The View from Right Field

Should Illinois Should Be Proud That Washington Is Following in Its Footsteps?

Being from Illinois it’s sometimes hard to proud of our government.  Illinois has the worst state credit rating in the nation and the highest unfunded pension liability, things you do not want to be number one in.

Still, Illinois may be serving as a model for the federal government.  In Thursday’s Wall Street Journal, Greg Ip asked:

“How is it possible for presidents to keep cutting most Americans’ taxes while expanding the safety net?  In great part, by borrowing.”

Honesty In Taxes: We All Have to Pay

There is a trend in tax increase proposals around the world.  Voters in Illinois this November will vote on a “Fair Tax,” i.e., a constitutional amendment to allow the Illinois legislature to pass a progressive income tax.  The key selling point in the campaign for the amendment, other than the name that the PR people gave to it is that only 3% of the people in Illinois will pay a higher tax.  Everybody else will pay less.

In New Zealand, which had an election last weekend, the Green Party proposed a wealth tax, but said it would only apply to the top 6% of people.  The center-left Labour Party rejected the wealth tax idea, but they did propose increasing the tax on income above NZ$180,000, which includes about 2% of taxpayers, from 33% to 39%.

Donald Trump’s Federal Income Taxes

Media reports are that Donald Trump, in spite of supposedly having a net worth in the billions, paid no federal income taxes in ten of the last fifteen years and paid only $750 in federal income taxes in 2016 and the same amount in 2017.  Two comments:

First, if President Trump has followed the tax laws and has not engaged in any scams or lies in order to reduce his federal income taxes,¹ then I have no problem with what he paid.  In that case, the problem is with the Internal Revenue Code, not President Trump’s individual returns.  Democrats who are appalled that President Trump paid no taxes should be telling us how the tax code should be changed.  And I am not talking about some campaign press release or position paper.  I’m talking about detailed legislation.  They should propose a bill.  They should vote on the bill and pass it.  They should tell us what they want to do by actually doing it.  The House of Representatives would be a great place to do this.

Bailouts, Turnabouts, Fair Play – And a Progressive State Income Tax

In today’s Chicago Tribune, Eric Zorn supports Illinois Governor J.B. Pritzker’s argument that Illinois should get a bail out from the federal government because, in Governor Pritzker’s words, “we pay more in federal taxes in Illinois than we get back from the federal government.”  Mr. Zorn acknowledges that federal spending is affected by things like higher poverty rates in other states, but eventually he comes back to the view that other states should bail out Illinois “[b]ecause we’ve been bailing them out for years.”

I wonder, though, why we should be looking at this on the basis of state boundaries.  Perhaps we should look at it on a county basis.  Maybe Cook County should get back from the federal government what it pays in. 

Solving the Covid-19 Crisis with Proposals You Would Have Made Anyway

As our leaders suggest solutions for the problems caused by Covid-19, it is fascinating how many of the proposals are ideas those leaders would have suggested without Covid-19.  Texas is saying abortion clinics aren’t essential businesses, while New Jersey says that gun shops aren’t essential.  And House Speaker Nancy Pelosi has suggested retroactively repealing the SALT deductibility limit for 2018 and 2019 as a way to get more disposable income to people.¹

Overall, I think the proposals you might want to give the most thought to are ones made by people who would not have suggested those ideas before Covid-19 but who think they may be appropriate now.
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¹ I suppose it would give money to people, though almost of it to rich people.
UPDATE (3/31/20 12:24 am): I deleted footnote 2, which I decided was not in keeping with the spirit of my post of March 23, 2020.

Sanders’s and Warren’s Wealth Taxes Aren’t Going to Just Cost the Super-Rich

I had been planning on writing about Elizabeth Warren’s tax-a-mega-millionaire program (actually, an annual 2% tax on net worths above $50 million and an additional 1% on amounts above $1 billion), but Bernie Sanders has come along with a bigger (and better-?) tax of his own.  Senator Sanders’s plan needs a chart (as with Senator Warren’s tax, Senator Sanders’s tax is assessed annually):

1% tax on wealth above $32 million;
2% tax on wealth between $50 to $250 million;
3% tax from $250 to $500 million;
4% tax from $500 million to $1 billion;
5% tax from $1 to $2.5 billion;
6% tax from $2.5 to $5 billion;
7% tax from $5 to $10 billion; and
8% tax above $10 billion.

Climate Change: A Bonus Question

This is to follow up on Tuesday’s post, “Climate Change Is a Two-Part Question.”  In June, The Economist wrote about “Green New Democrats” and in particular about Joe Biden’s and Elizabeth Warren’s plans for climate change.  While neither of them has endorsed the “Green New Deal,” they both have big dollar/big concept environmental plans. 

After reading the article, however, my question is this: How can you seriously claim to have a plan for climate change and not address a carbon tax or some kind of a plan for carbon pricing?  I know that cap-and-trade couldn’t pass the Democratic Congress of 2009-10, that the Liberal/National Coalition (i.e., center right) in Australia won re-election twice after repealing Australia’s carbon tax (here and here), and that the "yellow vests" in France were protesting a gasoline tax increase that was part of a climate change program. 

Cutting Taxes and Raising Spending Is Amazing – Until It Isn’t

What the United States is doing is amazing.  We are both cutting taxes and raising spending while the economy is growing and the federal deficit is already $500 billion.  This will raise the deficit to more than $1 trillion a year (did I say, “while the economy is growing”?).  And it looks like we might get away with it.  It’s amazing.

Other countries couldn’t do this.¹  But when you are big enough and you can print your own money,² you can get away with things little countries can’t.  If other countries tried to do what we are doing, they would soon find that nobody would lend them money and that, if they tried to just print more money, people would refuse to accept their money to pay for things (see, for example, Zimbabwe and, now, Venezuela).

Obamacare’s Elusive 60th Vote

Democrats complained a lot about the way Republicans passed the tax bill.  Megan McArdle explained¹:

“Last week, as you may have noticed, Republicans passed a tax bill.  As you may also have noticed, Democrats were aghast.  Passing a bill like that on straight party lines!  Using a parliamentary maneuver to push through something that could never have survived a filibuster!  How could Republicans be so brazen, so immoral, so fiscally irresponsible?

Those of us who remembered saying many of the same things during the passage of Obamacare had to beg them to stop.  I mean, we could have been seriously hurt, laughing that hard.”

In addition to the things Ms. McArdle mentioned, there were complaints about how Senators Bob Corker and Mario Rubio agreed to vote for the bill at the last minute.  Democrats complained Senator Corker had abandoned his concerns about the deficit, and Senator Rubio was bought off by a last-minute change to the family tax credit.  Of course, in making those complaints, the Democrats forgot about the Cornhusker Kickback and the Louisiana Purchase that got Senators Ben Nelson (of Nebraska) and Mary Landrieu (of Louisiana) to vote for Obamacare.

The Risk of Government Just Goes On and On

Megan McArdle rips, fairly, on the tax bill for, inter alia, fiscal irresponsibility (is this the time to be increasing the deficit and the debt?) and the way the individual tax cuts are being passed and then being repealed in 2025 (or so).  It is my understanding that, to be able to pass the bill without a filibuster in the Senate, the bill has to, among other things, not increase the deficit ten years out.  Therefore, the bill provides for the individual cuts to expire before the end of the ten-year period – but with the expectation that they will be extended at that point.  Which is what happened to the George W. Bush tax cuts passed in 2001.  The Democrats extended them in 2010.

Still, this is lousy way to write a tax bill.  While it is perhaps likely the cuts will be extended, who knows.  Is it fair to expect people to plan for the future when they don’t know what tax rules are going to be?  It is hard enough with Congress changing the tax laws every couple years.  The tax bill adds even more to Congress’s normal, somewhat scatterbrained approach.