much tax they actually pay.

-Vulnerable to special-interest tinkering; politically incorrect goods are routinely penalized with higher rates. Politically favored goods are granted exemptions.

-Prone to increases; 20 out of 29 OECD countries with a VAT have increased their rates since implementing a VAT.

A point we didn’t make is that VATs affect industrial organization. VATs are applied at each stage of the production process. That gives companies an incentive to reduce the number of taxable steps. That means more vertical integration than would otherwise occur. This can decrease the efficiency of the manufacturing process. Which means higher prices and fewer goods. Plus the tax.

Precisely Backwards

People buy less of something when it becomes more expensive. That’s what economists call the law of demand. It is one of the key drivers of every facet of human behavior. And it’s a simple concept. Easy to understand. Easy to apply.

Or maybe it only seems that way. 366 members of Congress just voted to attract tourists to the U.S. by taxing them $10 when they enter the country.

That noise you hear may well be Adam Smith rolling over in his grave.

Few things are more taxing than our elected officials’ economic illiteracy. How sad that visiting a wonderful country like America may soon be one of them.

The Tax Code

According to CNN, the federal tax code stands at nearly 100,000 pages, “with a word length that is about 10 times the size of the standard English version of the Bible.”

Wow.

Surely we can do better than that. Both parties complain about the complexity of our tax code, so why not do something about it?

Turns out they are, just in the wrong direction. Reps. Dreier and Berman are proposing a targeted tax break for filmmakers, and President Bush is proposing a tax break for casinos in the Gulf region.

I’m all for lower taxes, but this is ridiculous. Instead of a cut for a few people here and a few there, why not do away with all exemptions and special treatment and just charge everyone the same rate?

Tax avoidance would be almost impossible. The entire tax code could fit on one page. Imagine that, being able to do your own taxes. Tax rates would almost certainly go down due to popular pressure since everyone would have to pay.

The only downside is that H&R Block would probably go out of business.

Well, that and it probably wouldn’t do a thing about the real problem, which is spending. I noted some of the difficulties with that yesterday.