The wool is being pulled over the eyes of the American people. The President has revealed a budget with $3.5 trillion in spending and a $1.2 trillion deficit. The wool is in the latter number, and the eyes are really our collective pockets. Every dollar the government spends must eventually be paid for with a dollar of taxes. At some future point in time, the deficit must be made whole. But since the money is not being taken out of the peoples’ pockets today, outrage over the obscene level of spending is muted.
Unfortunately, most people are not computing their implied tax rate. As in, if instead of deficit spending, taxes were raised to cover the difference, tax rates would be much higher than they currently are. Estimated receipts for 2010 are $2.4 trillion, with $1.2 trillion of that coming from income taxes (both individual and corporate). If the entire budget deficit were covered by an increase in income taxes, rates would have to double. Double. Double? Double! Repeat: Double!
For reference, $940 billion of the remaining $1.2 trillion in receipts comes from social security and other payroll taxes – thus, it is assumed for purposes of calculating the implied tax rate that the increase is covered by income taxes.
If taxpayers understood that their implied tax rate is double in order to cover the budget deficit, would it still be tolerated? Of course, if actual income tax rates were doubled, would income tax receipts double? Both questions are a few notches beyond rhetorical.
The question remains on how to adjust the implied tax rate given that the taxes will be paid in the future. Is the number higher because of the interest cost on the debt, or should it be lowered due to the massive inflation that will no doubt be generated by the absurd government spending and printing of money?
Maybe we will all feel better after seeing our government healthcare provider. Wait – is that cost included in our implied tax rate?
Tuesday, May 12, 2009
Have Your Cake, Eat it Too, Pay Tax on Cake, See Government Doctor
A proposal is being floated to tax sugary drinks such as soda and Gatorade. Coincidentally, a proposal is being floated to socialize the healthcare industry. The two are inextricably linked. If everyone is paying for everyone else’s healthcare, unquestionably behavior linked to health should be dictated by everyone.
As the precept goes, when something is taxed, there is less of it. Thus, by taxing the consumption of sugary drinks, there will be less consumed. A better diet will no doubt lead to better health, and thus the collective costs to society will be lowered. The same, of course, goes for things like cigarettes. If the taxpayer is on the hook for treating lung cancer, then it is in the taxpayer’s interest to minimize smoking. It should not end there, though. Really any behavior that poses a risk to health should be taxed, or banned altogether.
It must be so. Another precept is that price ceilings lead to shortages. As in, the myth being propagated that the government can simply control healthcare prices is just that. There is no messianic hand wave that will magically keep costs under control when healthcare is “free” to all. Thus, the only way to keep the cost of socialized healthcare even remotely palatable is to massively regulate behavior.
Everyone must be coerced to live a healthier lifestyle. No activities with injury potential can be tolerated, and should be banned. Eating right and regular exercise will be a requirement. People must be eating their five servings of fruits and vegetables, taking their vitamins, and getting plenty of cardiovascular workouts. Urine samples can be used to ensure the proper consumption of essential nutrients. The government will regularly screen blood samples of the population to monitor important indicators of health. A workout database can be constructed to keep everyone on a regimen. People will log their routines via a government web site. Better yet, exercise equipment – whether at a gym or in the home – can be fitted with a wireless device to automatically send data to the centralized system. Government inspectors can regularly make visits to properly calibrate the meters. We will need full genetic screening of the population as well. The government must know each individual’s susceptibility to various ailments, and enforce proper preventative measures.
Or…We can choose to live in a free society where people make their own decisions, and also assume responsibility for the consequences of their actions.
As the precept goes, when something is taxed, there is less of it. Thus, by taxing the consumption of sugary drinks, there will be less consumed. A better diet will no doubt lead to better health, and thus the collective costs to society will be lowered. The same, of course, goes for things like cigarettes. If the taxpayer is on the hook for treating lung cancer, then it is in the taxpayer’s interest to minimize smoking. It should not end there, though. Really any behavior that poses a risk to health should be taxed, or banned altogether.
It must be so. Another precept is that price ceilings lead to shortages. As in, the myth being propagated that the government can simply control healthcare prices is just that. There is no messianic hand wave that will magically keep costs under control when healthcare is “free” to all. Thus, the only way to keep the cost of socialized healthcare even remotely palatable is to massively regulate behavior.
Everyone must be coerced to live a healthier lifestyle. No activities with injury potential can be tolerated, and should be banned. Eating right and regular exercise will be a requirement. People must be eating their five servings of fruits and vegetables, taking their vitamins, and getting plenty of cardiovascular workouts. Urine samples can be used to ensure the proper consumption of essential nutrients. The government will regularly screen blood samples of the population to monitor important indicators of health. A workout database can be constructed to keep everyone on a regimen. People will log their routines via a government web site. Better yet, exercise equipment – whether at a gym or in the home – can be fitted with a wireless device to automatically send data to the centralized system. Government inspectors can regularly make visits to properly calibrate the meters. We will need full genetic screening of the population as well. The government must know each individual’s susceptibility to various ailments, and enforce proper preventative measures.
Or…We can choose to live in a free society where people make their own decisions, and also assume responsibility for the consequences of their actions.
Tuesday, May 5, 2009
Maybe We Can Steal Prosperity
It might be time to start getting creative to deal with the current economic crisis. In Hazlitt’s classic Economics in One Lesson, he described the concept of the government spending money to stimulate the economy. He claimed that the purchasing power argument, whereby money is funneled through the government and thus spent in the economy, was akin to a thief robbing you and spending your money at restaurants and to buy cars. He says, “But for every job his spending provides, your own spending must provide one less, because you have that much less to spend. When your money is taken by a thief, you get nothing in return. When your money is taken through taxes to support needless bureaucrats, precisely the same situation exists.”
While on the surface Hazlitt sounds completely and totally logical, the concept of stealing money to get the economy going might not be all that far fetched. Hazlitt was writing well before the modern era. He must not have pondered all the consequences of widespread theft, and the numerous benefits to the economy as a whole. Maybe the government should create a new agency that hires thieves (yes, more employment) to break into people’s houses and steal their stuff.
Not only does the thief have money to spend in the economy, but the victims (if that word is even appropriate in this case) will now need to replace the stolen items and thus create more demand in the economy. But wait – what about the concept that the money used to replace goods could have been used to buy new goods instead? First of all, those stolen from probably had too many goods to begin with, and were likely sitting on cash – so the thief actually stirred up demand. Second, the insurance company will compensate for the stolen items anyway.
Yes, the cost of insurance is miniscule compared with the value of the goods. Thus, the actual cost of the theft is spread out over the entire insurance-buying population. And when the insurance companies become insolvent from paying out the increased volume of claims, the government can simply intervene and subsidize the industry.
And where will the extra money come to pay the insurance companies? Well, the government can simply print more money. What about the inflation? No problem, the government can set a ceiling on the price of goods. What about the shortage of goods that comes from the regulation of a price ceiling? Hey, the government now has a stockpile of stolen goods to meet the demand!
Somehow this should work, no? No. It just simply does not.
“Facts are the only antidote to a seductive vision” – Thomas Sowell
While on the surface Hazlitt sounds completely and totally logical, the concept of stealing money to get the economy going might not be all that far fetched. Hazlitt was writing well before the modern era. He must not have pondered all the consequences of widespread theft, and the numerous benefits to the economy as a whole. Maybe the government should create a new agency that hires thieves (yes, more employment) to break into people’s houses and steal their stuff.
Not only does the thief have money to spend in the economy, but the victims (if that word is even appropriate in this case) will now need to replace the stolen items and thus create more demand in the economy. But wait – what about the concept that the money used to replace goods could have been used to buy new goods instead? First of all, those stolen from probably had too many goods to begin with, and were likely sitting on cash – so the thief actually stirred up demand. Second, the insurance company will compensate for the stolen items anyway.
Yes, the cost of insurance is miniscule compared with the value of the goods. Thus, the actual cost of the theft is spread out over the entire insurance-buying population. And when the insurance companies become insolvent from paying out the increased volume of claims, the government can simply intervene and subsidize the industry.
And where will the extra money come to pay the insurance companies? Well, the government can simply print more money. What about the inflation? No problem, the government can set a ceiling on the price of goods. What about the shortage of goods that comes from the regulation of a price ceiling? Hey, the government now has a stockpile of stolen goods to meet the demand!
Somehow this should work, no? No. It just simply does not.
“Facts are the only antidote to a seductive vision” – Thomas Sowell
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