Socialism In The Nordic Countries

On Monday The Washington Post posted an article about how the economies of the Nordic countries work.

These are some of the things noted:

Undoubtedly, the Nordic nations, with their high incomes, low inequality, free politics and strong rule of law, represent success stories. What this has to do with socialism, though, is another question.

And the answer, according to a highly clarifying new report from analysts at JPMorgan Chase, is “not much.”

Drawing on data from the World Bank, the Organization of Economic Cooperation and Development and other reputable sources, the report shows that five nations — Sweden, Denmark, Finland, Norway and the Netherlands — protect property rights somewhat more aggressively than the United States, on average; exercise less control over private enterprise; permit greater concentration in the banking sector; and distribute a smaller share of their total income to workers.

“Copy the Nordic model if you like, but understand that it entails a lot of capitalism and pro-business policies, a lot of taxation on middle class spending and wages, minimal reliance on corporate taxation and plenty of co-pays and deductibles in its healthcare system,” the report notes.

This really does not sound like the utopia that Bernie Sanders is pushing–particularly the co-pays and deductions.

The article continues:

Sanders and other left-leaning Democrats promise to pay for tuition-free college and Medicare-for-all with higher taxes on the top 1 percent of earners. Most Nordic countries, by contrast, have zero estate tax. They fund generous programs with the help of value-added taxes that heavily affect middle-class consumers.

In Sweden, for example, consumption, social security and payroll taxes total 27 percent of gross domestic product, as compared with 10.6 percent in the United States, according to the JPMorgan Chase report. The Nordic countries tried direct wealth taxes such as the one that figures prominently in the plans of Sen. Elizabeth Warren (D-Mass.); all but Norway abandoned them because of widespread implementation problems.

The Nordic countries’ use of co-pays and deductibles in health care may be especially eye-opening to anyone considering Sanders’s Medicare-for-all plan, which the presidential candidate pitches as an effort to bring the United States into line with European standards.

His plan offers an all-encompassing, government-funded zero-co-pay, zero-deductible suite of benefits, from dental checkups to major surgery — which no Nordic nation provides.

The Netherlands’ health insurance system centers on an Obamacare-like mandate to buy a private plan; individuals face an annual deductible of $465 (as of 2016), according to the Boston-based Commonwealth Fund.

Dutch consumers’ out-of-pocket spending on health care represented 11 percent of total health expenditures in 2016, according to the Peterson-Kaiser Health System Tracker — the same percentage as in the United States. In Sweden, meanwhile, out-of-pocket spending accounted for 15 percent of health expenditures. Who knew?

The article concludes by noting that the burden for these programs falls on the middle class–the rich will always have tax accountants to limit the amount of taxes they pay–the middle class has no such luxury. Bernie Sanders’ proposals will essentially rob the poor to pay the rich. I really don’t think that is what most Americans have in mind.

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.

How Much Is Enough?

Will there ever come a time when the government feels that it has enough money to run the country, the state, or your town? I am beginning to wonder.

Holly Robichaud at the Boston Herald posted an article today about the tax bill passed by the Massachusetts House yesterday. While reading the details of this bill, please keep in mind that state revenue is presently $575 million above predictions. So what did the House do? They raised taxes!

The article reports:

How much are taxes going up?  Bacon Hill says $500 million.  Do you trust them?  $500 million is just the first year.  This is a tax package on steroids.  It gets bigger every year with no end in sight. 

Bacon Hill indexed the gas tax to inflation which means it will increase every year.  This year it is an additional 3 cents.  Next year it will increase again and the following year and the following year and the following year…..  It is the gas tax increase to infinity and beyond. 

Bacon Hill also tied the tax on underground storage tanks to inflation.

The cigarette tax is going up $1 per pack.  This is a direct attack on poor people. 

Unless the voters of Massachusetts change the way they vote, we can expect to see more of the same.

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The Boston Globe Gets It Right

I live in Massachusetts. I don’t plan to live in Massachusetts too much longer as my husband will be retiring at the end of this year, and the Massachusetts tax structure does not make retirement here a reasonable option. Real estate taxes are high, the temporary increase in the rate of the state income tax has been with us for more than twenty years, and if the current governor has his way, things will only be getting worse.

Today’s Boston Globe posted an editorial by Barbara Anderson, executive director of Citizens for Limited Taxation. The article is entitled, “Manage money from previous tax hikes first.” That pretty much says it all, but she goes on to explain what she means.

The article reminds us of some of the history of tax increase in Massachusetts:

In 1989, Governor Michael Dukakis returned from the presidential campaign trail and demanded tax hikes to fund a billion-dollar budget increase; supporters rallied at the State House, some of them dressed as giant crayons, to protest potential cuts to the arts. The legislative leadership was able to get the votes for the tax package only after promising that the new income tax rate, increased from 5 percent to 5.75 percent, would be temporary. The Legislature raised the rate again the next year, “temporarily,” to 6.25 percent.

…Instead, in 2011 a formula created in 2002 dropped the rate to 5.25 percent, where it remains — 24 years after the first “temporary” increase, and 12 years after the voters demanded a rollback to 5 percent.

Ms. Anderson further reminds us:

The Massachusetts tax burden is the fourth highest in the nation per capita, eighth highest relative to personal income. The state is not suffering from a lack of taxes; it is suffering from a lack of accountability for the taxes already paid. The ongoing scandal over electronic-benefits cards is a maddening example of this.

I think taxpayers in the Commonwealth of Massachusetts might be a little less grumpy about their tax rate if we didn’t routinely see stories about the Commonwealth’s waste of taxpayer money. Part of that waste is due to the fact that politicians like to spend other people’s money, but another part is the fault of the voters who keep electing the same people year after year. Until someone holds the Massachusetts legislature accountable, they will continue to be out of control. It also would help to have two viable political parties in the Commonwealth, but that may be a pipe dream!

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The Taxman Cometh (Again)

Investors.com posted an article about some of the ideas the government is considering in its search for increased revenue to close the budget deficit. It seems that the government is eyeing our 401(k) accounts.

The article states:

Rather than the current $50,000, Congress is considering limiting employer-employee 401(k) contributions to 20% of an employee’s salary up to a ceiling of $20,000, an idea dubbed the “20/20” plan. Even voters without 20/20 vision will quickly see it as another promise broken by a political culture whose spending has reached the level of insanity.

The Post (the New York Post) also interviewed Urban-Brookings Tax Policy Center co-director William Gale, whose idea of replacing all tax deductions on 401(k)s and IRAs with an 18% credit sent straight into everyone’s retirement account is also being considered within Congress.

This news comes as it was reported today that Social Security and Medicare will be out of money by 2033, three years earlier than last year’s estimate.

How about simply cutting the spending, ending GSA boondoggles, and making the first family pay for their own vacations?

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The Impact Of Raising Taxes On Dividends

This is a chart from today’s Wall Street Journal:

1dividends

The chart shows what happens when taxes on dividends is raised. The editorial that goes with the chart goes into the details of why this happens. Please follow the link to read the details.

The chart was posted in response to President Obama’s proposal to raise taxes on dividends from today’s rate of 15 percent to 39.6 percent, actually 41 percent after the phase out of deductions and exemptions, and a 3.8 percent surcharge, giving you an effective rate of 44.8 percent. The new rate would only apply to those making over $200,000 a year (individuals) or $250,000 (couple).

Exactly who would be impacted by this increase in the dividends tax? Actually, senior citizens would be hardest hit (yes, that is one of many reasons I am up in arms about this!). As you can see from the graph, when the tax rate on dividends goes down, corporations pay more dividends. Many senior citizens live on their dividends–if dividends decrease, their income decreases. Paying fewer dividends also devalues stocks–thus impacting everyone’s stock portfolio or 401k plan. Everyone loses.

The article concludes:

Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.

We need to stop worrying so much about soaking the rich and worrying more about making tax policy that allows everyone who works hard to become rich!

 

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