I'm Back

Watch the embedded video brought to my attention by a friend (thanks for giving me the motivation to get back into this). I know it's long, but I think it shows the problem with the Left's beliefs in tax and foreign trade policy (as a qualifier, Bernie Sanders (I-VT) is a democratic socialist (irony?) and I include him in the "Left"):

UPDATE: The Left and Right both fall into the foreign trade policy fallacy.

Sanders speaks about how much money the top 1% makes compared to the bottom 50%; however, he fails to mention how the top 1% income earners pay 38% of all income taxes. It seems that he is all about equality; is this fair? 32.6% of the tax returns filed in 2007 (last year data is available) had no or negative income tax liability; is that fair? In 2006, 33% of tax returns had no or negaitve tax liability; the highest percentage ever.  Should we put the entire burden of funding the federal government on one class of individuals? Well that is exactly where we are heading; look at the following graph from The Tax Foundation:

Does this show equality or fairness?  If this trend continues one should not be surprised when the individuals who pay the most taxes begin to leave.  When taxes become such a burden (the tipping point) wealthy individuals will begin to leave the country. Don't think this could happen?  The wealthy have migratory abilities and are global; they are not bound by borders like we are. One must take these factors into account when demonizing the rich. There is a valid argument that decreased taxes will actually increase revenues.

Additionally, Sanders is pro estate tax. Admittedly the estate tax will only tax the "wealthy" (in 2011, any estate worth more than $1 million will be taxed, if no legislative action is taken; which in this day and age is much easier to reach). However, Sanders does not take into consideration that the revenue gained from estate and gift tax is only 1.7% of total tax collections and costs associated with the wealthy trying to avoid the estate tax; which, let’s not be naïve, happens with any tax. Moreover, the cost associated with complying with the estate tax is substantial for both the tax-payer and the tax-collector (IRS). These costs (avoidance, compliance, and enforcement), if there were no estate tax, could be used for more productive means. I would venture to say that when the costs stated above are compared to the revenues received from the estate tax that it is very close to zero-sum. For the sake of argument, let’s stipulate that the revenues received minus avoidance, compliance, and enforcement costs equals $0.50 of every dollar. Is this efficient? I would argue no. If no estate tax were on the books, the costs associated with the tax would disappear and the money that would normally have been used for the tax would be put to better use elsewhere. I know that if the tax were to be abolished that complete industries would be useless (certain aspects of estate planning, accountants, portions of the IRS, etc.). Is that really a bad thing? These individuals are professionals (maybe not the IRS) that would arguably have an easier time to find other employment.

UPDATE:  Costs and Consequences of the Federal Estate Tax, a Joint Economic Committee Study states that

Of all taxes imposed by the federal government, the estate tax is one of the most harmful....Alicia Munnell, a member of President Clinton’s Council of Economic Advisers, estimated that the costs of complying with estate tax laws are roughly the same size as the revenue raised. Specifically, in an article co-authored with Henry Aaron, Munnell wrote that[:]

"In the United States, resources spent on avoiding wealth transfer taxes are of the same general magnitude as the [revenue] yield, suggesting that the ratio of excess burden to revenue of wealth transfer taxes is among the highest of all taxes to economic growth when measured on a per-dollar-of-revenue-raised basis."

Sanders also speaks on the trade policies of America and how many consumer goods are manufactured in China (or other countries) rather than in the U.S. Does Sanders not realize that if these goods were manufactured in the U.S. that they would cost considerably more and that all the individuals he claims he is fighting for would be worse off? Think about it, the only reason these goods are made in a foreign country is because it is cheaper for the producing company. That company then passes on those savings to the consumer and is more competitive with existing firms which puts pressure on those other firms to be more efficient in their business. The talk of “trade deficits” is bogus. If the U.S. is importing more goods than it exports, why is that bad? That merely means that the products imported are cheaper or of better quality than comparable goods produced in the U.S. More affordable products are better for everyone. Granted if these products were produced in the U.S., Americans would be employed to manufacture them; however, because Americans demand higher wages and benefits, not to mention the corporate tax structure, these additional costs will be passed on to the ultimate consumer. On balance, Sanders is saying that giving these limited individuals jobs is more important than providing cheaper products to the entire country. Is that fair or just? Wouldn’t the greatest value for the largest amount of individuals be cheap imports for all rather than expense domestic products in order to employ Americans?


This is the main problem I have with individuals on the Left. The Left has excellent intentions and aspirations; however, implementing their ideas have unintended consequences. The Left puts too much weight on what they think is right and that they have the higher moral ground, rather than thinking through the consequences of what they are recommending. Maybe the main difference is that I’m more of a realist and they are more conceptual in nature with their main reasoning being their beliefs rather than facts.

Just Look at the Numbers

The debate is underway; should the Bush tax cuts of 2001 and 2003 be extended to the “wealthy” that make more than $250,000? If one looks at historical data and trends regarding the relationship between cutting taxes and revenue received, it should be a no-brainer.

House Speaker Nancy Pelosi said this weekend that "I don't see any reason why we should renew a tax cut that only gives a tax cut to the wealthiest people in America, increases the deficit, and doesn't create jobs. That doesn't make any sense." Pelosi is wrong on two points. Cutting taxes to the “rich” will, based on historic data available through the IRS, increase revenue to the federal government. In addition, tax cuts should create jobs, real jobs; not ones that are “created or saved.”


Arthur Laffer of the Wall Street Journal outlines the historical data nicely:

Since 1978, the U.S. has cut the highest marginal earned-income tax rate to 35% from 50%, the highest capital gains tax rate to 15% from about 50%, and the highest dividend tax rate to 15% from 70%. President Clinton cut the highest marginal tax rate on long-term capital gains from the sale of owner-occupied homes to 0% for almost all home owners. We've also cut just about every other income tax rate as well.

During this era of ubiquitous tax cuts, income tax receipts from the top 1% of income earners rose to 3.3% of GDP in 2007 (the latest year for which we have data) from 1.5% of GDP in 1978. Income tax receipts from the bottom 95% of income earners fell to 3.2% of GDP from 5.4% of GDP over the same time period.

The revenue gained from the top wage earners actually increased when their tax rates were decreased. Pelosi’s characterization that tax decreases will add to the deficit is incorrect. Look at the numbers.

This should come as no surprise. When individuals get to keep more of their money, they have an incentive to work harder. When individuals have large percentages of their wages taxed, they have a less incentive to work. Why work when you don’t get to keep the benefits of your labor? Laffer also shows what happens when tax rates are increased during poor economic times:

And then there's the Hoover/Roosevelt Great Depression. The Great Depression was precipitated by President Hoover in early 1930, when he signed into law the largest ever U.S. tax increase on traded products—the Smoot-Hawley Tariff. President Hoover then thought it would be clever to try to tax America into prosperity. Using many of the same arguments that Barack Obama, Nancy Pelosi and Harry Reid are using today, President Hoover raised the highest personal income tax rate to 63% from 24% on Jan. 1, 1932. He raised many other taxes as well.

President Roosevelt then debauched the dollar with the 1933 Bank Holiday Act and his soak-the-rich tax increase on Jan. 1, 1936. He raised the highest personal income tax rate to 79% from 63% along with a whole host of other corporate and personal tax rates as well. The U.S. economy went into a double dip depression, with unemployment rates rising again to 20% in 1938. Over the course of the Great Depression, the government raised the top marginal personal income tax rate to 83% from 24%.

Is it any wonder that the Great Depression was as long and deep as it was? Whoever heard of a country taxing itself into prosperity? Not only did taxes as a share of GDP fall, but GDP fell as well. It was a double whammy. Tax receipts from the top 1% of income earners stayed flat as a share of GDP, going to 1% in 1940 from 1.1% in 1928, but at what cost?

Increasing taxes during economic constriction is not the way to climb out of a recession, as history shows us. The opposite is actually true.

In addition to tax revenue staying stagnant when taxes are increased, the GDP fell. This in turn, most certainly, led to higher unemployment. What Pelosi does not understand is that the best way to stimulate job creation is through the private sector. The federal government is quite possibly the most inefficient means to create private jobs. This might be why during this recession the only major sector which has grown is the public sector. This has increased the federal deficit for many years to come and depressed our economy.

One must ask themselves whether keeping more of one’s money is the best way to stimulate the sagging economy or whether giving up more of one’s money to the behemoth of the federal government would be more beneficial.

I think the numbers speak for themselves.

Arizona Immigration Bill Is No "Tougher" Than Federal Immigration Laws

By now everyone knows that last Friday, Governor Jan Brewer of Arizona signed into law "the nation's toughest bill on illegal immigration."  However, I think this is an inaccurate depiction of the bill (SB 1070).

All of the rhetoric and misrepresentations of the bill reminds me of the accusations by Democrats that Republicans were intentionally telling lies or exaggerating the health care reform bill.  Except the Republicans seem to have been right (that's another post for a later date).

 However, the opponents to Arizona's new immigration bill are doing the same thing that they railed against during the health care debates; and they are largely wrong on their interpretations of the new bill.

Having actually read the bill, there is no authority for law enforcement officials to randomly question individuals about their immigration status (emphasis mine):

For any lawful contact made by a law enforcement official or a law enforcement agency…where reasonable suspicion exists that the person is an alien who is unlawfully present in the United States, a reasonable attempt shall be made, when practicable, to determine the immigration status of the person.

The bill states that an Arizona law enforcement official can only determine an individual's immigration status after a lawful contact is made (i.e., traffic violation, domestic abuse, drug use, etc.) and that officer must have a reasonable suspicion that the individual is in the U.S. illegally.  Even after that, an officer is not required to question an individual, but only when practical.  This gives officers in the field some flexibility.   Moreover, to prove you are in the U.S. lawfully merely need to show:

1. A valid Arizona driver license
2. A valid Arizona nonoperating identification license.
3. A valid tribal enrollment card or other form of tribal identification.
4. If the entity requires proof of legal presence in the United States before issuance, any valid United States federal, state or local government issued identification.

As long as an individual carries a form of identification, that before issued, requires proof that they are in the U.S. legally, they have no problem.  A simple Arizona license is enough to prove that an individual is in the U.S. legally.  Even if someone does not have their license on them, I would think an officer would be able to look that individual up in a database.  In addition the bill states:

A law enforcement official…may not solely consider race, color or national origin in implementing the requirements of this subsection except to the extent permitted by the United States or Arizona constitution.

This is the standard qualifier.  Law enforcement officers cannot racially profile individuals.  It's in the plain language of the statute; however, opponents of the bill have obviously not read the bill or simply choose to dismiss this portion of the bill which gives a false representation of the legislation.

President Obama has stated that the Arizona bill is "misguided" and will "threatened to undermine basic notions of fairness that we cherish as Americans, as well as the trust between police and their communities that is so crucial to keeping us safe. "


Obviously President Obama has not read the bill.  This is a blatant misrepresentation of the legislation.  The bill clearly states that Arizona wishes to enforce the federal immigration laws to their fullest extent (emphasis mine):

No official or agency of this state or a county, city, town or other political subdivision of this state may limit or restrict the enforcement of federal immigration laws to less than the full extent permitted by federal law.

So based on President Obama's statements, he believes that the current federal immigration laws are also "misguided" and "threatened to undermine basic notions of fairness that we cherish as Americans."  Surely this cannot be the case.  The federal government would never be "misguided."

The opponents of this bill have either not read the bill or are simply telling lies.  SB 1070 merely gives the Arizona law enforcement officers the authority to ascertain an individual's immigration status, after making lawful contact and with reasonable suspicion.

The hyperbolic nature of the opponent's rheteric is exactly what they denounced a few months ago (except that the comments they were denouncing were not hyperbolic).  But when it works in your favor, even if they are blatant lies, they are not swayed.

A True Role Model

Brian Davis, who has never won a US PGA Tour event, sunk an 18 foot put on the 18th hole in order to force a playoff with Jim Furyk at the Verizon Heritage in South Carolina.

Davis soon found himself in trouble on the first playoff hole; on the beach, yards away from the green.  On his back swing, Davis hit a dried reed; which was indistinguishable except on slow-motion replay.  No one noticed, except Davis.

Davis immediately called the rule chief over.  It turns out that hitting the loose reed is a violation of Rule 13.4:

Except as provided in the Rules, before making a stroke at a ball that is in a hazard (whether a bunker or a water hazard) or that, having been lifted from a hazard, may be dropped or placed in the hazard, the player must not:

a. Test the condition of the hazard or any similar hazard;

b. Touch the ground in the hazard or water in the water hazard with his hand or a club; or

c. Touch or move a loose impediment lying in or touching the hazard.

Davis knew he had potentially violated a rule and called the violation on himself.  After a discussion and review of the swing, officials decided that Davis had indeed violated 13.4 and assigned a two stroke penalty; giving Furyk the victory.

This is a lesson for everyone.  Davis was accountable for his actions and called the penalty on himself, conceding the victory; not to mention the loss of potential winnings ($411,000 to be exact).

Davis' actions yesterday should be applauded by all.  This is the exemplification of honor and accountability.  Davis might have lost, but what he gained by bringing his infraction to the attention of event officials (when he could have easily dismissed his duty and no one would have notice) is invaluable.  I am now a fan of Davis and his example should be taught to all who will listen.

Update to VAT

As I have stated earlier, a Value Added Tax is being talked about by individuals around Washington and within the Obama Administration (see my earlier post here). 

A VAT tax would surely bring in revenue; however, the negatives of the tax would far outweigh the increase to the nation's coffers.

Caroline Baum of BusinessWeek provides a much more in-depth commentary of a VAT here.

Boston Tea Party Part Two

Today I attended the Tea Party rally in Boston. The organizers, Tea Party Express, expected around 3,000 people to attend. From my perspective, that sounds about right. The vast majority of people attending were Tea Party supporters or individual out to see what the Tea Party is all about (myself included). However, there were a number of President Obama / Anti Tea Party individuals.

From what I saw throughout the event were peaceful, respectful, and boisterous individuals. I did witness some arguments, but no racial slurs or punches were thrown. Most ended in a handshake.

I think the Tea Party members knew that everyone would be looking for these sort of actions and were not wanting to get caught up the media storm that would surely follow.

I whole-heartedly agree with the Tea Party’s premise of a smaller, more fiscally conservative federal government; and many signs throughout the event displayed these sentiments.

The only negative throughout the event was during Sarah Palin’s speech. A line of individuals holding anti-war and pro-union signs were marching through the crowd yelling into a megaphone. I have no problem with them voicing their opinions; however, I could not hear a portion of Palin’s speech over their objections. Palin was by far the biggest draw for the crowd and I’m sure the majority wanted to hear her speech, but was interrupted.

The portion of Palin’s speech I did hear was nothing new. It did reiterate the principles of the Tea Party, however, and stirred the crowd to cheers and applause on numerous occasions.


Overall, the event highlighted what the Tea Party stands for and gave an opportunity for numerous viewpoints to be heard. It will be interesting to see how the national media portrays this event, if at all. I think it is always a positive sight when a group of citizens choose to voice their First Amendment rights and if anything else, that should be applauded.

Pictures are below. I tried to take pictures which would give a fair representation of the crowd.

Ron Paul for President

Rasmussen Reports detailed their results of a recent survey: Ron Paul is dead even against President Obama in a hypothetical 2012 presidential election.

“A new Rasmussen Reports national telephone survey of likely voters finds Obama with 42% support and Paul with 41% of the vote. Eleven percent (11%) prefer some other candidate, and six percent (6%) are undecided.”

If you don't remember Ron Paul, he was the long-shot candidate in the 2008 GOP primary who created a grass-roots campaign.  Even though he was only able to obtain about 10% of the primary votes, he has loyal followers.  Ron Paul has the highest regard of the United States Constitution out of any other politician in Washington. He believes that the Constitution cannot be manipulated and would adhere to the Textualist interpretation of the document.

If this Rasmussen survey holds true and Ron Paul were able to win a presidential election, he might be the best chance America has at returning back to her founding principles.