Monday, October 31, 2011

The Collection is Eluded: Consumption Taxes Allow YOU to Control How Much Government Gets

And that's why the FAIR TAX has gone nowhere so far. Neither Democrats nor Republicans want YOU to kill the golden goose.

But now we have the very likeable Herman Cain, who advocates the consumption tax, the tax the Founders advocated. Even Alexander Hamilton, to whom we owe our strong central government, advocated for it in Federalist 21:

It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, "in political arithmetic, two and two do not always make four." If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

Two important commentators at Forbes are coalescing around the perfections associated with a consumption tax, Lawrence Hunter and John Tamny, but Hunter is clearly the constitutional originalist in this matter.

John Tamny, who has argued for a gross receipts tax on corporate business if there must be a corporate tax, however, has caught the spirit here:

As Larry Hunter, another fellow Forbes contributor has noted recently, the beauty of a consumption tax is its limiting nature. Quite unlike taxes on income that are paid no matter what, with a consumption tax individuals would be able to limit the amount of money handed to the government by virtue of spending less.

This is particularly important during times of economic hardship. While with income taxes we pay regardless, if a consumption tax were implemented Americans could put the federal government on a diet at the same time that economic uncertainty is forcing them to tighten their own belts.

At present, and as evidenced by the boomtown that Washington, D.C. currently is, the government industrial complex is gorging at the same time that most Americans are reducing expenditure. This is wrong on so many levels, and as it’s true that during downturns individuals tend to spend less (their savings once again an economic stimulant), so should Washington be forced to. 

Morgan Stanley's Stephen Roach Ridicules Fed's War on Savers, Who Are Indispensable to Future Growth

He is quoted here at, identifying zero interest rate policy as

"financial repression practiced by your favorite central bank, the Federal Reserve. The idea that we can run zero interest rates in perpetuity and penalize savers is absurd."

"Do you know that half of American workers have no retirement fund?"

"How else are we going to fund economic growth?"

"Right now we’re borrowing surplus savings from abroad because we don’t save a nickel at home, and we have to wean ourselves from that."

Last week's GDP release indicated a precipitous fall in the personal savings rate of 20 percent in the third quarter to 4.1 percent annualized as Americans spent all their minor wage gains and diverted monies from savings just to keep up with rising prices for food, energy and healthcare, among other things.

They are not buying major appliances with the money, as Whirlpool is set to lay off 5,000 in coming months due to rapidly falling sales.

Herman Cain's National Sales Tax Might Make Renters Better Off, With Transitional Problems For Existing Owners of Residences and Rental Income Properties

An important study published in 2008 here simulating the effects of the Fair Tax, Herman Cain's ultimate goal, namely a consumption tax to replace all other federal taxation, concluded the following about its impact on housing:

The enactment of H.R. 25 thus causes the homeownership rate to gradually decline as the demand for housing falls. Demand for owner-occupied housing decreases because of the elimination of the tax on normal returns to capital in the nonresidential and rental housing sectors (which reduces the relative tax advantage of owner-occupied housing) and the elimination of the tax deductions for mortgage interest and property taxes. Note that under H.R. 25 all consumption goods are treated roughly the same since most nonresidential consumption is taxed, rental housing payments are taxed, and the tax on new investment in the owner-occupied sector is roughly equivalent to a front-loaded or prepaid tax on the flow of housing services from such investment; only housing services from existing, owner-occupied housing are untaxed. As a result, there is no preferential tax treatment of new investment in owner-occupied housing under H.R. 25. Because of this, a portion of the investment in owner-occupied housing that would have occurred under the income tax is shifted to the nonresidential and rental housing sectors. Rental capital as a share of the total capital stock increases from 13.4 percent to 13.7 percent in the long run and the output of rental housing as a share of total housing output increases from 24.9 to 26.2 percent. This decreases the real price of rental housing services as the stock of rental housing increases, which makes renters better off. ...

Our results indicate that such a reform would generate significant overall macroeconomic improvement in both the short and long runs, reflecting the labor supply and savings responses to lower overall tax rates on labor income and the elimination of the taxation of normal returns to capital income (a marginal effective tax rate of zero on the income earned by new investment). In particular, the model simulation results indicate that GDP would increase by 3.8 percent in the long run, reflecting a 2.9 percent [increase] in labor supply and a 5.3 [percent] increase in overall investment. However, the implementation of such a reform would raise some significant transitional issues, especially in the housing sector. These can be grouped into effects on the owner-occupied housing sector and the rental housing sector. ...

[T]he simulations suggest that the prices of existing homes would fall by 10.1 percent in the year of enactment of H.R. 25, although this effect would dissipate rather quickly, with declines of only 2.6 percent two years after reform, 1.2 percent five years after enactment, and no effect in the long run. ...

[T]he real value of existing rental housing would decline by 25.7 percent in the year of enactment of reform, and this decline would remain roughly constant, with a long run decline of 25.8 percent. These declines arise because investments in rental housing were made on the assumption of continued depreciation deductions under the income tax, but these deductions disappear under the sales tax while rents are fully taxed under the new regime.

Sunday, October 30, 2011

Author Estimates Underground Economy Worldwide at $10 Trillion a Year

There is a story about the new book, Stealth of Nations by Robert Neuwirth, here:

More than half of all employed people worldwide work off the books. And that number is expected to climb over the next decade.

"Estimates are that the informal economy around the world is [worth] about $10 trillion a year," says journalist Robert Neuwirth. "That's an astounding figure because what it means, basically, is that if the informal economy was combined in one country, it would be the second-largest economy on Earth, rivaling the United States economy."

At a tax rate of 25 percent, which is what the US budget, if we had one, effectively requires because we are spending $3.8 trillion per year in a $15 trillion economy, worldwide we are talking lost tax revenue of $2.5 trillion. 

Saturday, October 29, 2011

Herman Cain on Trade: Imports Are Subject To OUR Domestic Taxation

I remain puzzled by this: still as of this moment maybe only one guy has really sounded the alarms about Herman Cain on free trade to its devotees, namely Jerry Bowyer at Forbes.

Larry Kudlow talks up Herman Cain like crazy every Saturday on his radio show, and I've been listening for weeks while all the other candidates come out and talk with him about flat tax proposals of their own, and still none of Kudlow's free-trade peeps seem to have picked up on it, nor has Kudlow for that matter.

While they do not take Herman seriously enough to read even Herman's own description of his 999 Plan, however, the money has started to pour in, $5 million in October alone, most of it on-line, according to Robert Costa at National Review here.

And I don't think any of Herman's Republican challengers has brought it up either. They'll criticise one or another feature of the 999 Plan as too complicated, unrealistic, unpopular or unworkable, but I still do not hear any of them criticise Herman as a protectionist.

But Herman makes no secret of his playing-field-leveling plans.

As shown here:

Exports leave our shores without the Business Tax [9 percent] or the Sales Tax [9 percent] embedded in their cost, making them world class [!] competitive. Imports are subject to the same taxation as domestically produced goods, leveling the playing field.

In other words, imports will get slapped with a 9 percent business tax and with the 9 percent sales tax just as domestic goods are in order to protect our market from unfairly subsidized products designed to undercut our prices, capture market share and drive US competitors out of action on our own soil.


Herman Cain is running a stealth fair trade campaign under cover of a Fair Tax program, designed in part obviously to appeal to Democrat voters in union shops.

It tells you a lot about the guy, especially since he's the only Republican running who is serious about overturning the income tax itself. All the rest of them accept the assault on the constitution it represents.

Herman is a wily devil.


Nancy Pelosi Sandbags Maria Bartiromo: Quibbles About ObamaCare Waivers For Small Companies When Vast Majority Go To Union Members And Employees of Insurers

The video of Rep. Nancy Pelosi protesting that most of the 1,800 ObamaCare waivers have gone to small companies, provoking Maria Bartiromo to complain the waiver for McDonald's wasn't for a small company, is here.

Waivers shown on the official government lists, found here, tell a revealing tale, however, which Nancy Pelosi obviously didn't want to talk about.

The first few lists show a wide variety of businesses and plans, many indeed with relatively few employees, if by few you mean under 1,000 covered employees. But I counted alone 20 firms I recognized by name with over 1,000 employees and up to 50,000. Like Dish Network, Cracker Barrel, Ruby Tuesday, Meijer, Western Growers, Grimmway Enterprises, Adecco, Crate and Barrel, and the NFL! These lists all told account for over 600,000 such employees.

But if you examine the rest of the lists, you'll find about 1.7 million union members given waivers and nearly 1 million employees of the health insurers themselves.

Occupy Wall Street Protesters in Madison Really Are Jerk-Offs

You always knew they were a bunch of wankers:

A neighboring hotel's staff alleged voiced concerns about having to recently escort hotel employees to and from bus stops late at night due to inappropriate behavior, such as public masturbation, from street protesters.

Reported here.

The Republican Establishment Has Taken the Tea Party to the Cleaners

So said Lawrence Hunter, here, of the debt-ceiling fiasco:

[T]he problem with the direction the country is headed is the Republican Establishment, which has made a long career out of snookering and hoodwinking conservatives into believing the Republican Party is the party of small government, low taxes, freedom and prosperity at home, and peace abroad.  Republicans are, in fact, the very opposite.  To paraphrase Pogo, “We Republicans have met the enemy and he is us.”

Republicans are the stern, conservative side of the Janus Faced welfare state at home and empire abroad.  The GOP is Twiddle Dum to the Democratic Twiddle Dee.  And dear Tea Partiers, they just took you to the cleaners the same way they have been taking the American people to the cleaners since FDR rolled around the Oval Office. Welcome to the Nation’s Capital. ...

Until the Republican Establishment is replaced to a man (there are no women) with serious people devoted to restoring America, rather than just getting themselves re-elected time and again, no progress will be made toward winning this epic struggle for freedom, peace and prosperity.

Compare Rush Limbaugh here on October 13th, who keeps maintaining that the Tea Party must take over the Republican Party, but who on issues running the gamut from bank bailouts to taxes and tariffs to George W. Bush to spending to free trade adopts the alloyed rhetoric of the very establishment he decries:

The Tea Party is under assault from the Democrats and the Republican elite, and now the battle has been brought full fore in the pages of the New York Times Magazine.

There's some quotes from various people in this story.  Bill Kristol on the Tea Party:  "It's an infantile form of conservatism."  Scott Reed, veteran strategist and lobbyist:  "I think it's waning now," talking to the reporter of the story about the Tea Party's influence.  "Party leaders have managed to bleed some of the anti-establishment intensity out of the movement, Reed said, by slyly embracing Tea Party sympathizers in Congress, rather than treating them as 'those people.' Did he mean to say that the party was slowly co-opting the Tea Partiers? 'Trying to,' Reed said. 'And that’s the secret to politics: trying to control a segment of people without those people recognizing that you’re trying to control them.'"  This is a Republican consultant talking about how to neutralize the Tea Party.

John Feehery, a lobbyist who was once a senior House aide I think to Denny Hastert, is also quoted.  "The thing I get a kick out of is these Tea Party people calling me a RINO. No, guys, I've been a Republican all along. You go off on your own little world and then come back and say it's your party. Well, this ain't your party."

Rush should spend more time reading Forbes and less time The New York Times.

The Constitution Was in a Shambles Long Before Obama Came on the Scene

So says Lawrence Hunter here, who thinks the expedient of a Bill of Rights was only a parchment barrier to begin with:

The Founders gave us The War Power Clause of the Constitution vesting the exclusive power to declare war with Congress. Politicians replaced it with The War Powers Resolution and presidential wars of whim.

The Founders gave us myriad constitutional restrictions on the powers of the federal government both explicit and implicit. Politicians and judges replaced them with a series of court rulings, on the Commerce Clause for example, so sweeping in their expansion of the federal government’s regulatory powers beyond the Constitution’s writ that, in the words of Cornell Law Professor William Jacobson, “The Commerce Clause has proven voracious enough to swallow the rest of the Constitution. Any scraps left over will be devoured by the Due Process and Equal Protection clauses of the 14th Amendment.”

The Founders gave us habeas corpus and the Fourth Amendment, protecting against arbitrary arrest and guaranteeing that people would be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures. Politicians replaced them with The Patriot Act and the Homeland Police State, preventative detention, rendition, unauthorized wiretaps, secret searches and seizures and TSA.

The Founders gave us the Fifth Amendment, guaranteeing the people protection against over-reaching police and prosecutors, forced self-incrimination and double jeopardy, and against laws that would confiscate private property without due process and just compensation. Courts and Politicians gave us a series of rulings and legislation allowing the police, prosecutors and judges to act arbitrarily in the name of the general welfare, public safety and national security without regard to the cherished Rights of Englishmen that were passed down to us through the United States Constitution.

The Founders gave us the Eighth Amendment protecting the people against the imposition of excessive fines and infliction of cruel and unusual punishments. PB&J gave us RICO, prosecutorial charge stacking, extortionate plea bargaining, lawless and pathological judicial/prosecutorial misconduct, GITMO and water boarding.

Vote For Cain To Prove You're Not Stupid

(available here)

Cain v. Unable 2012

Beat Obama With a Cain!

Herman Cain for President: A Pizza in Every Oven

(as seen here)

'Only We Can Call Each Other Cracker'

(as seen here)

Friday, October 28, 2011

I'm Nominating This One For Blown Prediction of 2011

As seen here:

Retail consultancy Customer Growth Partners expects that American consumers have worked to put their finances in order and are ready to spend. Their forecast calls for holiday sales in the November to December period to rise 6.5 percent from last year to $554 billion.

That's twice consensus forecasts, which have put holiday sales growth between 2.5 percent to 3 percent. It also is the fastest pace for retail sales growth since 2004, when holiday sales rose 6.9 percent.

Why is this a crazy prediction? Because Whirlpool announced today that it is laying off 5,000 as consumers are unable to buy major appliances.

And because of this, reported here in the same place, also today:

The total compensation paid by employers in the third quarter rose by the smallest amount since at least 1982 as employees paid for a greater portion of their health care and companies continued to sit on their record hoards of cash. ...

Meanwhile, the savings rate plummeted to 3.6 percent, the lowest in four years, according to separate data released Friday from the Commerce Department. That’s down from 5.3 percent in June.

“Spending more when you’re taking home less and cutting into savings — That’s not the best recipe for stronger spending in the near term," Jonathan Basile, an economist for Credit Suisse, wrote in a note to clients.

Consumers remain under stress just to pay the bills, and are reducing savings to cope. That is not a recipe for a smashing holiday spending season.

The Federal Reserve is Deliberately Robbing Widows, Orphans and Retired People

So says Robert Higgs, here:

Given that the Fed’s official policy is to drive all interest rates to near zero, one may conclude that the Fed seeks to impoverish the widows, orphans, retired people, and all other financially untutored people who rely on interest earnings to support themselves in their old age or adversity. Can a crueller official policy be imagined, short of grinding up these unfortunate souls to make pet food or fertilizer?

The politicians constantly bark about their solicitude for those who are helpless and in difficulty through no fault of their own. Yet, the scores of millions of people who saved money to support themselves in old age now find themselves progressively robbed by the very officials who purport to be their protectors.

Marines Embrace Occupy Wall Street, Threaten Tipping Point.

Because one of their own got injured, not on substantive grounds.

Story here:

So I ask all of you, can you too sense the tipping point? When will enough be enough? If not now, when? I feel the problem is that the average Joe citizen is ignorant and comfortable. These, in addition to selfishness have become the standard for the majority of the population. As long as people are comfortable they remain silent. Well, I’m really . . . uncomfortable and I’m sick of seeing this . . . happening. The Occupy protests that are going on are our first glimmer of hope.

Probably never heard of the Tea Party, or Oathkeepers, or the November 2010 elections.

Jarheads. Hard on the outside, empty on the inside.

Federal Revenues Came From Tariffs and Land Sales in First Half of 1800s, From Tariffs and Excises in Second Half

A largely forgotten fact when discussing the history and meaning of US tax policy.

Gary M. Anderson and Dolores T. Martin examined the role of land sales in considerable detail in 1987 here.

I provide a few excerpts:

[F]rom 1800 until the beginning of the Civil War, proceeds from the sale of public lands constituted a major source of revenue for the federal government, accounting for 48 percent of net receipts in 1836. ...

After 1820, receipts from land sales became a major component of federal revenues. During 1836, for example, receipts from land sales exceeded 48 percent of total federal revenues. From 1820 to 1860, receipts from land sales averaged 10.8 percent of total federal receipts per annum.

From the program’s beginnings in 1796 until 1862, privatization of the public lands via sales to the private sector scored several major successes. By 1862, acreage equaling about 67 percent of the public domain in 1802 had been sold, and land sale receipts provided a significant, although fluctuating, fraction of total federal revenues. ...

Before the Civil War, proceeds from land sales and tariff revenues were the two major components in federal receipts. The proceeds from these different sources were highly substitutable; one dollar of revenue from land sales could replace one dollar from a tariff and vice versa. There is strong evidence to suggest that this substitutability may have been a significant factor in the demise of the system of revenue-maximizing land sales.

Of course the rise in reliance on excises from 1862 onwards could also explain why reliance on land sales declined to almost nothing by century's end, quite apart from the so-called rent-seeking aspects of tariff politics which the authors explore. But they seem not to notice the role of excises.

Excises on alcohol and tobacco ramp up dramatically to $100 million to $150 million per year from 1862, from next to nothing beforehand, while tariffs move up and down around a trendline of $200 million in revenues per year starting also at the same time, having been in the $50 million and below range per year for most of the century prior to the War Between the States.

The importance of alcohol, and tobacco, in the social and economic history of America should not be underestimated, as Daniel Okrent's important recent book on Prohibition has reminded us.

Gotta go. Time to light up and have a drink!

Thursday, October 27, 2011

Elizabeth Warren is Going After the 'Hick Vote' in Massachusetts

I'll bet you're surprised they had any hicks in Massachusetts. I know I am.

She's gonna have to let her hair down and get a tat, though. And maybe a Harley to chase Scott Brown around in his pickemuptruck.

The story is in The Boston Herald, here.

Cain's 999 Plan Would Produce Faster Economic Growth Than Perry or Romney

So says Louis Woodhill for Forbes, here:

Comparing the Republican candidates’ tax plans as written, Cain’s “9-9-9” proposal is the best, because its 9% (effective) corporate income tax rate would produce faster economic growth than Perry’s 20% rate or Romney’s 25% levy.  Cain’s plan has a number of problems, but these could be fixed if he were to give up on the notion that it should be “revenue neutral”.

Given that Cain has the best plan for economic growth, it is not surprising that the latest polls show him leading the Republican pack.

This having been said, Cain’s 9-9-9 plan is not as good as the FairTax, which Cain himself says is his ultimate goal.  The FairTax , which taxes only consumption spending, would yield the fastest economic growth of any tax system.  The FairTax plan has also had the benefit of years of analysis and refinement to minimize the distributional inequities that would attend any kind of fundamental tax reform.

Mr. Cain should start emphasizing that economic growth is much more important than revenue neutrality, and he should promise to refine his plan so that no income group ends up having to pay much more than they would under the current system.  If he does so, he, like fundamental tax reform, will be unstoppable.

Cain's 999 Plan Beats Perry's Flat Tax

So says Diana Furchtgott-Roth here:

The Cain plan gets rid of payroll taxes, about $15,000 on an income of $100,000, whereas the Perry plan does not. So under the Perry plan, our hypothetical family would pay $25,000, compared with $14,970 under the Cain plan. That's an extra $10,000.

If Cain could get rid of the payroll tax as well as keep tax rates to 9 percent, many taxpayers would gain substantially. But he has not said how he will replace the payroll tax revenues or transition to private accounts.

The S&P500 Still Has A Date With 950

So says James Kostohryz, here:

Europe will be back to square one and descend toward a terminal crisis – ostensibly the same crisis -- within a matter of weeks or months. Global equity markets will collapse, and the S and P 500 will test and possibly penetrate recent lows of around 1,075 on the way to a date with 950-1,020.

Americans Today Pay An Average Gasoline Consumption Tax of 10.2 Percent to States

The current average state excise and tax per gallon of gasoline is 30.4 cents, according to the American Petroleum Institute, here.

The federal excise is 18.4 cents.

Today's national average price per gallon is $3.464, as shown here.

This means that today's national average base price per gallon is $2.976 per gallon.

That yields an average state excise of 10.2 percent at today's base price, and an average federal excise of 6.2 percent. 

GDP, Q3 2011 First Report, at 2.5 Percent; Personal Savings Drop Big

See the full pdf at the Bureau of Economic Statistics, here.

Personal savings fell a full percentage point, or $116 billion, while personal disposable income went up $17 billion, matching exactly the increase in personal outlays of $133 billion.

Get it? People are saving less and spending any increases just to get by because of . . . increasing prices.

A falling savings rate, now at 4.1 percent, is woefully inadequate. A person saving at that rate making $50,000 per year would need over 12 years to save just 6 months' expenses.

"Bear market rallies tend to end on good news."

"What more good news is coming?"

-- Mish, here

Wednesday, October 26, 2011

German Leftist Gregor Gysi Savages The Two-Faced Angela Merkel

Ambrose Evans-Pritchard had the quotations, here:

Die Linke ('Left') leader Gregor Gysi was electrifying. "It is the arrogance of power," he began, and never let go.

"Every week you come up with a different story about this crisis."

"We were told there would be no leverage and you have reversed everything in a matter of weeks. Now we learn that the 20pc loss will fall entirely on taxpayers. They alone will pay. That is the decision you are taking."

"Why don’t you tell German taxpayers the truth? They are being asked to pay the losses for French banks."

Those domestick traitors, bosom-thieves,
Whom custom hath call'd wives;
the readiest helps
To betray the heady husbands,
rob the easy.

-- Ben Jonson

Dick Morris Loves The 999 Plan, But Slaughters The Arithmetic

Trillions. Billions. They're all the same, right?

He was much better on Hannity today, where he nailed the consumption tax's grip on the neck of big government.

Not very many people have been making that point, that I know of, except me.

Explaining Property Taxes Then and Now

Critical listeners to recent remarks I made here on The Newsmaker Show with Kevin Doran will have wished that I had done a better job of explaining property taxes in the late 19th century and how their burden on property owners helped create the conditions which led to the tax reform which gave us the Income Tax in 1913.

So do I. Regrettably one can't say everything one needs to when trying to explain something else, especially like Herman Cain's 999 Plan.

If anyone gets the impression that I intended to say that the federal government routinely and directly taxed homeowners then, for example, in the same way homeowners are so taxed today on their property, that would be a mistake, but one which could easily be inferred. The federal government did do that sort of thing three times in the 19th century, but only for very brief periods and only to fund wars: in 1798, 1812 and 1861. Which is not to say there weren't other attempts, notable in the Pollock decision in 1895.

To a considerable extent, however, I have found that the terms "property tax," "excise," "tariff," "ad valorem" and the like get used interchangeably, and confusingly, in discussions about taxes both then and now. We would be better served if we were all more precise in these matters, but even supposed experts talk about this period with such imprecision sometimes that it is difficult to know exactly what people really do mean.

For example, "ad valorem" today gets used, as at, as a category under which to list excise taxes, tariffs, property taxes, etc., as opposed to income taxes, corporate taxes and social insurance taxes. In truth, however, its specific meaning has been more complicated than that.

From that characterization would not know that tax historians often distinguish personal property taxes in the first half of the 19th century as "in rem" from real property taxes in the second half as "ad valorem."

In the case of the former, as in 1798, slaves, for example, were taxed for war preparations with France as personal property. It didn't matter, however, how much one had invested to purchase the slave. Each one was simply taxed at 50 cents. Similarly a tax assessor would count the windows on your house, your horses, your cows, chickens etc. (unless you hid them well) and total them up by kind and assess the appropriate tax, which inhered in the thing, "in rem," not in the value, "ad valorem."

The latter is how the federal government in the 19th century was able to get around the onerous requirements of apportioning direct taxation of property equally according to state population. Instead of the arduous task of trying to tax the whole general sum of an individual's wealth in every state on an equal basis, the value of beer, wine and liquor, for example, produced anywhere could thereby be taxed everywhere the same, proportionally according to its value. In this way there was no need to divide the necessary revenue to be raised according to the population of the individual state, since the basis was the same everywhere beer was sold.

Such taxation is often called an excise, generally understood to fall on domestic produce. We still pay excises to this day, for example everytime we fill up the gas tank, 18 cents on the gallon to the feds. In truth excises are just a special kind of sales tax. A tariff is similar, but taxes foreign imports.

When it comes to the problems of farmers in the late 19th century, who eventually made league with Prohibitionists to install the Income Tax in 1913, theirs was a two-fold problem. Not only did the cost of financing state government fall heavily on them because of property taxation in the state in which they lived, federal excises on their produce represented a double "property tax" whammy. Think tobacco excises.

Viewed from this perspective, government at all levels, it seemed, got them coming and going.

To his credit, Herman Cain is trying to imagine a world in which government gets it for a change, instead of the taxpayer. His way of trying to make that happen is to play human desire to consume off of human desire to avoid paying taxes, by making what we consume each and every day the scene of a skirmish in the battle for limited government, which cannot exist without self-restraint.

Tuesday, October 25, 2011

The 1913 Income Tax Enabled Stark Increases to Government Revenues to Pay for WWI

Revenues went up by a factor of 6 in three short years, and dramatically reversed federal reliance on tariffs, excises and other taxes of one kind or another to finance the preponderance of government spending. Note the overnight reversal between 1917 and 1918 in the income tax share of the federal revenue. The analogy today would be like going from $3 trillion in revenues to $18 trillion.

Excises on alcohol started disappearing in 1920 with enactment of Prohibition. Such taxes had routinely accounted for 20-40 percent of all federal revenues from the War Between The States until that time. Over the course of a decade from 1920 through 1932 alcohol excises dropped in the end by a factor of 10, but instantly surpassed their 1920 levels with Repeal in 1933, a year in which everyone desperately needed a drink.

By 1875 One Third of Federal Revenues Came From Taxes on Alcohol

According to Daniel Okrent's Last Call: The Rise and Fall of Prohibition:

After lapsing in 1802, the alcohol excise was reimposed under James Madison to pay for the War of 1812, suspended in 1817, and then brought back by Abraham Lincoln in 1862 to finance the Civil War. This time the tax did not fade away . . . For most of the next thirty years the impost on alcohol annually provided at least 20 percent of all federal revenue, and in some years more than 40 percent. By the time the excise was doubled to cover the cost of the Spanish-American War, the brewers had finally realized that the tax they had once so strongly opposed might be their salvation, and they patriotically (and shamelessly) declared that they had financed 40 percent of the war's cost.

By way of comparison, tariffs in 1875 funded 55 percent of the federal budget. Seven years after the passage of the Income Tax, tariffs in 1920 funded barely 13 percent of the federal budget.

The significance of Daniel Okrent's recent history of Prohibition is not in the least that it shows how much federal government had depended on liquor taxes in addition to tariffs and property taxes to fund itself.

The perfidy of Prohibition is that it was brought to us by the same folks who gave us the Income Tax in the first place. They knew something would be needed to replace the federal revenue which would be lost when alcohol sales were finally banned. But when Prohibition got the boot, the Income Tax did not.

So the flipside to the Temperance movement is its Intemperance toward the original intent of the constitution, which was to prohibit direct taxation without apportionment by population in favor of tariffs, excises and ad valorem taxes.

Before The Income Tax, Federal Tariffs and Real Estate Taxes Punished Farmers

From a helpful history of the estate tax from the IRS, here (emphases added), which is unaware of the significant federal revenue contributed by alcohol taxes (between 30 and 40 percent):

The War Revenue Act of 1898

Throughout the last half of the 19th century, the industrial revolution brought about profound changes in the U.S. economy. Industry replaced agriculture as the primary source of wealth and political power in the United States. Tariffs and real estate taxes had traditionally been the primary sources of Federal revenue, both of which fell disproportionately on farmers, leaving the wealth of industrialists relatively untouched. Many social reformers advocated taxes on the wealthy as a way of forcing the wealthy to pay their fair share, while opponents argued that such taxes would destroy incentives to accumulate wealth and stunt the growth of capital markets.

Against this backdrop, a Federal legacy tax was proposed in 1898 as a means to raise revenue for the Spanish-American War. Unlike the two previous Federal death taxes levied in times of war, the 1898 tax proposal provoked heated debate. Despite strong opposition, the legacy tax was made law. Although called a legacy tax, it was a duty on the estate itself, not on its beneficiaries, and served as a precursor to the present Federal estate tax. Tax rates ranged from 0.75 percent to 15 percent, depending both on the size of the estate and on the relationship of a legatee to the decedent. Only personal property was subject to taxation. A $10,000 exemption was provided to exclude small estates from the tax; bequests to the surviving spouse also were excluded. In 1901, certain gifts were exempted from tax, including gifts to charitable, religious, literary, and educational organizations and gifts to organizations dedicated to the encouragement of the arts and the prevention of cruelty to children. The end of the Spanish-American War came in 1902, and the tax was repealed later that year. Although short-lived, the tax raised about $14.1 million. [About 2.5 percent of the federal budget].

Another Way to Spell 'Hyprocrite' is 'TARP Republican'

"I redefined the Republican Party."

"I've abandoned free-market principles to save the free-market system."

Sunday, October 23, 2011

America: Phoenix Rising From the Ashes

From Ambrose Evans-Pritchard, here, not in the least because our own energy supplies and manufacturing are coming back, on top of all this:

The global depression will grind on as much of the Western world tightens fiscal policy and slowly purges debt, and as China deflates its credit bubble.

Yet America retains a pack of trump cards, and not just in sixteen of the world’s top twenty universities.

It is almost the only economic power with a fertility rate above 2.0 - and therefore the ability to outgrow debt - in sharp contrast to the demographic decay awaiting Japan, China, Korea, Germany, Italy, and Russia.

Europe's EMU soap opera has shown why it matters that America is a genuine nation, forged by shared language and the ancestral chords of memory over two centuries, with institutions that ultimately work and a real central bank able to back-stop the system.

The 21st Century may be American after all, just like the last.

The Velocity of Money is Retarded by Government

Especially by rules governing the timing of transactions, and also by rules distinguishing one kind from another.

Both should be voided in tax reform, equalizing them in order to establish a level playing field between investment gain and wage gain.

Capital gains held less than a year vs. more than a year? Out. Tax all capital gains at one low rate, regardless of time held. To do otherwise inhibits price discovery.

Capital gains on real estate held less than two years vs. two or more? Out. Tax all such gains at the same low rate as any other capital gain, regardless of time held.

Rates different for unearned capital gains from ordinary earned income? This distinction distorts the one in favor of the other. Both kinds should be taxed at the same low rate in order to discover which makes more sense to the investor at the time, based on market conditions. Government should not interfere with the conditions.

Rep. Newt Gingrich Gets Blame For Housing Legislation Which Led To Bubble

Rep. Newt Gingrich was instrumental in turning the American dream into the American nightmare.

Under Gingrich's leadership in the US House as Speaker he spearheaded the drive to turn our homes into a mere commodity which could be flipped over and over again free of capital gains tax. And as everyone now knows only too well, commodities go up, and commodities go down.

From his Wikipedia entry:

In 1997 President Clinton signed into effect the Taxpayer Relief Act of 1997, which included the largest capital gains tax cut in U.S. history. Under the act, the profits on the sale of a personal residence ($500,000 for married couples, $250,000 for singles) were exempted if lived in for at least 2 years over the last 5. (This had previously been limited to a $125,000 once-in-a-lifetime exemption for those over 55.) There were also reductions in a number of other taxes on investment gains. Additionally, the act raised the value of inherited estates and gifts that could be sheltered from taxation. Gingrich has been credited with creating the agenda for the reduction in capital gains tax, especially in the "Contract with America", which set out to balance the budget and implement decreases in estate and capital gains tax. Some Republicans felt that the compromise reached with Clinton on the budget and tax act was inadequate, however Gingrich has stated that the tax cuts were a significant accomplishment for the Republican Congress in the face of opposition from the Clinton administration.

Look what happened to housing in 1997 after the legislation became law according to the Shiller index:

After four decades of relative price stability in real terms, the dramatic tax change Gingrich championed helped develop one of the most notable bubbles in American history, as well as a banking crisis and unemployment the likes of which we haven't seen since the 1930s.

Whether it's Herman Cain's 999 Plan or a Flat Income Tax, The Current Code Must Go

So says Steve Forbes, here, who reminds us why that is:

The federal income tax code and all its attendant rules and regulations -- almost 10 million words and rising.

The code has been changed 14,000 times since 1986; last year alone there were 500 changes. The cost of compliance is horrific. The IRS itself calculates that we spend more than 6 billion hours a year filling out tax forms, the equivalent of almost 3 million full-time jobs. The Tax Foundation calculates that by 2015 annual compliance will be costing the American people some $483 billion a year.

Saturday, October 22, 2011

Herman Cain's So-Called Abortion Flip Was Nothing of the Kind: He Clearly Endorsed Private Choice For Adoption, Not Abortion.

What it was was a poor attempt to entrap the still too trusting Herman Cain to make it appear that his position on abortion is incoherent.

The transcript of the controversial interchange shows Herman immediately grasped Piers Morgan's attempt to bait and switch when Herman TWICE interjects the comment "you're mixing two things," namely "bringing up the baby as her own" and "abortion."

The media and the left, like Ed Kilgore of The New Republic here, are hoping that if they repeat their lie enough that we'll all believe it.

Piers Morgan starts talking about abortion, and suddenly introduces a hypothetical about raising a child who was conceived in a rape "as her own":

MORGAN: Abortion. What's your view of abortion?

CAIN: I believe that life begins at conception. And abortion under no circumstances. And here's why --

MORGAN: No circumstances?"

CAIN: No circumstances.

MORGAN: Because many of your fellow candidates -- some of them qualify that.

CAIN: They qualify but --

MORGAN: Rape and incest.

CAIN: Rape and incest.

MORGAN: Are you honestly saying -- again, it's a tricky question, I know.

CAIN: Ask the tricky question.

MORGAN: But you've had children, grandchildren. If one of your female children, grand children was raped, you would honestly want her to bring up that baby as her own?

CAIN: You're mixing two things here, Piers?


CAIN: You're mixing --

MORGAN: That's what it comes down to.

CAIN: No, it comes down to it's not the government's role or anybody else's role to make that decision. Secondly, if you look at the statistical incidents, you're not talking about that big a number. So what I'm saying is it ultimately gets down to a choice that that family or that mother has to make.

Not me as president, not some politician, not a bureaucrat. It gets down to that family. And whatever they decide, they decide. I shouldn't have to tell them what decision to make for such a sensitive issue.

MORGAN: By expressing the view that you expressed, you are effectively -- you might be president. You can't hide behind now the mask, if you don't mind me saying, of being the pizza guy. You might be the president of United States of America. So your views on these things become exponentially massively more important. They become a directive to the nation.

CAIN: No they don't. I can have an opinion on an issue without it being a directive on the nation. The government shouldn't be trying to tell people everything to do, especially when it comes to social decisions that they need to make.

MORGAN: That's a very interesting departure --

CAIN: Yes.

MORGAN: -- from the normal politics.

CAIN: Exactly.

There is absolutely nothing controversial here about Herman Cain saying a president has no business telling people to raise such a child as their own.

And Rick Santorum should be ashamed of himself for piling on.

Incidentally, Herman is correct about the relative rarity of the adoption question: statistics show just under 250,000 total children per year waiting to be adopted and adopted, in about equal numbers.

That's because our advanced civilization murders about 1,210,000 unborn children every year.

Gaddafi in the Meat Locker

"Beauty, wit, high birth, desert in service,
Love, friendship, charity are subject all
To envious and calumniating time."

Muammar Gaddafi's Fingers

"If I was an Arab dictator and a western politician shook me warmly by the hand, I would count my fingers."

-- Simon Jenkins, The UK Guardian, 22 Feb. 2011, here.

Except the two-faced meddling hypocrites of the west had plenty of company:

China's Submarine Force To Remain Mostly Defensive, Regional and Smaller

So says David Axe, here:

The Song submarine’s surprise appearance alongside the USS Kitty Hawk helped stoke fears of Chinese undersea dominance that were further fuelled by a brief surge in PLAN sub acquisition. Today, with more US and allied submarines entering service and fewer Chinese boats on the slipways, those fears – and the policies and assumptions they produced – warrant reconsideration. China isn’t building a world-class, globally-deploying submarine force. It’s building a mostly defensive, regional undersea force – and a smaller one than once predicted.

The "incident" off the California coast almost a year ago does not warrant even a mention in this re-assessment of China's ability to project submarine power.

Friday, October 21, 2011

Larry Kudlow Likes Herman Cain's 999 Plan

Former Treasury hands Gary and Aldona Robbins priced out the Cain plan on a static basis and discovered it to be revenue neutral. Essentially they found a $26 trillion tax base yielding $2.3 trillion in revenue for a 9.1 percent overall rate. Hence, 9-9-9.

In essence, the Cain plan combines the flat tax (with its single marginal rate) and the fair tax (which uses the national sales tax). I don’t know if this is really possible. But in terms of first principles, throwing out the tax code, lowering marginal tax rates, getting rid of the carve-outs and deductions that make the current code impossible to understand, and providing an economic-growth tonic to heal our current funk, it makes a lot of sense.

That Herman Cain is rising in the polls is no surprise.

Recalculating Herman Cain's 999 Plan For Calendar Year 2008

Herman Cain's 999 Plan continues to get tweaked by none other than Herman Cain himself, in response to criticisms and questions about it in the media in the wake of recent Republican presidential debates.

Some of the additional information he is supplying looks to have been latent and just previously unexplained, while other information has the feel of modification. In any event, the unsettling thing about this is that the 999 Plan appears to be something of a work in progress, not a finished, fully vetted proposal, which makes it less sellable politically.

One question which seems so important to the left, for obvious reasons, has been the plan's ability to fund the Leviathan State's appetite.

Previously it seemed to me that the plan was woefully inadequate to the task. But some of the additional information that has come out makes me more sanguine, if that's the right word as the taxpayer stares into the maw of the bloodthirsty Beast.

For example, with respect to the 9 percent corporate tax, it turns out that, for reasons which I still do not understand, business' cost of labor is no longer deductible for tax purposes under the plan. So for 2008 when corporate profits posted as $1.25 trillion, you theoretically must add back in net compensation of nearly $6.2 trillion. I think. A 9 percent tax on $7.45 trillion now yields a much higher corporate contribution to federal revenue for 2008 of $671 billion.

Combine that with a 9 percent tax on adjusted gross income of $8.5 trillion equaling $765 billion and with a 9 percent tax on personal consumption expenditures of approximately $10.5 trillion equaling $945 billion, the resulting sum is $2.38 trillion, just shy of the actual collected in 2008 under the current system, which was $2.5 trillion.

And if I read the language of the 999 Plan correctly, there will also be substantial tariff revenue from imports designed to level the playing field between them and our own exports. Imports in 2008 of $2.5 trillion taxed at 9 percent would yield an additional $225 billion in revenue, more than enough to cover the $120 billion shortfall. Presumably some imports would not be so taxed due to pre-existing trade agreements, but the potential is obviously there for far more revenue from tariffs than America presently collects.

Mr. Cain is also now stating that his plan is undecided about how to remove the regressivity of the sales tax on the poorest Americans, but that it will. This will, of course, reduce the revenue described above, as will the income tax deduction for charitable contributions.

OWS Protesters Are So Full Of It They're Crapping On Manhattan Doorsteps

America's finest.

Story here.

Thursday, October 20, 2011

'For now the Devil, that told me I did well, Says that this deed is chronicled in hell.'

Democracies don't go to war against democracies, just against everyone else.

I'm With Hitch: Secret Scripts and 3D Glasses are Kooky and I Don't Want a President Who Believes In Them

If Rick Perry had any brains, he'd have said as much:

[W]e are fully entitled to ask Mitt Romney about the forces that influenced his political formation and—since he comes from a dynasty of his church, and spent much of his boyhood and manhood first as a missionary and then as a senior lay official—it is safe to assume that the influence is not small. Unless he is to succeed in his dreary plan to borrow from the playbook of his pain-in-the-ass predecessor Michael Dukakis, and make this an election about "competence not ideology," he should be asked to defend and explain himself, and his voluntary membership in one of the most egregious groups operating on American soil.

Read the whole thing here from Christopher Hitchens.

Newt Gingrich Admits Romney Got Idea of Individual Mandate for Massachusetts from Newt and The Heritage Foundation Conservative Think Tank

Story here at The New Republic.

It's episodes like this which just prove how few genuine conservatives exist in today's Republican Party.

But go ahead, sign up with Heritage anyway, you mind-numbed robots of Rush Limbaugh and Sean Hannity.

That's just one of the big reasons Rush has worked so hard to co-opt the Tea Party and prevent a third party challenge from developing.

Rush is thick as thieves with the enemy. 

Herman Cain Is The Loose Cannon On His Own Ship

Seen here in a story about his latest abortion answers:

“It seems that Cain is either constantly misunderstanding questions posed to him on what should be easy, fundamental issues, or he admits to having misspoke after it is pointed out that the position he has stated is not that of a conservative,” the Iowa Republican’s Craig Robinson wrote. “Herman Cain has been campaigning for over a year now, and with only about two months until people start voting in caucuses and primaries, I’m more confused about where Herman Cain stands than ever before.” 

Herman Cain's TARP Comments Now and Then Reveal That He Has No Clearly Defined Objection to Government Ownership of 'Private' Industry

In June 2011, here:

I studied the financial meltdown and concluded on my own that we needed to do something drastic, yes. When the concept of TARP was first presented to the public, I was willing to go along with it. But then when the administration started to implement it on a discretionary basis, picking winners and losers and also directing funds to General Motors and others that had nothing to do with the financial system, that's where I totally disagreed. 

We should -- the government should not be selecting winners and losers, and I don't believe in this concept of too big to fail. If they fail, the free market will figure out who's going to pick the up the pieces.

In October 2011 here:

CAIN: I have said before that we were in a crisis at the end of 2008 with this potential financial meltdown. I supported the concept of TARP, but then, when this administration used discretion and did a whole lot of things that the American people didn't like, I was then against it. So yes, and I'm owning up to that. 

Now, getting back to the gentleman's question in terms of what we need to do, we need to get government out of the way. It starts with making sure that we can boost this economy and then reform Dodd-Frank and reform a lot of these other regulations that have gotten in the way -- 

COOPER: Time. 

CAIN: -- and let the market do it just like Mitt has talked about.

So Herman's story now is that he is upset that winners and losers were picked under TARP by the Obama regime. Bailing out banks was OK. GM? Not so much.

To Herman, however, picking winners and losers just among the banks doesn't seem to matter, where TARP obviously was used to pick winners and losers in that industry. Just ask all the sound banks who've had to ante up advance FDIC insurance fund premiums to restore the depleted DIF used to help the failing and see how they feel about all the special treatment the big bad boys received at their expense.

Here is Herman just three weeks after passage of TARP in October of 2008, raising no objection whatsoever to the new strategy of picking winners in the banking industry:

[I]nstead of buying toxic mortgage-related assets of banks as originally proposed, the Treasury has changed tactics and will buy equity positions called preferred stocks, which gives us as taxpayers an ownership stake in their success for a limited period of time.

Herman is making things up as he goes on many issues, editing his positions as he becomes aware of the inconsistencies of his own statements.

Not surprising, but not very encouraging.

999 Plan Contains Protectionist Elements

Which to Jerry Bowyer, here, is just another reason to oppose the plan:

And I haven’t even mentioned the protectionist elements of the plan which would, for example, allow business to deduct expenditures for capital goods if they are purchased domestically, but not if they are purchased for abroad. That one alone would constitute a Smoot, a Hawley and a half a Perot in one fell swoop.

B.O. Finally Gets Gaddafi: "And Now [Obama's] An Assassin"

So Louis Farrakhan in May 2011, here:

"We voted for our brother Barack, a beautiful human being with a sweet heart, and now he's an assassin. They turned him into them."

So ends the undeclared, illegal war against Libya, which was only supposed to take a few days.


TSA VIPR Units Search Trucks at 5 Interstate Locations in Tennessee Tuesday 10/18/11

Whatever happened to probable cause?

The American fascist police state expands its operations, in the ever so co-operative Bible Belt.

Two bus stations were also targeted, as reported here.

Random searches of cars cannot be far behind.

Herman Cain on Social Security

Seen here:

"Increasing the retirement age for benefits" is "preposterous."

Herman Cain Clearly Considers Mormonism To Be Just Another Christian Denomination

In his own words in 2007, here:

The Baptists, Methodists, Catholics, Lutherans, Pentecostals, Mormons and a few other faiths have three things in common – they believe in Jesus Christ, that He is the Son of God and that He died and was resurrected for our sins.

So what's the problem?

The political pundits continue to try and make Mitt Romney's religious beliefs a big issue as he runs for the Republican presidential nomination. Different denominations of Christianity are just that – different denominations – which means different worship practices of the same fundamental Christian beliefs.

America: where what once was fringe becomes mainstream.

Wednesday, October 19, 2011

Louisiana Bans Cash In Transactions For 'Used' In Order To Establish Paper Trails For Law Enforcement

Story here.

"This note is legal tender for all debts, public and private" says the one dollar bill.

Just words.

Government just can't find enough ways to slow down the velocity of money.

Herman Cain Invites Every Family To Do Tax Arithmetic To Test His 999 Plan, But Only 17 Percent Do Their Own Taxes

Could they even if they wanted to?

So this story from earlier this year:

So given all the supremely personal acts that we have happily relinquished to software, why do 60 percent of Americans use a real live tax pro to do their taxes? TurboTax costs less than $100 for most people, and it’s probably a breeze compared with open enrollment. Yet only 21 percent of Americans use tax software. Nearly as many, 17 percent, use a pencil.

Tuesday, October 18, 2011

Herman Cain's 999 Plan Actually Taxes Income Three Times, Not Just Once

Most people who work get paychecks from businesses. Net compensation to about 150 million Americans in 2009 came to $5.9 trillion.

The businesses who pay all these people will no longer be able to deduct the cost of labor from their corporate taxes under the 999 plan, so business will pay a 9 percent tax on its cost of labor.

Once businesses pass through the wages, the workers now pay a 9 percent tax on this money which now becomes income to them, which, however, has already been taxed once at 9 percent as income to the businesses.

Whereupon, with what's left after being taxed twice, the workers now buy things in the marketplace from businesses and pay a 9 percent national sales tax without exception, thus exposing the same money to a third round of taxation.

Over the weekend Herman Cain has maintained here that his plan "is fair and neutral, taxing everything once and nothing twice."

On the contrary, much of the income is taxed three times.

Herman Cain Has a 999 Plan. Obama Just Has a 9 Plan, as in Unemployment.

So says Joseph Curl, here.

Jonathan Chait Sticks With Calumny

Even if Cain decided midstream to switch from business plan pseudo-candidate to actual candidate, it is difficult to believe that many of his putative supporters would actually pull the lever for him. Announcing one’s support for him is a statement, a finger in the eye of Obama and the liberals, not an indicator of a likely vote.

New York Yankees Beat Wall Street Bankers 124-28 in Cross Town Beat Down

So says Mark J. Perry, here:

Where's the outrage about "excessive" salaries for Yankees players, which have increased relative to average New York City salaries much more than salaries for NYC bankers?  What about an "Occupy Yankee Stadium" protest?