Barry Ritholtz Can't Take It That Fellow Liberal Bloomberg Blames Congress For '08 Meltdown

In The Washington Post, here.

In the end, I think this is because of two things. One, a bias toward liberalism, the finger prints of which are all over the current crisis, so Barry can't stand it when one of his own departs from his version of the accepted narrative and puts the blame on liberalism's institutional face. And two, a widespread intellectual failure affecting liberals, conservatives and independents alike, which conflates the free market and the banking sector:

The previous Big Lie — the discredited belief that free markets require no adult supervision — is the reason people have created a new false narrative.

The banks are beholden to a fiat currency mediated by a fiat central bank fed by a government printing press. They are by no means a private sector player, and haven't been since 1913. Banking isn't a free market, it does require adult supervision, and the taxpayers should be outraged by the on-going failure of it every goddamn Friday night. Congress willingly acceded to this failure in the 1990's under Clinton and the Republicans when they gave banks free reign over money creation. The Federal Reserve became beside the point. It only took a decade to implode.

To paraphrase Russell Kirk: Free markets aren't a failure, they just haven't been tried recently.

Off the Hook

Remove the taxpayer guarantee and put bankers personally on the hook, and that will change things for the better in a hurry. 

Seal Target Geronimo Insists bin Laden Was Not Murdered, Obama Blew Intel For Political Gain

Read all about it, here.

Famous Serial Monogamists of Conservatism

(source)

The Anti Heritage Foundation Line of the Day

"Heritage’s economic policies are reasonably free-market, at least when Democrats are in power."

-- Ryan Young, here 

The Broadest Tax Base Which Can Possibly Be Imagined Implies a Tax Rate of 6.2%

Herman Cain's 999 Plan is focusing attention on the perennially perplexing problem of taxation for the American electorate in 2012. His plan has brought questions about broadening the tax base for tax reform front and center, including: What tax base is large enough to generate adequate federal revenues? and: What rate of taxation is fair?

Herman's big idea is to scrap the entire tax code and start over with three new bases taxed at the same low rate for a temporary period of time, eventually transitioning the country permanently to just one of these bases, taxed at a much higher single rate.

His scheme is quite conventional in that it looks to the existing traditional bases of taxation with which we have been familiar for decades: corporations and individuals.

What is new, however, is the national sales tax, the base for which was fairly sizable in 2008 at $10.1 trillion in personal consumption expenditures [PCE], and running at almost $10.8 trillion annualized through August 2011.

Currently the overwhelming burden of taxation falls on the individual filer whose personal income is taxed in order to provide Social Insurance and Federal revenues, which in 2011 are currently running at an annualized rate of $2.3 trillion, as shown here by the Bureau of Economic Analysis. Corporations, excises and tariffs provide puny sums by comparison: less than $500 billion in 2008.

This means that in 2011, Herman Cain's ultimate idea of taxing consumption to replace current revenues of approximately $3 trillion would imply a national sales tax rate of 28 percent on $10.8 trillion in goods and services expenditures this year. That's a pretty hefty rate by comparison with present conditions.

Currently the personal income base on which we exact that $2.3 trillion in Social Insurance and Federal taxes is just over $13 trillion. This implies an overall tax rate of 18 percent. If personal income in that aggregate amount had to do all the pulling to generate the full $3 trillion in revenues, personal income would have to be taxed at a rate of 23 percent to do the same thing as the consumption tax. Not as high, but still much higher than the 9 percent Herman Cain has called for currently, if only temporarily, in deference to the God of the Bible who asked for just 10 percent from his chosen people.

By way of comparison, if there were some way to easily tax GDP, currently running at $15 trillion, the effective tax rate would have to be 20 percent.

So is there a tax base which is broader still, from which we can derive the necessary sums and get that rate even lower?

Given that people by definition receive income in consequence of the conduct of business of one kind or another (aside from gambling, prostitution and bank robbery), it seems reasonable to look at the size of the various tax bases available strictly from businesses, without whom none of the other tax bases would exist in the first place. If we really mean it when we say we want to tax income only once, we need to go to its source, and for nearly everyone in our society, that source is business.

Corporations in 2008 had total receipts of $28.5 trillion, 2.8 times the size of Herman Cain's PCE tax base. It would have taken a gross receipts tax of merely 10.5 percent on this sum to have generated $3 trillion in tax revenue in tax year 2008, a year when revenues were actually lower at $2.5 trillion. That implies a gross receipts tax of only 8.8 percent on corporations in 2008.

In such a world, there would be no more income taxes on individuals, no Social Security or Medicare taxes either, and no capital gains taxes nor taxes on investment income or savings of any kind, and government would not go wanting. Nor would business be constrained by other taxes and fees imposed on it if we were to throw out the current code and replace it with this simple levy.

But the base could be made broader still in order to lower the effective rate even more.

Add in partnerships, which had $5.9 trillion in total receipts in 2008. And S corporations, which had $6.1 trillion in total receipts in 2008. Both of these added to corporation total receipts yields a gargantuan tax base for 2008 of $40.5 trillion in gross receipts.

All of that could have been taxed at a mere 6.2 percent to meet the federal revenue of $2.5 trillion collected in 2008.

No more talk of a flat income tax, nor of a progressive income tax, nor of a consumption tax. No more compliance costs of $450 billion because of the current code. No more lost time equivalent to 3 million full time jobs.  Just one, low, simple, rate on business. That's it.

In addition to God, John Tamny might go for it, too:

"The answer as always is for the government to simply get out of the way. If it must tax corporations, its taxation should be blind in the way that justice is. A flat gross receipts tax would make all corporations equal before the IRS. That would ensure the most economic allocation of capital on the way to rational, market-driven growth."

Herman Cain's Consumption Tax Is Firmly Rooted In The Framers' Original Intent

Lawrence Hunter for Forbes provides an excellent primer on the Framers' argument for indirect taxation, which is to say taxation on consumption, showing how such taxation was chosen by them on purpose because it is by nature self-limiting, which is a necessary predicate to limited national government:

Hamilton’s exposition in Federalist #22 illustrates the sophistication of the theory of political economy that informed the original constitutional design, which gave rise to a constitutional pincer holding the national government firmly in check.  History has borne out the Framers’ expectations that taxes on consumption are to a large degree self-limiting, while direct taxes know far fewer limits.  In the case of the original Federal design, the self-limiting tendency of indirect taxes on consumption augmented the other arm of the constitutional pincer—limiting the national government solely to the exercise of delegated powers—to make unnecessary other specific constitutional limitations on the national government’s taxing and spending authority, i.e., explicit taxing, spending and borrowing limitations.

The whole thing, here, is must reading.

31 Percent of Occupy Wall Street Protesters Support Violence to Advance Agenda

Doug Schoen has the results of his survey, here, concluding that Occupy Wall Street is:

a group of engaged progressives who are disillusioned with the capitalist system and have a distinct activist orientation. Among the general public, by contrast, 41% of Americans self-identify as conservative, 36% as moderate, and only 21% as liberal.

Establishing a Motive for the Norway Shooter's Crimes

The motive appears to be a political response to left-wing anti-Semitism, if the details of the alleged shooter's biography reported widely are accurate.

The bombing in the land of Quisling looks like an elaborate diversion designed to provide cover for the real operation, which was to murder as many members as possible of the youth arm of the left-wing, anti-Israel Norwegian Labor Party, being groomed at their summer camp for future service:

The Workers' Youth League (Bokmål: Arbeidernes Ungdomsfylking, Nynorsk: Arbeidaranes Ungdomsfylking, or AUF) is the youth organization affiliated with the Norwegian Labour Party.

AUF was formed in April 1927, following the merger of Left Communist Youth League and Socialist Youth League of Norway. It's [sic] ideology is social democracy and democratic socialism. The current leader is Eskil Pedersen. Many former leading figures in AUF have gone on to serve in significant positions in government, such as the incumbent Prime Minister of Norway, Jens Stoltenberg.

A survivor of the shooting explains what all those kids were doing on that island where the murders occurred:

What can I say? The last normal thought in my head was about the AUF´s organization of students. I had just been to a political workshop (that´s what we do at Utøya) – and was on my way up tp [sic] the AUF-shop where I was going to take a shift. ...

Blowing up important buildings in Oslo and killing the future politicians of the Arbeider-party (ed. AP) who are attending summercamp at Utøya. What wrong have we done?

Those who resort to violence have run out of arguments. How could he do this to my AUF-friends? It seems so surrealistic. I don´t understand. I can´t comprehend.

She doesn't understand because she has been taught not to. This formal, political indoctrination of the young is designed to pave the way for the strident, anti-Semitic views of the Norwegian Labor Party, as detailed here, here, here, here and here. Which goes far to explain what could possibly motivate an extremist fanatic of the opposite persuasion, equally misguided, in this case a loner with delusions of grandeur.

[A] young man is not a proper hearer of lectures on political science; for he is inexperienced in the actions that occur in life, but its discussions start from these and are about these; and, further, since he tends to follow his passions, his study will be vain and unprofitable, because the end aimed at is not knowledge but action. And it makes no difference whether he is young in years or youthful in character; the defect does not depend on time, but on his living, and pursuing each successive object, as passion directs. For to such persons, as to the incontinent, knowledge brings no profit; but to those who desire and act in accordance with a rational principle knowledge about such matters will be of great benefit.

-- Aristotle, Nicomachean Ethics 1.3, here

Progressive Taxation: What Would Jesus Take?

The short answer is: all of it.

The long answer is more complicated.

Rush Limbaugh was a little ticked off a while back because liberals were asserting that Jesus would raise taxes, especially on the rich, which is, of course, a complete caricature of Jesus' teaching. Jesus wouldn't just raise taxes. He'd have made them completely irrelevant. For everyone.

The fact of the matter is, Jesus advocated complete liquidation of one's assets as a condition of discipleship. And after one did so liquidate, one would have no job to tax, either, because one would have to leave one's job to follow him.

Read the famous story about the rich man in Mark 10, paralleled in Matthew 19 and Luke 18, whom Jesus instructed to "sell whatsoever thou hast, and give to the poor." Liberals like to stop right there, with the obligations this story places on the rich.

Few like to reckon, neither liberals nor Christians it must be said, with Luke 14:33: "Whosoever he be of you that forsaketh not all that he hath, he cannot be my disciple."

Or with the calling of The Twelve Disciples, who left all and followed Jesus at his command, wandering around Galilee and Judea for something between one and three years until Jesus met his coup de grace, leaving their families unsupported for the time and becoming deadbeat dads in the process. A fine lot, they.

The truth is Jesus had only these 12 takers, and all of them proved to be something of a disappointment in the end, to say the least. Everyone else he called to discipleship found it a bit of a stretch, and followed at a distance, as it were, especially if a miracle feeding looked to be in the offing. The analogy would be to the Jewish proselytes to whom Paul preached his gospel, which they found rather more attractive than that whole circumcision thing required to become Jews.

Jesus' radicalism makes a certain kind of sense if the end of the world and The Final Judgment is just around the corner, which, of course, would make practical concerns beside the point. "Take no thought for your life, what ye shall eat, or what ye shall drink; nor yet for your body, what ye shall put on." "Some of you standing here will not taste death before you see the kingdom of God come with power."

This is the sort of stuff from which progressive liberalism, inspired by 19th Century liberal Christianity, tried to salvage something, denuded as it was of its supernaturalism and its apocalypticism. Inappropriately inserting their interpretation of a timeless Christian religion into American life, the progressives advocated a moral sensibility based on an unhistorical reading of the history of the religion, pretending all the while that only fundamentalists sought to impose a theocracy on America. In view of the high rates of taxation they came to advocate starting from 1913 (see here), one would almost gladly settle for the fundamentalists' theocracy with its tithe. What rich man in America wouldn't kill for a 10 percent tax rate?

Progressive taxation is a Christian heresy, arbitrarily ratcheting up the cost of discipleship citizenship the richer one gets, but never quite taking all the money, and never really justifying the varying costs in any given year, nor from year to year. Why is the price of entry at a lower rate for a relatively poorer rich man than for a richer rich man? Oh, progressivism tries to pretty this up with sayings of Jesus such as "To whom much is given, much is required" and the like, but at the expense of the full record which shows that Jesus demanded the same from everyone: a complete turning of one's back on one's former existence, no matter how great or how small by human standards of measurement. The Christian conception for this turning was summarized in a single word: "repentance." By contrast the paying of taxes in America is merely with reluctance.

In addition to this heresy, progressivism offers a related one which asserts that a better, improved future is just around the corner for all, if only the rich pay their fair share. This promise of an immanentized eschaton is a bastardized version of Jesus' belief in the coming sudden end of the world and of the in-breaking of the kingdom of God. But the reality is, like the prediction of the end of the world before it, the progressives' expected bright future never arrives, no matter how much money they throw at it.

The message of Jesus was much more stern and demanding than you will find in any church in America, or in the tax-writing committees of the Democratic caucus for that matter. Jesus' message was both much more pessimistic and much more undemocratic than most Americans would care to hear, which is why you don't hear it. It assumes that though many may be called, few end up being chosen. "Narrow is the gate and difficult the way that leads to life, and few there be that find it." (Note to Rev. Rob Bell).

To a significant degree, that pessimism about human nature naturally animated the American founding generation, which ever sought to restrain human evil by recourse to divided government and divided powers within it. They were as familiar with the weaknesses of human nature through their reading of ancient history, literature and philosophy as they were through their reading of the Gospels and St. Paul.

They knew better than most men before them or since that you can't make men good simply by passing laws.

Paul in particular had written that sin was not counted where there was no law, but that when the law came, sin revived, and he died. The analogy from the tax world is similar: If you want to witness tax evasion, multiply the taxes. So funding the new government was going to be at best a tricky business. Which is one reason I think the founders decided to export the sorry business of taxation the way they did, imposing tariffs on foreign trade to generate government revenues, instead of taxing the population directly. They knew it was better to raise the ire of the alien who could be kept at bay than the ire of the countryman who could not.

It's a lesson we need to relearn, and fast.  

Annual Cost to the Taxpayers of Earned Income and Child Tax Credits is $109 Billion

So admits the liberal Tax Policy Center, here:

Each year the earned income tax credit (EITC) and the child tax credit (CTC) deliver more than $109 billion of cash assistance, mostly to families with children.

There's corporate welfare, and then there's . . . well . . . welfare!

By contrast, the mortgage interest deduction costs the Feds about $88 billion in lost tax revenue annually.

And the rich don't pay Social Security taxes on any compensation beyond $107,000 in wages and salary each year. I estimate that loss to the Treasury at about $100 billion annually.

So, Solomon, which is worse?

Phyliss Schlafly Likes Herman Cain's Corporate Tax Reforms

As reported here:

We should reduce or eliminate taxes on businesses that employ Americans producing goods and services inside our own country, while increasing taxes on the profits that corporations earn by outsourcing or manufacturing overseas.

Above all, we should eliminate the foreign tax credit, a self-destructive provision that allows corporations to pay China, Venezuela or Saudi Arabia the money they would otherwise owe the U.S. government. Let's also cut out the deductions that U.S. corporations take for hiring foreigners to do work that Americans can do. ... 

Of Republican presidential candidates, only Herman Cain and Rick Santorum understand that what corporations need is lower taxes on their operations inside the United States rather than on the profits they earn in other countries.

The Economic and Social Value of the Joint Income Tax Return Produced the Baby Boom

So says Phyliss Schlafly, who thinks Texas Gov. Rick Perry's flat tax plan flattens the traditional family and rewards kinky couples, here:

The joint income tax return for husbands and wives was landmark legislation. The Republican Congress passed it in 1948 over President Truman's veto.

As originally designed, the joint return recognized a husband and wife as two equal partners, even if the husband earned all the family's income. Each tax bracket, deduction and exemption was equal to twice that of a single person.

Subsequent tax reform bills, especially the one signed by Richard Nixon in 1969, which also introduced the hated Alternative Minimum Tax, reduced the value of a joint return to only about 1.6 persons, while increasing the tax benefit of an unmarried "head of household" to about 1.4 persons. Simple arithmetic shows that a single parent with an unmarried live-in "partner" gets more favorable tax treatment than respectable married couples struggling to support their own children.

And by the way, the postwar "baby boom" happened during the 20-year period when married couples were fairly valued in the federal income tax. That's not coincidence; incentives matter, and America's marriage rate and birth rate plummeted after the value of the joint return was reduced.

Direct Taxes Are Limited To Taxes on Land and Improvements, and to Capitations

According to the opinion of Chief Justice Salmon Chase in Veazie Bank v. Fenno, 1869:

The question before the Supreme Court in this case was the constitutional validity of an act of Congress in 1866 imposing a 10 percent tax on the issuance of circulating bank notes by nationally chartered banks or by state chartered banks. ...

Chief Justice Salmon Chase delivered the opinion of the Court. The Court held the tax to be constitutional. ...

Chief Justice Chase turned to the historical record.

He pointed out that Congress had enacted taxes that were acknowledged to be direct. Those taxes were enacted in 1798, 1813, 1815, 1816, and 1861. In each instance the sums collected were apportioned among the states. The subjects of those taxes were, variously, lands, improvements, dwelling-houses, and slaves. Chief Justice Chase pointed out that Congress never considered taxes on personal property, contracts, or occupations to be direct taxes. He observed that slaves were not an exception because, even though many of the slave states had considered slaves to be real property, slaves were, of course, persons and subject to a capitation, which was direct.

Therefore, Chief Justice Chase concluded, Congress understood direct taxes to be limited to taxes on land and improvements, and capitations.

-- Alan O. Dixler, 2006 (here)

Kalle Lasn Thinks Anti-Semitic Viewpoints Deserve Free Speech Protections

Kalle Lasn said the following, quoted here, in response to a controversial photo spread in Adbusters Magazine pulled from Canadian magazine shelves last year:

"If you think that publishing side-by-side images of the Gaza and Warsaw ghettos is a valid expression of free speech, email the Canadian Jewish Congress and tell them to back off," Lasn wrote. "In Canada, we should be free to choose from a diversity of viewpoints and decide for ourselves what is anti-Semitic and what is a legitimate critique of Israel's occupation of Palestine."

The trouble with Kalle Lasn is that one gets the impression from him that Jews shouldn't occupy anything, including their own homeland.

Bill Clinton's Middle Class Tax Increase Meant the Rich Got a Bigger Piece of the Pie

Mark Perry seems to have missed a good story.

He's been talking recently about how the income share of the top 20 percent has been FLAT since 1994, as shown here.

What's more interesting, however, is the oddity that his charts show that the income share of the top 20 percent experienced a pronounced spike up between 1992 and 1994, which includes the first two years of the Bill Clinton administration.

Why did the richer get a bigger share of the income pie after Bill Clinton raised taxes on them in 1993?

Top marginal income tax rates had declined from 38.5 percent in 1987 to 28 percent in 1988, as shown here, and in 1991 another higher rate of 31 percent was added under Bush 41. But under Clinton in 1993 an additional marginal rate of 39.6 percent was added with the help of the Democrat controlled Congress. So higher marginal income tax rates prevailed, but the richer nevertheless got a bigger share of the income.

That doesn't make any sense. How did that happen?

The answer is Clinton's middle class tax increases.

For one thing, the cap on income subject to Social Security taxes was raised. That bumped up the limit on incomes on which the tax was levied. A tax increase for all wage earners. For another thing, the cap on income subject to Medicare taxes was removed. That meant no ordinary income could escape the tax any longer. Another huge tax increase. And thirdly, Social Security income beyond 50 percent up to 85 percent became subject to income taxation. Anyone taking Social Security income felt this, not just the rich. Another huge tax increase.

These were massive tax increases on wage earners, as opposed to those richer Americans who could take their income differently if need be, often in the form of capital gains, or from tax-free municipal bonds, or from tax shelters.

The net effect of the Clinton tax increase was that just about everyone in the four quintiles below the top 20 percent lost ground on income, which meant that the rich appeared to spike up in their share of the income pie. The regimentation in law of the tax increases on everyone altered and froze the aggregate shares of the income pie going forward, hence the flatness of those charts since 1994.

The truth was that Clinton's tax increase on the richer, who ended up shifting income to avoid taxation, masked a massive tax increase on everyone else, who couldn't shift their income if they wanted to, and they've experienced a smaller bite of the income pie ever since.

That's what expanding the tax base in tandem with raising rates will do.

Republicans, take note.

America's Biggest Militia is the National Rifle Association: 4.3 Million Members

SPLC Claims 500 Percent Growth in Active Patriot Militias

As reported here, in a story about the recent arrest of members of a so-called militia in Georgia:

“This is only the latest manifestation of the patriot militia movement we have seen grow since 2008,” said Mark Potok of the Southern Poverty Law Center in a phone interview. “In 2008 we counted 149 patriot militia groups operating in the United States—by 2010 that number had increased to 824—that’s a 500 percent increase. It’s hard not to notice that this jump coincides with both the rise to power of Barack Obama and the subprime mortgage collapse.”

Actually it's a 453 percent increase, but liberals never were very good at math.

For example, an illegal weapons charge against a Hutaree militia member was recently dropped, evidently because the FBI was using a ruler made in China which was short by an inch. We'll have to wait for defense statements on that one when the case finally comes to trial, two years after the arrests in March 2010 in the wake of the passage of ObamaCare.

The Georgia case is four old coots in what we used to call an old-fashioned conspiracy to commit murder, but in this day and age where everything is exaggerated to the superlative degree (I'm great!), the disgruntled federal employees' plot becomes a TERROR PLOT and their self-description as a MILITIA gets taken as seriously as Barack Obama's claim to be a Christian.

If the FBI could hear the conversation around the family dinner table every night since that Commie bastard got elected president, we'd all be in jail thanks to George Bush's anti-terror legislation now in the hands of a leftist ideologue.

The next thing you know the Southern Poverty Law Center will start counting well-armed husbands, wives and children as militias when all they are is FAMILIES.

Onward Christian soldiers!

Unemployment At or Above 9 Percent For 28 of Obama's 34 Months in Office

That's 82 percent of the time, most of which he has spent on more important matters, like interfering with your healthcare, campaigning for stimulus spending, campaigning, partying, campaigning, golfing and campaigning.

Did I mention he's spent a lot of time campaigning?

National Review's Exhausted Conservatism Incubates More Liberal Monetarism

As with Ramesh Ponnuru's call here at The New Republic (!) for more monetary loosening and fiscal tightening, a policy neither Democrats nor Republicans embrace.

He must be reading Ambrose Evans-Pritchard at the UK Telegraph since the financial crisis, who keeps calling for same.

He has no understanding of, and pays no attention to, the source of the explosion in debt in The Great Moderation, however, which was a civilizational commitment to misallocation of capital to housing. To finance it, money creation had to pass from the control of central banks to so-called private bankers.

It is they who have brought us to this pass with massive amounts of leverage, with Democrat and Republican accommodation all the way, in exchange for power, money and influence.

National Review is incapable of teaching such things because it's part of the problem, not part of the solution. No wonder Ramesh wanders.

US Bond Market at $35.3 Trillion for Q1 2011, Grows 2 Percent Since 2009

The overall bond market has grown in size by about $700 billion since 2009.

(source)

Top Corporate Bankruptcies

The largest corporate bankruptcies in US history, according to the most up-to-date report from The Wall Street Journal:

1) Lehman Bros., $691 billion

2) Washington Mutual, $327.9 billion

3) WorldCom, $103.9 billion

4) GM, $91 billion

5) CIT Group, $80.4 billion

6) Enron, $65.5 billion

7) Conseco, $61.4 billion

8) MF Global, $41 billion

9) Chrysler, $39.3 billion

10) Thornburg Mortgage, $36.5 billion

11) Pacific Gas and Electric, $36.15 billion.

Just four of these top failures occurred previous to 2008.

Fannie Mae and Freddie Mac Have Now Cost the Taxpayers $141 Billion

The latest cost figures are reported in The Wall Street Journal, here.

Rush Limbaugh, Boob Extraordinaire, Attacks The Basis of Western Civilization

In a long, truly embarrassing, tirade against studying Greek and Latin and all things Classical, here. 

Calling all that useless and worthless because some student studying Classics is worried her degree will prove to be so and said so at Occupy Wall Street:

Now, do you think somebody going to college, borrowing whatever it is in this case, $20,000 a year to get a degree in Classical Studies ought to be told by somebody at a school that it's a worthless degree?

In this Rush is the typical American utilitarian, for whom any field of study which doesn't get you a job and a career in that field is useless and worthless.

The lumpen barbarians aren't just occupying Wall Street.

Happy Binary Palindromic All Saints Day!

11.1.11

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 CNBC.com, 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.

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. 

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.

Shhhhhhh!

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.

(source)

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)

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!

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

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?

Here.

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 usgovernmentrevenue.com, 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.

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.