Tag Archives: Taxes

The Great California Exodus, by Andrew Moran

The mystery is why the state still has over 39 million people. From Andrew Moran at libertynation.com:

California has become the joke of the United States. Thanks, progressives

German author Franz Kafka wrote in The Metamorphosis, “There is an infinite amount of hope in the universe … but not for us.” The legendary writer might as well have been writing about the state of California, a progressive wasteland that is the personification of everything wrong with leftist orthodoxy. In the mid-19th century, when it became a state, tens of thousands of people headed west. Today, those with a modicum of judgment and respect for their pocketbook are heading anywhere that is not named California, attempting to flee the incompetent mismanagement of Governor Gavin Newsom and his Democratic friends in Sacramento on every subject, from the economy to civil liberties.

The Exodus: A Primer

California may be the most populous state in the Union, but it could transform into the exodus capital of America. The Golden State has witnessed its population stall, declining slightly from 39.96 million to 39.78 million in the second half of 2019, according to the Department of Finance.

Growth has slowed close to zero or even declined in most coastal counties. The San Francisco Bay Area advanced, and counties east of Los Angeles witnessed modest growth. However, Los Angeles County shed residents for the second consecutive year in 2019. It is unclear how severe the population drop is in the aftermath of the Coronavirus pandemic and the state government’s proposed tax hikes.

Contrary to internet mythos, it is not only high-income earners who are packing up their things and saying goodbye to Newsom. Studies, including one from the Public Policy Institute of California and another by the Empire Center for Public Policy, have found that poorer households are more likely to flee than their affluent counterparts. But considering the policing being proposed or enacted, it is safe to say that the wealthy have no reason to be some of the left-behinds.

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Doug Casey Debunks Four Myths About Trump, Taxes, and the Economy

Why should anybody give more money to the government than they absolutely have to? From Doug Casey at internationalman.com:

Trump taxes

International Man: For many years, President Trump has made no apologies for trying to pay the least amount of taxes possible. He’s clearly stated this in many interviews.

His desire to minimize his taxes has brought scorn from many in the mainstream media, and politicians from both sides of the aisle. These people are of the opinion that paying taxes is an honorable and necessary responsibility. It brings to mind the wrongheaded saying “taxes are the price we pay for a civilized society”, which came from US Supreme Court Justice Oliver Wendell Holmes. Many people believe this.

But if that’s true, how come low tax locales like Singapore, the Cayman Islands, Monaco aren’t backward hell holes, but rather sophisticated and civilized?

Doug Casey: Almost any lie can be accepted as truth if it’s said often enough and with enough certainty. That absolutely applies to what Holmes said. It’s shameful how people don’t think about its meaning, but slavishly repeat it.

Taxes aren’t the price we pay for civilized society. They’re a sign of the fact that society is becoming uncivilized. A civilized society is based on voluntarism. Taxes are all about coercion.

People don’t seem to recognize or remember that before 1913 there was no income tax in the US. There was no reporting of any kind to the US government. It was a much more civilized and far freer country then.

As far as Trump minimizing his taxes, congratulations to him. The object should be to cut the size of the US government in half, and cut it in half again, and again. And along with it, cut the tax burden that it imposes on the average American.

Trump should be proud of himself for cutting his taxes. It’s your patriotic duty as an American citizen to deny revenue to the State and the kind of people that are drawn to it and populate it.

The fact that some people resent others for not paying taxes is just evidence that they’ve been consumed by the vice of envy, which is one of the worst of the vices. Jealousy says “if you have something that I want, I’ll try to take it from you, just because I want it.” Envy says “if you have something that I want, and I can’t take it from you, I’ll destroy it and hurt you.”

It’s speaks poorly of the ethics of the average American, that they’ll self-righteously shame their neighbors for not paying “enough” taxes to the State.

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California’s Housing Nightmare Is Only Getting Worse, by Tyler Durden

California has only its Democrats to blame for its housing woes. From Tyler Durden at zerohedge.com:

When historians look back on contemporary California, one thing they’ll be bound to make note of is that the state’s developers bet on the wrong model.

Endless, suburban sprawl is coming back to haunt California in ways both major and minor. In densely populated communities across the state, traffic is horrible thanks to underdeveloped public transportation (this is especially true in LA). Most residents have accepted that deadly, devastating wildfires are just part of the deal now – bound to recur endlessly until the state’s population shrinks to the point that it no longer intermingles with the state’s vast swaths of woodland.

But it’s not just the apocalyptic images of fiery doom that have some of the state’s residents rethinking their decision to settle in California. The wildfires have had all kinds of ancillary effects: In parts of the state, PG&E is essentially shutting down large portions of the power grid in disruptive distributed blackouts intended to lower the fire risk.


Denmark as a Model for American Socialists? by Lars Hedegaard

There are unique reasons why Denmark’s political arrangements work. From Lars Hedegaard at gatestoneinstitute.org:

  • Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy, the state will require that you look for a job or it will force a job on you.
  • In Denmark, it is uncomplicated for enterprises to fire workers, which gives them great flexibility to adapt to shifting market conditions. In fact, Denmark is more free-market oriented than the US.
  • “Very high taxes and the vast public sector clearly detract in the capitalism index and reduce economic freedom. But Denmark compensates by… relatively little regulation of private enterprise, open foreign trade, healthy public finances and more. This high degree of economic freedom is among the reasons for Denmark’s relatively high affluence.” — Mads Lundby Hansen, chief economist of Denmark’s CEPOS think tank.

Here are some facts to consider before American “democratic socialists” look to Denmark for guidance, as Senator Bernie Sanders did during the 2016 presidential campaign.

First of all, Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy enough to work, the state will require that you look for a job or it will force a job on you.

The willingness of all the Danes to pay high taxes is predicated on the country’s high degree of homogeneity and level of citizens’ trust in each other, what sociologists call “social capital.” By and large, Danes do not mind paying into the welfare state because they know that the money will go to other Danes like themselves, who share their values and because they can easily imagine themselves to be in need of help — as most of them, from time to time, will be.

To continue reading: Denmark as a Model for American Socialists?

No Free Lunches Be Damned, by MN Gordon

From MN Gordon at economicprism.com:

“There ain’t no such thing as a free lunch,” is one of the essential axioms of economics. No doubt about it, there’s no getting around this simple truth. Everything has a price.

For example, even if someone buys you lunch the lunch still isn’t free. The opportunity cost, your time to eat the lunch when you could’ve been doing something else, has a price. In addition, even if you don’t consider your time a cost, there’s no denying the fact that someone paid for the lunch. Hence, it wasn’t free.

Nonetheless, despite this simple fact, politicians promise free lunches for the many at the expense of the few. This offense is especially on display during a presidential primary election. Free college. Free drugs. Free housing. Free food.

You name it, there’s hardly a lunch out there this season’s crop of presidential candidates haven’t already laid claim to. This is what they must do to get elected. This is how presidential politics works in a democracy.

We don’t like it. We don’t agree with it. But what we think really doesn’t matter. The facts are lucidly clear. On the national level, the populace has shown for the last 80 years – or more – that they’ll vote for whatever candidate promises the most stuff for free.

Nothing for Something

The politicians know there’s no such thing as a free lunch. But they also know that modern day economic policy is predicated on financing government programs through ever expanding debt. This means someone else, perhaps you, will have to pick the tab.

The Federal Reserve makes it all possible by creating enormous amounts of central bank credit, which is then loaned to the government. This also has the secondary effect of debasing the currency. Obviously, the Treasury welcomes this ongoing dilution of value. Over time it lightens the debt burden and allows them to make good on yesterday’s promises with a currency of diminishing value.

For extended periods this may seem to work remarkably well, on the surface. Spendthrift politicians get elected. The populace collects their ‘entitlements.’ Lunches appear to be free.

When an economy’s demographics are young, and growth is strong, the price of lunches looks minimal. The miracle of getting something for nothing seems possible. But as the economy ages, and growth peters out, debt levels become unsustainable.

Eventually, the bill comes due. The lunches must be paid for. Instead of something for nothing, the populace now gets nothing for something.

In other words, the credit expansion reaches its natural limits when the economy can no longer service the debt. That’s when a breakdown, government default, and depression, must occur to purge the debt – the rot – from the system. Prices, assets, and wages are readjusted so they are in line with the economy. Unproductive activities vanish. New, useful, undertakings rise from the ashes.

To continue reading: No Free Lunches Be Damned

From Denmark With Love, By Terresa Monroe-Hamilton

Trouble in a socialist “paradise”? From Terresa Monroe-Hamiliton, via Doug Ross, via theburningplatform.com:

An interview with a Dane for America:

Bernie and Hillary are in love in with socialism. Both of them want a romantic affair with Socialism from Denmark. However, they do not tell the American people the parts of the romantic deal that will ruin many American families financially.

Jonas Christensen is a Conservative Dane, who has lived all his life in Denmark. He does not recognize the paradise-like picture that is painted by Bernie and Hillary concerning Denmark. Nothing in Denmark is free, regardless of what Bernie has stated several times. Jonas goes on to say that they do not have free healthcare and they do not have free education. These institutions are paid for by taxes… taxes that are defined by the OECD as the highest taxes in the world.

We have not heard from Bernie or Hillary on how they will pay for the healthcare system or the educational system they have in Denmark. Let’s look at how the Danes pay for those systems. Here are some of the taxes Americans are going to pay, so the Democratic love affair can become a reality:

– 180% car tax. If you want to buy a car in Denmark, you have to pay 180% more than the actual price.

– Death tax. If you die, your heir must pay a tax to inherit.

– 25% consumption tax on all goods. When you go to the supermarket and buy groceries, you have to pay 25% more than the actual price.

Those are just some of the taxes that you are going to pay if Bernie or Hillary is elected president. Income taxes are also very high. Danes pay an average of 45% in taxes and some of the wealthiest pay up to 70%.

Jonas says, “I want to send this warning to the American people, so they do not choose Hillary or Bernie as President. I love Denmark. However, I hate Socialism.


Here’s the Next Crisis “Nobody Saw Coming” by Charles Hugh Smith

The next crisis “nobody saw coming” is the most easily foreseeable crisis of a whole slew of lurking crises: the crisis in state and local government finances. Actually, it’s already started; check Puerto Rico. From Charles Hugh Smith at oftwominds.com:

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures.

Strangely enough, every easily foreseeable financial crisis is presented in the mainstream media as one that “nobody saw coming.” No doubt the crisis visible in these three charts will also fall into the “nobody saw it coming” category.

Take a look at this chart of state and local government debt. As we noted yesterday, nominal GDP rose about 77% since 2000. So state and local debt rose at double the rate of GDP. That is the definition of an unsustainable trend.

As noted earlier in the week, state and local taxes have soared 75%. While this would be no big deal if wages and salaries had risen by 75% in the same time frame, but earnings have barely kept pace with inflation (38% since 2000).

So state and local taxes have risen at a rate twice that of wages/salaries. State and local governments can keep raising taxes, but where’s the money going to come from?

To continue reading: Here’s the Next Crisis “Nobody Saw Coming”

Greece is being taxed to death, by Alan Reynolds

For all the discussion about Greece the last several months, one subject rarely gets mentioned: the Greek tax burden. It is high, punitive even, and the recently agreed deal will make it even higher and more punitive. From Alan Reynolds, at politico.eu:

No debtor ever became more creditworthy by being forced to accept less income.

More than five years have passed since May 2010, when Greece was enticed to borrow €73 billion from the International Monetary Fund (IMF), European Commission (EC) and European Central Bank (ECB) with painful strings attached.

That 2010 program, said the IMF, “had two broad aims: to make fiscal policy and the fiscal and debt position sustainable, and to improve competitiveness.” There was no emphasis on improving domestic economic growth or employment — just “competitiveness” in trade. The IMF speculated that “restoring confidence” would “lead to a growth recovery” in 2012. When that didn’t happen, another €154 billion in loans was provided. And the IMF blamed the bad “investment climate” on a “lack of confidence,” rather than any lack of after-tax income.
Prominent U.S. economists blame the seven-year depression in Greece on savage cutbacks in government spending. “The contraction in government spending has been predictably devastating,” wrote Joseph Stiglitz in February. And Paul Krugman later criticized the period “from 2009 to 2013, the last year of major spending cuts” in Southern Europe. In reality, however, Greek government spending rose from 44.9 percent of GDP in 2006 to 53.7 percent from 2009 to 2012 and to 60.1 percent in 2013. That 2009-2013 “fiscal stimulus” was precisely when the economy contracted — by 4.4 percent in 2009, 5.4 percent in 2010, 8.9 percent in 2011, 6.6 percent in 2012 and 3.9 percent in 2013. By contrast, the economy grew slightly in 2014 when government spending was “only” half of GDP. That is, the economy fell when government’s share rose, and the economy rose when government’s share fell.

What is rarely or never mentioned in the typically one-sided misperception of spending “austerity” is the other side of the budget — namely, taxes.

The latest Greek efforts to appease creditors would raise corporate tax again to 28 percent, raise the 5 percent “solidarity surcharge” on personal incomes, and discourage tourism by raising the VAT on restaurants and island shopping.

Looked at separately, each of these suffocating tax rates might appear almost reasonable. Looked at together, they are totally unreasonable. To offer a Greek employee an extra €100 requires that €42 be first subtracted for Social Security tax, and then up to €46 more subtracted for income tax. Out of the original €100 of marginal labor cost, the remaining €14 of after-tax income going to a skilled worker could only buy about €10 worth of goods after value-added tax is paid.

The tax wedge between what employers pay for labor and what workers have left to spend, after taxes, is 43.4 percent for a Greek family of four with average earnings — the highest in the OECD and more than double the comparable U.S. wedge of 20.6 percent. This demoralizing tax wedge, which grows even larger at higher incomes, clearly depresses hiring and working in the formal economy. It also helps explain why a third of the Greek labor force is self-employed (making tax avoidance easier).

Little wonder that Greece has been suffering a massive brain drain — with hundreds of thousands of the best and brightest emigrating in recent years, including many doctors. At least a fourth of the remaining Greek economy survived by going underground, but that “shadow economy” ran on cash and banks are now sternly rationing cash withdrawals and transfers to delay capital flight.

To continue reading: Greece is being taxed to death

1000s Of American Jobs Could Be Lost If This…, by Mark Nestman

The problem with the hyper-expansion of international organizations the last few decades is that it’s almost impossible to keep track of all the things they’re doing to “improve” planet earth and its citizens’ lives. Here’s the latest bad idea from the Organisation for Economic Cooperation and Development (OECD), which has had a string of them, from Mark Nestman on a guest post at theburningplatform.com:

Leave it to bureaucrats to decide that while some competition is good, too much is bad. In a nutshell, that’s what the Organisation for Economic Co-operation and Development’s (OECD) ongoing campaign against lower taxes is all about. And now, they’re taking it to a whole new level.

Back in 1998, the OECD’s Committee on Fiscal Affairs (CFA) released a report outlining what it perceived as a dangerous trend: more and more countries were reducing taxes. The OECD called this trend “harmful tax competition.” It was dangerous, according to the OECD, because it had the potential to reduce tax revenues in nations that didn’t wish to engage in tax competition.

To help fight harmful tax competition, the OECD proposed that low-tax countries be forced to cooperate in tax investigations by high-tax countries. It also called for sanctions against jurisdictions engaging in harmful tax competition.

While it hardly seemed possible in 1998 that the OECD would get its way, that’s exactly what happened. Fast forward to 2015, and the OECD’s “global information exchange standard” is nearly in place. The Obama administration gave the effort a big boost by enacting the Foreign Account Tax Compliance Act (FATCA) in 2010, with the end result that more than 60 countries, including several low-tax jurisdictions, have agreed to exchange information on foreign customers in local banks, trust companies, etc., in order to avoid possible sanctions.

However, the OECD is just getting started. It’s a bit like the old saying, “Give an inch and they’ll take a mile.” Its latest campaign is to crack down on a practice it calls “base erosion and profit shifting” (BEPS). Essentially, the “War on BEPS” is designed to prevent companies from routing profits through low-tax countries. The aim is to put a stop to the global erosion in corporate tax rates, which have declined from an average of almost 50% in the early 1980s to 25% today.

For instance, Apple Computer pays tax on its global income at a rate of less than 10%, less than one-third of the top US corporate tax rate (35%). To the bureaucrats at the OECD, that’s simply an intolerable situation.

The BEPS initiative is designed to put an end to this kind of legal tax avoidance. It would force companies to cough up mountains of data on their structure and operations. Based on an analysis of this data, national tax authorities would then apportion corporate taxes based on concepts such as “location of the economic activity” and “value creation.”

The Obama administration, which seems never to reject an idea that could lead to higher tax revenues, eagerly signed on to the BEPS initiative. But in the (unlikely) event that Congress goes along, the US is likely to experience a jobs drain unlike anything it’s ever experienced.

That’s because once BEPS is in place, the only way for US multinational corporations to take advantage of lower tax rates in other countries is to relocate “economic activity” and “value creation” to those countries. Perhaps the most reliable way for a company to demonstrate adherence to these concepts is to move jobs to those countries.

To continue reading: 1000s of American Jobs Could Be Lost


Blow Up the Tax Code and Start Over, by Rand Paul

A flat tax is not a new idea and the US economy and its debt situation would undoubtedly be in a lot better shape if it had been enacted back in 1996 when Steve Forbes made it a plank in his unsuccessful presidential campaign. The idea of progressivity—the more you earn the more of each marginal dollar the government gets to steal—on the grounds that higher earners should bear more of the cost of government, is specious. Under a flat tax, government would continue to steal, and higher earners would pay more tax and thus bear more of the cost of government. From Senator and presidential candidate Rand Paul, via a guest post at theburningplatform.com:

Some of my fellow Republican candidates for the presidency have proposed plans to fix the tax system. These proposals are a step in the right direction, but the tax code has grown so corrupt, complicated, intrusive and antigrowth that I’ve concluded the system isn’t fixable.

So on Thursday I am announcing an over $2 trillion tax cut that would repeal the entire IRS tax code—more than 70,000 pages—and replace it with a low, broad-based tax of 14.5% on individuals and businesses. I would eliminate nearly every special-interest loophole. The plan also eliminates the payroll tax on workers and several federal taxes outright, including gift and estate taxes, telephone taxes, and all duties and tariffs. I call this “The Fair and Flat Tax.”

President Obama talks about “middle-class economics,” but his redistribution policies have led to rising income inequality and negative income gains for families. Here’s what I propose for the middle class: The Fair and Flat Tax eliminates payroll taxes, which are seized by the IRS from a worker’s paychecks before a family ever sees the money. This will boost the incentive for employers to hire more workers, and raise after-tax income by at least 15% over 10 years.

Here’s why we have to start over with the tax code. From 2001 until 2010, there were at least 4,430 changes to tax laws—an average of one “fix” a day—always promising more fairness, more simplicity or more growth stimulants. And every year the Internal Revenue Code grows absurdly more incomprehensible, as if it were designed as a jobs program for accountants, IRS agents and tax attorneys.
Polls show that “fairness” is a top goal for Americans in our tax system. I envision a traditionally All-American solution: Everyone plays by the same rules. This means no one of privilege, wealth or with an arsenal of lobbyists can game the system to pay a lower rate than working Americans.

Most important, a smart tax system must turbocharge the economy and pull America out of the slow-growth rut of the past decade. We are already at least $2 trillion behind where we should be with a normal recovery; the growth gap widens every month. Even Mr. Obama’s economic advisers tell him that the U.S. corporate tax code, which has the highest rates in the world (35%), is an economic drag. When an iconic American company like Burger King wants to renounce its citizenship for Canada because that country’s tax rates are so much lower, there’s a fundamental problem.


To continue reading: Blow Up the Tax Code and Start Over