It’s About The Money–Health Concerns Are Being Ignored

Many of our more liberal states are looking for additional sources of revenue. Unfunded liabilities and expanded welfare programs and medical programs have been very expensive to the states that have embraced them. One thing that many states are looking at to increase tax revenue is the legalization of marijuana. On Saturday, Yahoo Finance posted an article about how much income legal marijuana is actually generating in California.

The article reports:

California’s legal cannabis revenue isn’t growing as fast as many state officials anticipated, recent data suggests. And one industry expert believes that taxes and a still thriving black market for marijuana, are partly to blame.

“The legal market is struggling with the set of regulatory rules and tax rates that are pretty onerous and make it fairly uncompetitive versus a thriving black market that’s had the whole industry for 60 years now,” Tom Adams, BDS Analytics managing director, told Yahoo Finance’s YFi PM in an interview this week.

California’s marijuana excise tax produced $74.2 million in revenue for the second quarter of this year, according to the California Department of Tax and Fee Administration.

Yet back in January, Governor Gavin Newsom’s proposed budget predicted the state would generate $355 million in excise tax revenues for the fiscal year. That projection was later revised down again to $288 million back in May.

The shortfall is reminiscent of Michigan, where a nascent medical marijuana market has resulted in lower than expected revenue.

Adams contended the legal market faces additional expenses like the cost of testing, that the illegal market does not.

Meanwhile, there is evidence that marijuana is harmful to the developing brains of young adults. There also may be a link between marijuana and mental illness.

In January 2019 I posted an article which stated:

After an exhaustive review, the National Academy of Medicine found in 2017 that “cannabis use is likely to increase the risk of developing schizophrenia and other psychoses; the higher the use, the greater the risk.” Also that “regular cannabis use is likely to increase the risk for developing social anxiety disorder.”

…These new patterns of use have caused problems with the drug to soar. In 2014, people who had diagnosable cannabis use disorder, the medical term for marijuana abuse or addiction, made up about 1.5 percent of Americans. But they accounted for eleven percent of all the psychosis cases in emergency rooms—90,000 cases, 250 a day, triple the number in 2006. In states like Colorado, emergency room physicians have become experts on dealing with cannabis-induced psychosis.

Cannabis advocates often argue that the drug can’t be as neurotoxic as studies suggest, because otherwise Western countries would have seen population-wide increases in psychosis alongside rising use. In reality, accurately tracking psychosis cases is impossible in the United States. The government carefully tracks diseases like cancer with central registries, but no such registry exists for schizophrenia or other severe mental illnesses.

On the other hand, research from Finland and Denmark, two countries that track mental illness more comprehensively, shows a significant increase in psychosis since 2000, following an increase in cannabis use. And in September of last year, a large federal survey found a rise in serious mental illness in the United States as well, especially among young adults, the heaviest users of cannabis.

Is the extra tax revenue worth it?

Do We Really Want To Give Power To These People?

Yesterday The Hill posted an article with the following headline, “Democrats vow to repeal tax reform, putting taxes in focus for 2020.” Why? Federal tax revenue has increased, and the economy is doing very well, why would you want to mess with success? Because you can’t let President Trump succeed at anything. And if the American people figure out that lower taxes are better than higher taxes, Washington will lose its stranglehold on the American taxpayer.

The article reports:

Former Vice President Joe Biden made it clear: “First thing I’d do is repeal those Trump tax cuts.” Sen. Kamala Harris (D-Calif.) seconded the motion, saying she would repeal the tax cuts on “day one.” Mayor Bill de Blasio has attempted to raise taxes on high earners in New York City.

Democrats seem eager to prove that they still have no idea how jobs and wage increases are created in a capitalist economy — that is, by capital investment that starts new businesses or expands existing ones, increasing the demand for labor as jobs are created, bidding up wages.  

But stimulating capital investment requires incentives that arise from reducing tax rates. That is what President Trump and Republicans in Congress did in their Tax Cuts and Jobs Act of 2017.

Was it good for America and its workers for the federal government to impose the highest marginal corporate tax rates in the industrialized world? Before Trump’s tax reform, those tax rates were nearly 40 percent, counting federal rate and state corporate rates, on average. Most of the rest of the world imposed marginal tax rates only half as high on their businesses.

Tax reform reduced the rate on businesses to the world average and ended double taxation on earnings of U.S. corporations abroad. That is why the U.S. economy has created millions of jobs with Trump in the Oval Office. The Democrats’ ball and chain on American business has been sharply cut back, creating a capital investment boom.

The article concludes:

And contrary to Democratic disinformation, President Trump’s tax reform included tax cuts for the middle class of about $2,000 a year per family; rates for families making $19,000 to $77,000 were cut by 20 percent. The same occurred for single taxpayers making $9,500 to $38,700. Tax reform also nearly doubled the standard deduction, and actually doubled the child tax credit — both of which benefit lower-income workers the most.

Amazingly, these tax benefits have been confirmed by the New York Times and the Washington Post, which have acknowledged that most Americans received a tax cut. H&R Block concluded that “overall tax liability is down 24.9 percent, on average.” So much for the socialist derision of tax reform.  

Raising taxes would only consign America’s working people back to renewed recession, as under Biden and President Obama. Democrats seem to want to run as they did in 1984, when Walter Mondale campaigned on a tax-increase platform. Then recession occurred when President Bush agreed to raise taxes in a 1989 budget deal, which only increased the deficit.

“If it ain’t broke, don’t fix it” should be the motto of the day. The Trump economy is doing very well. The Obama economy did not do well. In 2020, American voters will have a chance to choose between the two. Let’s hope they choose the right one.

A Well-Deserved Honor

Steven Hayward posted an article at Power Line Blog today about a Presidential Medal of Freedom that President Trump will be awarding to Arthur Laffer, the father of the Laffer Curve.

So what is the Laffer Curve. The International Finance website defines it as follows:

The term “ Laffer Curve” was coined by Jude Wanniski (former associate editor of the The Wall Street Journal) in 1978 when Wanniski penned an article named “Taxes, Revenues and the Laffer Curve”. In December 1974, Wanniski who was the associate editor of The Wall Street Journal along with Arthur Laffer, Professor at the Chicago University, Donald Rumsfeld ( Chief of Staff of to President Gerald Ford) and Dickey Cheney (Rumsfeld’s deputy) were discussing President Ford’s WIN (Whip Inflation Now)  proposal for tax increases at a restaurant in Washington, Laffer grabbed a napkin and a pen and sketched  a curve on the napkin illustrating the tradeoff between tax rates and tax revenues, Wanniski later named it as the “Laffer Curve”.  A humble and honest academician who served Former U.S. President Ronald Reagan’s Economic Advisory Board, Arthur credited the theory to 14th century Muslim scholar Ibn Khaldun and eminent Economist John Maynard Keynes.

This is what the Laffer Curve looks like:

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The “Laffer Curve” is a theoretical curve showing the relationship between applied income tax rate and the resulting government revenue. The theory propagates the following points:

    • A tax rate of zero would result in zero government revenue
    • A tax rate of 100% will also result in zero government revenue
    • As the tax rate increases to above zero, there is an increase in the revenues of the government
    • As the tax rate continues to increase, the resultant increase in government revenue begins to slow
    • At a particular point the curve peaks and turns back towards the horizontal axis

The Laffer Curve is the reason that the federal government will collect more tax revenue this year despite the fact that President Trump lowered taxes. When taxes are raised, those with the money to hire good tax accountants find a way to avoid paying high taxes and tax revenues go down. Those of us without good tax accountants (usually the middle class) are stuck paying the increased taxes. The spending power of the middle class decreases, and the economy slows down. When the middle class has more money to spend, the economy does well.

Congratulations, Arthur Lapper. The recognition is well deserved.

Crony Capitalism Stopped In New York City

Heritage.org posted an article today about Amazon’s decision not to locate in New York City.

The article reports:

Based on Amazon’s public statement, it seems the company couldn’t rely on the deals it had cut or the political support it had received to last beyond the next election. And businesses can’t base long-term decisions like this on shifting political sand.

That’s part of the problem with crony capitalism. It may procure short-term wins for a select few politicians and for businesses that can afford to pay to play, but it’s not a strategy for long-term success.

Employers want to set up shop in places where they can grow and succeed. The best environment for that is a level playing field with minimal government interference and low, broad-based taxes—not picking winners and losers through special-interest subsidies

A favorable business environment is one where local leaders work to help all businesses equally, not a select few. Employers want leaders who can listen to their needs without telling them how to run their business, and they want communities and leaders that welcome the jobs and economic growth that employers bring, instead of protesting their presence. 

It turns out this is not what New York City had to offer. Amazon said that certain politicians “made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward.”

New York City is not a friendly business climate, and losing those special “relationships” would have left it exposed to the same burdens and barriers that other businesses face in New York. 

For most businesses, deciding where to locate really all comes down to the bottom line.

The article notes that businesses and people are leaving New York:

According to the ALEC-Laffer State Economic Competitiveness Index, “Rich States, Poor States,” New York ranks dead last in the overall economic outlook ranking, while Virginia ranks among the top 10. 

And Amazon isn’t the only company wary of locating in New York. Plenty of individuals, families, and businesses are fleeing the state, and they’re taking their income and tax revenues with them. 

In fact, between 1997 and 2016, every dollar of income that left New York was replaced by only 71 cents coming in. That deficit will only continue under New York’s current policies.

The article concludes:

States and cities should also take a lesson from this New York episode: Crony capitalism isn’t the way to win over more business. The key is to provide a level playing field that offers opportunity for all businesses to grow and thrive.

It Really Is The Spending

The following graph was posted at The Washington Examiner yesterday:

The article notes:

As shown in the chart below, in the 50 years prior to the effective date of the Trump tax cuts (1968-2017), tax revenue averaged 17.4 percent of gross domestic product, while spending averaged 20.3 percent. With the Trump tax cuts in place, revenue is below the historical average for the next few years, but by the middle of the decade, it returns to that average and then surpasses it as some provisions of the tax cut begin to expire. By 2029, the end of the CBO projection period, revenue reaches 18.3 percent — or nearly one point of GDP above its historical average.

We need some serious budget-cutting in Washington. It is time for baseline budgeting to stop. Department budgets need to start from scratch and justify every penny.

The Real Numbers

Yesterday Investor’s Business Daily posted an editorial about the federal deficit and federal revenues. The numbers tell a very different story than the one the media would have you believe.

The editorial reports:

The latest monthly budget report from the Congressional Budget Office shows the deficit jumping $102 billion in just the first two months of the new fiscal year.

…A true apples-to-apples comparison, the CBO says, shows that the deficit climbed by just $13 billion.

So, no, the deficit is not soaring.

The editorial explains:

In fact, the CBO report shows that overall tax revenues climbed by $14 billion in the first two months of the year, compared with the same months last year. Which means they continue to hit new highs.

The CBO report shows that combined income and payroll taxes were the same in the first two months of the new fiscal year as they were last year. That’s even though far less money was withheld from paychecks thanks to the Trump tax cuts.

It also found that corporate income taxes went up by $5 billion. That’s despite the “massive corporate tax giveaway” that Democrats want to repeal.

Why are these revenues flat or up? Simple: The tax cuts help spur accelerated economic growth, which create jobs and spark income gains. More workers and higher wages mean more tax revenues. On the corporate side, a bigger economy means more profits, which even when taxed at lower rates can produce more revenue. This is exactly what advocates of Trump’s pro-growth tax cuts said would happen.

Meanwhile, revenue from “other sources” climbed by $8 billion. (To be clear, at least some of that $8 billion came from the re-imposition of ObamaCare’s nefarious tax on insurance premiums, which Congress had suspended the year before.)

But while revenues climbed by $14 billion, spending in the first two months of the new fiscal year climbed by $27 billion.

The obvious solution to the deficit problem is to limit spending. If we can’t agree on that, we could lower taxes again to increase revenue further, but I suspect that would really cause some Congressional heads to explode.

The Problem With Taxes In America

Walter Williams, a professor of economics at George Mason University, posted an article at The Daily Wire today about taxes.

Professor Williams noted a few things about taxes in America:

The argument that tax cuts reduce federal revenues can be disposed of quite easily. According to the Congressional Budget Office, revenues from federal income taxes were $76 billion higher in the first half of this year than they were in the first half of 2017. The Treasury Department says it expects that federal revenues will continue to exceed last year’s for the rest of 2018. Despite record federal revenues, 2018 will see a massive deficit, perhaps topping $1 trillion. Our massive deficit is a result not of tax cuts but of profligate congressional spending that outruns rising tax revenues. Grossly false statements about tax cuts’ reducing revenue should be put to rest in the wake of federal revenue increases seen with tax cuts during the Kennedy, Reagan and Trump administrations.

A very disturbing and mostly ignored issue is how absence of skin in the game negatively impacts the political arena. It turns out that 45 percent of American households, nearly 78 million individuals, have no federal income tax obligation. That poses a serious political problem. Americans with no federal income tax obligation become natural constituencies for big-spending politicians. After all, if one doesn’t pay federal income taxes, what does he care about big spending? Also, if one doesn’t pay federal taxes, why should he be happy about a tax cut? What’s in it for him? In fact, those with no skin in the game might see tax cuts as a threat to their handout programs.  (The underline is mine.)

The above information might explain why Democrats keep getting elected despite their overtaxation and reckless spending (yes, I know the Republicans also overspend).

The article concludes:

Another part of the Trump tax cuts was with corporate income — lowering the rate from 35 percent to 21 percent. That, too, has been condemned by the left as a tax cut for the rich. But corporations do not pay taxes. Why? Corporations are legal fictions. Only people pay taxes. If a tax is levied on a corporation, it will have one or more of the following responses in order to remain in business. It will raise the price of its product, lower its dividends to shareholders and/or lay off workers. Thus, only flesh-and-blood people pay taxes. We can think of corporations as tax collectors. Politicians love our ignorance about this. They suggest that corporations, not people, will be taxed. Here’s how to see through this charade: Suppose a politician told you, as a homeowner, “I’m not going to tax you. I’m going to tax your land.” I hope you wouldn’t fall for that jive. Land doesn’t pay taxes.

Getting back to skin in the game, sometimes I wonder whether one should be allowed in the game if he doesn’t have any skin in it.

It’s time to insure that everyone has some tax burden so that they will consider that burden when they vote.

The Numbers Tell The Story

Yesterday Investor’s Business Daily posted an editorial about the growing federal deficit. The numbers in the editorial tell the story of what is actually happening:

Each month the Treasury Department releases its tally of federal spending and revenues. The most recent data are through the month of August. Since the federal government starts its fiscal year in October, the latest report includes all but one month of the 2018 fiscal year.

What do the data show?

Through August, the federal deficit topped $898 billion. Over the same period last year the deficit was $674 billion.

So, the deficit is running $224 billion higher this fiscal year compared with last.

But the Treasury data also show that federal revenues through August totaled $2.985 trillion. That’s an increase of $19 billion over the previous year.

In other words, despite Trump’s massive tax cuts, federal revenues are running higher this year than last.

The problem is that federal spending has climbed even faster. Through August, outlays totaled $3.88 trillion. That’s $243 billion more than the prior fiscal year.

…The Treasury data show that while corporate income tax receipts are down, individual income tax revenue is up by $100 billion — a 7% gain — over last year. Payroll taxes are up by $5 billion. Revenues from excise taxes and customs duties are also up.

So, while corporations are paying fewer taxes, they’re hiring more workers and paying them more, which is generating additional income and payroll taxes. This is exactly what advocates of the tax cuts predicted would happen.

As Kudlow explained in his remarks, increased growth has “just about paid for two thirds of the total tax cuts.”

The article goes on to illustrate that government spending is totally out of control. Until the spending drops, the deficit will not decrease. Those of us who voted for Republicans expected them to stop the runaway spending. If they continue to spend like drunken sailors, they will lose their majority.

But It Sounds So Good

On Wednesday, Investor’s Business Daily posted an editorial about the cost of free stuff. Yes, you read that right.

The editorial reports:

In a devastating piece that appeared on the left-of-center web site Vox (to its credit), Manhattan Institute fellow Brian Riedl went through the simple math of what free actually costs. It’s a lot.

It’s not just the free aspect, but the fact that the democratic socialists have made so many promises that must be paid for that will make it so tough to swallow for most voters.

Riedl looked at the 10-year costs of all the various promises made by Bernie Sanders, Alexandria Ocasio-Cortez, and other self-described democratic socialists. He was as generous as could be in his estimates, often accepting the democratic socialists’ cost estimate even when it was patently and absurdly too low. It’s quite a laundry-list of promises with enormous costs: “Free college” ($807 billion); Social Security expansion ($188 billion); single-payer health care ($32 trillion); guaranteed jobs at $15 per hour plus benefits ($6.8 trillion); infrastructure ($1 trillion); student loan debt forgiveness ($1.4 trillion).

Net cost: about $42.5 trillion over 10 years, give or take a few hundred billion. To paraphrase the late, great Republican Sen. Everett Dirksen: “A trillion here, a trillion there, and pretty soon you’re talking real money.”

I wonder if the young people who support socialism understand how much it costs.

The article reminds us that our spending is already out of control:

As it is, current federal estimates expect about $44 trillion in tax revenues over that same period, with a deficit of roughly $12.4 trillion. Remember: All this democratic socialist spending comes on top of what we’re already spending.

Please consider this when you vote. If you want the government to take less of your money, the only hope you have (although it is a small hope) is to vote Republican.

The Facts vs The Talking Points

Remember when the Democrats said that the Trump tax cuts would blow a huge hole in the deficit because of the money that would not be collected. Those who believed the Democrats need to study the Laffer Curve. Although liberals keep saying it doesn’t work, the history of tax cuts proves it does.

Yesterday Investor’s Business Daily posted an editorial about the impact of President Trump’s Tax Cuts.

The editorial states:

The latest monthly budget report from the nonpartisan Congressional Budget Office finds that revenues from federal income taxes were $76 billion higher in the first half of this year, compared with the first half of 2017. That’s a 9% jump, even though the lower income tax withholding schedules went into effect in February.

The CBO says the gain “largely reflects increases in wages and salaries.”

For the fiscal year as a whole — which started last October — all federal revenues are up by $31 billion. That’s a 1.2% in increase over last year, the CBO says.

The Treasury Department, which issues a separate monthly report, says it expects federal revenues will continue to exceed last year’s for the rest of the 2018 fiscal year.

The editorial concludes:

As we have said many times in this space, the problem the country faces isn’t that taxes are too low, but that spending is too high. The CBO projects that even with the Trump tax cuts in place, taxes as a share of GDP will steadily rise over the next decade, and will be higher than the post-World War II average.

But bringing in more tax revenues doesn’t help if spending goes up even faster. And that has, unfortunately, been the case, as the GOP-controlled Congress has gone on a spending spree.

Look at it this way. Tax revenues are up by $31 billion so far this fiscal year compared with last year. But spending is up $115 billion.

In other words, the entire increase in the deficit so far this year has been due to spending hikes, not tax cuts.

There are too many Republicans in Congress who don’t understand why the American voters sent them there. The Democrats have always loved to spend other people’s money, but the Republicans were supposed to be the alternative to that. Unfortunately, many Republicans have failed the voters. The only way to fix Washington is to unelect every Congressman who votes for spending increases. Otherwise the spending will only get worse.

The Economic Impact Of Tax Cuts

First of all, let’s take a short walk down memory lane to a Washington Post article from November 20, 2017.

The article explains how the Democrats plan to use the tax cut plan in the 2018 mid-term elections:

The goal of the ads will be to hit two messages. The first is that the GOP changes to the tax code themselves would be enormously regressive, showering most of their benefits on the wealthy while giving crumbs to working- and middle-class Americans or even raising their taxes. The second is that these tax cuts would necessitate big cuts to the safety net later — the ad references $25 billion in Medicare cuts that could be triggered by the GOP plan’s deficit busting — further compounding the GOP agenda’s regressiveness down the line.

Geoff Garin, a pollster for the Democratic super PAC Priorities USA, tells me that his polling shows that this combination alienates working-class whites, particularly Obama-Trump voters. “They are fundamentally populist in their economic views, and they find big breaks to corporations and the wealthy especially heinous when the flip side of that means cutting Medicare and Medicaid,” Garin said.

That was the original plan. Now lets look at an article posted yesterday in The New York Post about the results of the tax cut plan.

The New York Post reports:

We are already starting to see a fiscal dividend from Trump’s pro-business tax, energy and regulatory policies. The Congressional Budget Office reports that tax revenues in April — which is by far the biggest month of the year for tax collections because of the April 15 filing deadline — totaled $515 billion. That was good for a robust 13 percent rise in receipts over last year. ‎

…But there’s another lesson, and it’s about how wrong the bean counters were in Congress who said this tax bill would “cost” the Treasury $1.5 trillion to $2 trillion in most revenues over the next decade. If the higher growth rate Trump has already accomplished remains in place, then the impact will be well over $3 trillion of more revenue and thus lower debt levels over the decade.

Putting people back to work is the best way to balance the budget. Period.

The article concludes:

No one thought that Trump could ramp up the growth rate to 3 percent or that his policies would boost federal revenues. But he is doing just that — which is why all that the Democrats and the media want to talk about these days is Russia and Stormy Daniels.

I want to go back to the original Democrat statements about the damage the tax cuts would do to the economy. Did they really believe that or do they simply want more of our money under their control? Either way, it doesn’t say good things about them–either they don’t understand economics (see the Laffer Curve) or they lied. Obviously they have to continue lying if they want to use the tax cuts as part of their mid-term election campaign–they have already stated that they want to rescind many of the tax breaks that have resulted in the recent economic growth.

If you are inclined to vote on pocketbook issues, the only choice in November is to vote for Republican candidates for Congress.

The Problem Is Not The Revenue–It’s The Spending

CNS News posted a story today stating that the federal government raked in a record of approximately $2,883,250,000,000 in tax revenues through the first eleven months of fiscal 2015 (Oct. 1, 2014 through the end of August), according to the Monthly Treasury Statement released Friday. This equals approximately $19,346 for every person who was working either full or part-time in August.

The article further reports:

Despite the record tax revenues of $2,883,250,000,000 in the first eleven months of this fiscal year, the government spent $3,413,210,000,000 in those eleven months, and, thus, ran up a deficit of $529,960,000,000 during the period.

…The largest share of this year’s record-setting October-through-August tax haul came from the individual income tax. That yielded the Treasury $1,379,255,000,000. Payroll taxes for “social insurance and retirement receipts” took in another $977,501,000,000. The corporate income tax brought in $268,387,000,000.

The chart below is an illustration of America‘s spending problem.

The article also noted that under ObamaCare new taxes took effect in 2013.

Excessive spending is a problem that Washington has no incentive to fix. It is up to the voters to give them an incentive–fix this or we vote you out of office!

 

Income Inequality

Lately we have been hearing a lot about ‘income inequality.’ It’s even a Biblical concept–Jesus said, “The poor you will always have with you, and you can help them any time you want.” So income inequality was with us in Biblical times and is still with us. It seems to be a constant thing. Other than help the poor among us, do we have the ability to change it. Well, we have a government that right now is trying.

Yesterday CNS News reported that according to a new study by the Congressional Budget Office, the top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010. So what did the bottom 60 percent pay? That sounds like too few people pulling the wagon with too many people in it.

The article explains:

The households in the top 20 percent by income paid 92.9 percent of net income tax revenues taken in by the federal government in 2010, said CBO. The households in the fourth quintile paid another 13.3 percent of net income tax revenues. Together, the top 40 percent of households paid 106.2 percent of the federal government’s net income tax revenue.

The third quintile paid another 2.9 percent—bringing the total share of net federal income tax revenues paid by the top 60 percent to 109.1 percent.

That was evened out by the net negative income tax paid by the bottom 40 percent.

There is one aspect of the tax code that needs to be considered when viewing these statistics. When Congress has the highest percentage of millionaires per capita in America, why would they produce a tax code that is so unfavorable to the rich? Well, it’s not totally unfavorable to the rich–it is unfavorable to rich people who currently are earning their wealth. Family wealth carefully invested in tax shelters is not taxable. Previously acquired assets are not taxed unless they are sold.

The American tax code is already 13 miles long. We need to scrap it, and make it very simple–how much did you make, how much did you give to charity, how much mortgage interest did you pay? Subtract that from your gross income and pay a small percentage of what is left. The charitable deduction encourages people to support charitable works and the mortgage deduction encourages people to buy houses and form communities. End of story.

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