tag:blogger.com,1999:blog-582368152716771238.post1530207816362895918..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: Fiscal cronyismJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger25125tag:blogger.com,1999:blog-582368152716771238.post-61069411794052901272013-02-05T14:02:02.979-06:002013-02-05T14:02:02.979-06:00i think this guy has a real good assessment of how...i think this guy has a real good assessment of how power (and hence the cronyism) works in this country, and this is from '87!<br /><br />http://www.youtube.com/watch?v=UUQaNJILTdgjames_applesaucehttps://www.blogger.com/profile/11028743602949342678noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-42821103693164254362013-01-08T10:22:30.356-06:002013-01-08T10:22:30.356-06:00Bacon?Bacon?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-52322533389358113492013-01-08T03:35:12.188-06:002013-01-08T03:35:12.188-06:00Meanwhile, over at the Tax Analyst blog at tax.com...Meanwhile, over at the Tax Analyst blog at tax.com David Brunori directs us to an in-house promotional video created by Governor LePage of Maine. I took at look at that video and noted that the governor twice refers to creating "tax breaks" for companies in order to bring additional investment to that state (beginning at about minute 2:30). For example:<br /><br />"We created a tax break for capital investment which provides immediate tax relief for investment made in Maine by existing companies or new companies". <br /><br />http://www.taxanalysts.com/taxcom/taxblog.nsf/Permalink/DBRI-93PLLF?OpenDocument<br /><br />I wonder why he didn't say "loophole"? Not only is "tax break" accurate in the sense that the provision was certainly no oversight, but the Governor is darn proud of it, and the bill seems to have had broad bi-partisan support, despite subsequent opposition rhetoric for "tax cuts for the rich." <br /><br />But, when politicians change their minds and want to eliminate that, I'm sure it will be called a "loophole", as if they never voted for it in the first place. One might argue that "loophole" sets the right pejorative tone, but I don"t think it is otherwise accurate at all, any more than giving tax relief to 70,000 "Mainers" at the bottom of the income scale was a "loophole". Not characterizing the latter or, say, the payroll "tax break" as a "loophole" is curiously something everyone seems to agree on.Vivian Darkbloomhttps://www.blogger.com/profile/18362419878968863283noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-49465090293819392892013-01-07T07:12:13.552-06:002013-01-07T07:12:13.552-06:00So, what you're saying is, you can't reall...So, what you're saying is, you can't really answer the question. Your ammo is all aggressive assertion. Okay.<br /><br />You also seem blissfully unaware that before Oblundercare, unlike Europe, the United States did not have a fully socialized system. Thus, if people decided they wanted to spend money on IVF or cosmetic procedures, that all came out of private pockets and not tax revenue. So, unless you're talking about the bankrupt ideas of Medicare and Medicaid, spending on health care does not reduce the deficit.<br /><br />I stand corrected on the Byrd Rule. I guess the Republicans weren't as adept at Magic Math and Magi Accounting as the Democrats and some people don't learn from history. Now, is this a rule that's named for the Democrat's KKK Grand Kleagle?<br /><br />Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37819418898046675942013-01-07T03:18:48.290-06:002013-01-07T03:18:48.290-06:00@Methinks ...consider that it's the cost of he...@Methinks ...consider that it's the cost of health care that's driving our large projected deficits. If our per capita health care costs were in line with those of any other advanced country, we'd see not deficits but large budget surpluses in the future.<br /><br />"I understand the appeal of following down the rabbit hole countries which have bankrupted themselves with their giant welfare states....no I don't."<br /><br />Right. You don't understand. Other advanced countries certainly have their fiscal woes, but in the area of health care it costs them a lot less per person than we are paying to achieve comparable results. If we could bring our health care cost down to their levels, voila, projected deficits disappear.<br /><br /> <br />And recognize that our large current deficits are caused almost entirely by the economic downturn resulting from the housing bubble's collapse.<br /><br />" Huh? You mean we didn't have deficits before 2008? And Obama didn't jack up spending in 2009 and keep it elevated (and is now demanding more in 2013)? They're all a result of the unfortunate events of 2008?"<br /> <br />Yep. Take away the 2008 economic collapse with its consequent tax revenue losses, and take away bail outs, stimulus, and safety net expenses (which prevented an even more disastrous collapse), and we wouldn't see any huge deficit spike. (Then take away the cost of the Bush tax cuts and the cost of the war in Afghanistan and the deficit all but disappears.)<br /><br />"BTW, the reason the 2003 tax RATE cuts had sunset provisions had nothing to do with the byrd rule. The republicans didn't have enough votes in the senate to make them permanent."<br /><br />Yes, the Republicans didn't have enough votes (they would have needed 60) to make the Bush cuts permanent under normal rules, so they had to use the reconciliation process (just 51 votes needed for passage), and that's exclusively where the Byrd Rule applies, in the reconciliation process. And since the Byrd Rule additionally applies only to deficit creation extending beyond a ten year term, and it was clear their legislation would create such deficits, Republicans could only avoid having their bill blocked by adding the ten year expiration. In reconciliation without the ten year expiration any senator could have objected under the Byrd Rule and blocked the bill. <br /> Johnhttps://www.blogger.com/profile/13718398994164216979noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-41419390640093909562013-01-06T21:19:08.527-06:002013-01-06T21:19:08.527-06:00not one word but two..'deliberate loopholes...not one word but two..'deliberate loopholes'Shailesh Sarafhttps://www.blogger.com/profile/06643157152168525829noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-67151481457771853122013-01-06T14:38:06.104-06:002013-01-06T14:38:06.104-06:00What a marvelous idea, Anonymous! Only the high i...What a marvelous idea, Anonymous! Only the high income taxes won't hurt the already rich and well connected. They'll overwhelmingly hurt people who are not rich and who lack the political connections to get special favours from our political overlords. <br /><br />This is why I hate calling it taxes on "the rich". They are income taxes on high earners, not "the rich". High taxes on high earners discourage people from taking the risks necessary to start a business or pursue a rewarding career because they reduce the return on those endeavors. They prevent people from GETTING rich. Now, why would you discriminate so against the poor?<br /><br />Today and always in America, people move in and out of the group of highest earners. There is no permanent wealthy class. High and progressive income taxes ensure a permanent, unchanging and protected elite. An American aristocracy. Yet another diseased idea progressives wish to adopt from Europe in the name of preventing the very thing they foster.Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-33693165522510030462013-01-06T09:07:01.716-06:002013-01-06T09:07:01.716-06:00John, what's the likelihood that given how mon...John, what's the likelihood that given how money is raised and spent in American politics, that we'll ever have zero loopholes?<br />If we agree that this likelihood is low, doesn't that call for high income taxes on the rich to compensate?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46325860607296074852013-01-05T21:39:48.493-06:002013-01-05T21:39:48.493-06:00Maybe the word you're looking for is a "r...Maybe the word you're looking for is a "rent" ?MKhttps://www.blogger.com/profile/14629290801692403894noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-7854108568149241202013-01-05T10:49:38.047-06:002013-01-05T10:49:38.047-06:00"American Taxpayer Relief Act of 2012" -..."American Taxpayer Relief Act of 2012" - Also known as the Lobbyist Employment Act of 2012.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-4103306372966614102013-01-05T10:04:46.902-06:002013-01-05T10:04:46.902-06:00Too bad "indulgences" is already taken.Too bad "indulgences" is already taken.JB McMunnhttps://www.blogger.com/profile/15468282698533043544noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-73663776031597482452013-01-05T09:51:16.118-06:002013-01-05T09:51:16.118-06:00That other countries enjoy favorable health outcom...<i>That other countries enjoy favorable health outcomes says more about how lifestyle factors...</i><br /><br />Well, that and the fact that they all have parallel private health care provisioning for which they pay out of pocket. Not all that egalitarian, but (whaddaya know) needed to reduce looooooong wait lists and get access to expensive procedures simply not provided by the collective.Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-12034837166413361302013-01-05T05:17:57.044-06:002013-01-05T05:17:57.044-06:00Question: When does a tax reduction have zero econ...Question: When does a tax reduction have zero economic stimulus effect?<br />Answer: When it is temporary. <br /><br />Allowing the cuts to just expire would have at least had the effect of allowing businesses to plan ahead. kyle8https://www.blogger.com/profile/13299846346032212714noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-23339757951934454992013-01-05T04:28:40.382-06:002013-01-05T04:28:40.382-06:00"it's the cost of health care that's ..."it's the cost of health care that's driving our large projected deficits."<br /><br />Right, and by pulling healthcare out of the market and making it a public good we take strong mechanisms for cost control and innovation and trade them for lousy ones. <br /><br />"If per capita health care costs were in line with those of any other advanced country..."<br /><br />You can't control costs with magic. Other countries pay less for services because they pay less for services, and they get what they pay for. That other countries enjoy favorable health outcomes says more about how lifestyle factors affect health and how you get diminishing returns on a lot of healthcare spending. If we capped our healthcare spending we probably wouldn't see outcomes worsen much, either. Let rich people finance cutting-edge medical technology through private means. Our public programs should be about creating a safety net, a minimum standard; they are NOT a replacement for the market.Kevinhttps://www.blogger.com/profile/10063795287099905940noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-80640494102951742452013-01-04T22:36:19.172-06:002013-01-04T22:36:19.172-06:00Congratulations my fellow taxpayers and Americans!...Congratulations my fellow taxpayers and Americans!<br /><br />We now have a national tax code so complicated that no one understands it, or really knows if it is progressive or regressive or just bad and punitive to productive behavior (the latter is true, at least I think).<br /><br />And federal spending? Again no one really knows or understands it all, except that agency spending is runaway, and entitlements are becoming very expensive. <br /><br />So, take monetary policy--made behind closed doors by the mysterious FOMC, and quick tell me without looking at Wiki who are the 12 FOMC members, and how do they get there? <br /><br />Okay, so I don't understand our tax code, federal spending, or our monetary policy. <br /><br />Hey, I am only a citizen, why should anyone makes things clear to me? Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-5851757151147674572013-01-04T22:14:29.529-06:002013-01-04T22:14:29.529-06:00Aha! Thank you. That is stunning.
No, it does n...Aha! Thank you. That is stunning.<br /><br />No, it does not conflict with with what I know to be true. You have confirmed the liberal use of Magic Math. You cannot reduce the cost of provisioning merely by increasing demand (access). Just doesn't work. Unless you use Magic Math. NONE of the government's schemes have ever come close to costing what congress said they would to sell them to the public and only a dreamer and a fool would believe this time Magic Math will work.<br /><br /><i>...consider that it's the cost of health care that's driving our large projected deficits. If our per capita health care costs were in line with those of any other advanced country, we'd see not deficits but large budget surpluses in the future.</i><br /><br />Your government is running an annual deficit in excess of $1 Trillion. Even using Congressional Magic Accounting designed to severely understate costs, the CBO only calculated a deficit reduction of $143 Billion over a nine year period (source: White House blog). Even if that reduction were real (it's not), the CBO's own estimates show that Oblundercare's savings don't even rise to the level of a rounding error in the annual deficit. So, please explain to me how a $1 Trillion deficit is meant to be eliminated and a surplus created by an annual spending cut of $15.8 billion? <br /><br />I understand the appeal of following down the rabbit hole countries which have bankrupted themselves with their giant welfare states....no I don't.<br /><br /><i>And recognize that our large current deficits are caused almost entirely by the economic downturn resulting from the housing bubble's collapse.</i><br /><br />Huh? You mean we didn't have deficits before 2008? And Obama didn't jack up spending in 2009 and keep it elevated (and is now demanding more in 2013)? They're all a result of the unfortunate events of 2008? <br /><br />Irrespective of wildly fluctuating tax rates since the 1930's, tax revenue has averaged 18% of GDP. A reasonable person (possibly one who is not a victim of the American public school system) would expect that tax collection would look roughly the same in the future. Federal spending, on the other hand, has zoomed from around 20% of GDP in 2007 to 24% since Oblamebush ascended to power (it's actually more than that, as John Cochrane points out in an earlier recent post, but I'm feeling generous toward the clowns tonight). And the GDP has, since the Times of Troubles in 2008, continued on its upward trajectory and is now respectably higher than it was before woe befell us. So, unless higher GDP spells "economic downturn" to you or you have some really good reason to believe that tax revenue will for some reason be a higher as a percentage of GDP than it has been the last 80 years, I'd say our current TRILLION dollar annual deficits are a function of increased out of control spending, not so much the burst bubble.<br /><br />BTW, the reason the 2003 tax RATE cuts had sunset provisions had nothing to do with the byrd rule. The republicans didn't have enough votes in the senate to make them permanent. Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40324482185204869242013-01-04T19:01:54.735-06:002013-01-04T19:01:54.735-06:00To answer your question, the CBO and JCT both dete...To answer your question, the CBO and JCT both determined that the ACA would reduce the deficit over the long term, rendering the Byrd Rule inapplicable.<br /><br />Note, too, according to the CBO, repealing the ACA would add $109 billion to federal deficits over the period between 2013 and 2022.<br />http://www.cbo.gov/publication/43471<br /><br />I'm sorry if this conflicts with what you want to believe.<br /><br />Also, since being at the head of a stampede is a dangerous place, consider that it's the cost of health care that's driving our large projected deficits. If our per capita health care costs were in line with those of any other advanced country, we'd see not deficits but large budget surpluses in the future.<br /><br />And recognize that our large current deficits are caused almost entirely by the economic downturn resulting from the housing bubble's collapse.<br /><br />Then you'll be on safer footing.<br /><br /><br /><br /><br /> Johnhttps://www.blogger.com/profile/13718398994164216979noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-2555586411430692442013-01-04T17:12:15.017-06:002013-01-04T17:12:15.017-06:00I'm at the head of the stampede because the de...I'm at the head of the stampede because the deficit isn't going to be reduced with tax hikes. These tax hikes dream of raising $62 Billion per year. The annual deficit is over $1 Trillion and rising. Put that in a bar graph and see how hilarious it looks. It's pointless to provide disincentive to produce if the clowns in the Potomac Swamp are determined to spend us into hell anyway. <br /><br />I have a question for you: How did Oblundercare escape the ax of the Byrd Rule? I suspect by way of Congressional Magic Accounting, which is a lie that keeps on taking.<br /><br /><br />Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-80166828013131660612013-01-04T16:38:01.238-06:002013-01-04T16:38:01.238-06:00Oh, anonymous! Again you ask the wrong question! ...Oh, anonymous! Again you ask the wrong question! I think the questions you were looking for are: <br /><br />Can I still write off my purchase of an electric golf cart?<br /><br />Can I still get a tax credit for my SUV purchase? (My lawyer gets a new one every couple of years because of that one. John, take note! Why hoof it to work when you can be paid to ride in style?)<br /><br />Is the vegetable garden in my backyard eligible for farm subsidies? also related: Am I ConAgra, because I can really rake in the tax loot if I am?<br /><br />Can I subsidize your energy consumption by installing generously subsidized solar panels?<br /><br />How much do Senators cost so that I can buy my very own and get the tax exemptions I want? (They are cheaper than you might think, actually)<br /><br />All that is stuff you can do now without moving your business to the Caribbean or launching your own options market making BD. Get in the game!<br /><br />Good luck!Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-57701001921590043992013-01-04T16:02:15.515-06:002013-01-04T16:02:15.515-06:00You say it's "nice" that the new tax...You say it's "nice" that the new tax rates are "'permanent,'" spar[ing us] the annual last minute crisis when the "'Bush tax cuts expire.'" <br /><br />Some readers might appreciate as historical perspective a reminder of why the Bush tax cuts were designed to expire. From Wikipedia:<br /><br />The Bush tax cuts had sunset provisions that made them expire at the end of 2010.<br />[at which time congress voted a two year extension], since otherwise they would fall under the Byrd Rule.<br />http://en.wikipedia.org/wiki/Bush_tax_cuts<br />The Byrd Rule is a Senate rule that . . . allows Senators . . . to block a piece of legislation if it purports to significantly increase the federal deficit beyond a ten year term.<br />http://en.wikipedia.org/wiki/Byrd_Rule <br /><br />In other words, the Bush tax cuts had a "scheduled cliff" because Bush administration economists and policy makers knew perfectly well that their proposed tax cuts would significantly increase the deficit beyond a ten year term but were bound and determined to push them through any way they could. Which makes one wonder now (speaking of cronyism) why many supporters of tax cuts that were known to be deficit generating at the time are in the forefront of the current anti-deficit stampede. Johnhttps://www.blogger.com/profile/13718398994164216979noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-28284338109553032322013-01-04T15:40:16.045-06:002013-01-04T15:40:16.045-06:00One could come up with quite a number of possible ...One could come up with quite a number of possible terms, some not printable here. <br /><br />One widely-used term, created by Stanley Surrey and widely accepted among the "experts", is "tax expenditure". His idea was to create a term that encompassed all tax deductions, exemptions and credits in the Code that serve as the functional equivalent of "spending". The thought was that these items were no different than having someone pay the full tax and then having Treasury turn around and write a check for the amount of the tax benefit. Frankly, I don't like the term, partly because it is now used for stuff that really has nothing to do with spending. Most lay folks don't understand it. It has been hijacked, like "loophole" for rhetorical political purposes. The JCT is trying to work out a new nomenclature that distinguishes tax subsidies from other "tax distortions".<br /><br />To give the thing the proper pejorative flavor for a lay audience, you might consider "tax breaks", "tax giveaways", etc. Preceding that with "Congressionally mandated" might add appropriate description and emphasis. The fact that you might need to introduce the term by a short explanation should not dissuade you. Your purpose here, I assume, is to educate, not obfuscate. Brevity has its advantages, but not at the expense of meaning.<br /><br />But, please, not "loophole". That's a term politicians love to use when they want the public to think that they pointing their big guns at something evil but at the same time invisible (have you ever seen a "loophole"?). If they were honest, they would turn that gun on themselves.<br /><br />I realize this is a futile battle on the language front. If Boris Bittker couldn't make a difference, I don't know how I possibly can. If you have the time, though, read the article. Some things don't change, unfortunately.Vivian Darkbloomhttps://www.blogger.com/profile/18362419878968863283noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-29325365819233478962013-01-04T14:59:27.150-06:002013-01-04T14:59:27.150-06:00Suggest a better term and I'll use it. I don&#...Suggest a better term and I'll use it. I don't want something like "preferences" that makes this sound even vaguely like sensible public policy. Your description of "the whole favor-granting system" is great. Now, a one-word replacement for loophole, which I grant is not right. Loophole suggests an unintentional way of avoiding taxes, exploiting something in the code which its writers did not intend. (Defective crumby trust?) These are above-board, completely intentional favors to specific and quite wealthy groups. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-54769811088216655532013-01-04T14:53:07.345-06:002013-01-04T14:53:07.345-06:00....and I see we have here only a partial list of .......and I see we have here only a partial list of all the holes in the cheese :-)Methinkshttps://www.blogger.com/profile/17278490832490933652noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27544790802928964192013-01-04T14:49:50.067-06:002013-01-04T14:49:50.067-06:00I don't know who all those "charming comm...I don't know who all those "charming commenters" were in your earlier comments section; however, the items you list are not "loopholes". They are tax benefits very consciously put into the Code by our elected officials at the behest of certain interest groups. Come on, language matters. By calling this stuff "loopholes" we're really letting our elected officials and the whole favor-granting system off the hook. Put this misused term in the same corner as "marginal tax rate", please.<br /><br />Alas, this is nothing new. Boris Bittker wrote an entire law review article about it back in '73 titled "Income Tax Loopholes and Political Rhetoric". http://digitalcommons.law.yale.edu/fss_papers/2287/Vivian Darkbloomhttps://www.blogger.com/profile/18362419878968863283noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-29283425103550696382013-01-04T12:22:37.720-06:002013-01-04T12:22:37.720-06:00What's the total, as a % of GDP these add up t...What's the total, as a % of GDP these add up to?Anonymousnoreply@blogger.com