Thursday, April 08, 2021

History Tells Us That Wealth Taxes Don’t Work

With Democrats now in control of the House, Senate, and White House, many of the most significant policy battles of the next two years will be determined by intraparty fights within the Democratic Party’s various factions.

Although not a moderate in any meaningful sense, President Joe Biden has always positioned himself strategically at the center of his party. Nevertheless, his defeat of the party’s left-wing in the last presidential primary won’t be the end of a populist insurgence. Sadly, one fight will be between those, such as Treasury Secretary Janet Yellen, who want to raise taxes significantly, and those who, like Sen. Bernie Sanders (I-VT), want to raise taxes even more significantly.

Sen. Elizabeth Warren (D-MA) would prefer the latter and has reintroduced her proposal for destructive wealth taxation. Her tax would impose a 2 percent annual levy on wealth over $50 million, going up to 3 percent for wealth over $1 billion. This purely class-warfare scheme is advertised as a way to close the U.S. wealth gap.

My Mercatus Center colleague Jack Salmon and I recently published a paper that looks at the economic literature on this issue to evaluate the arguments of wealth-tax proponents. We found that they generally exaggerate wealth inequality in the United States, overestimate the potential revenue a wealth tax would raise and minimize the negative impact of such a levy.

If you’re skeptical of economic predictions, consider that these scenarios have already played out in the real world. A detailed analysis by the Tax Foundation shows that while many Organisation for Economic Co-operation and Development countries have tried a wealth tax, only five of those countries still have one today.

Wealth taxes weren’t widely abandoned because these governments suddenly embraced free-market principles. Instead, implementing the tax put reality on a collision course with the same theoretical myths now being spread in the United States. These taxes don’t rake in the revenue or solve the supposed problem of inequality. For starters, wealth taxes aren’t paid by rich people who reduce their consumption as a consequence. They reduce their investments, which reduces capital formation, which slows productivity and wage growth. In other words, wealth taxes may be originally paid by wealthy folks, but the economic burden falls heavily on workers.

Previous wealth taxes also triggered capital flight to other countries, which explains the relatively small amount of revenue actually collected. Declining capital stocks then slowed economic growth and depressed overall tax revenues. The Tax Foundation notes, “Among those five OECD countries collecting revenues from net wealth taxes, revenues made up just 1.2 percent of total revenues on average in 2019.” And high administrative costs due to a more complex tax made even the little bit of revenue raised unappealing. That’s why so many countries gave up.

Preventing the inevitable capital flight that follows the imposition of a wealth tax would require authoritarian measures. Indeed, to go hand in hand with his proposed wealth tax last time around, Sanders called for the creation of a “national wealth registry,” a major expansion of the IRS and the imposition of an “exit tax” that would confiscate 40 percent of a rich person’s wealth under $1 billion and 60 percent over $1 billion if they renounce their citizenship and try to escape the tax. Is this the world we really want to live in?

I’m sure Biden is under tremendous pressure to acquiesce to these progressive demands. He also needs loads of revenue for his big spending plans. He must resist. History tells us that he won’t raise much money from a wealth tax, and he won’t even deliver on a class warfare agenda, since workers will pay the price at a time when they can least afford it.

 

Biden’s Crony Anti-Infrastructure Plan

“A crony anti-infrastructure plan” is, sadly, the best description of the Biden administration’s proposed $2.3 trillion infrastructure plan. It’s insanely expensive and unnecessary, especially coming, as it does, on top of last year’s fiscal insanity.

Over the past year, our leaders have spent $6 trillion in bailout and COVID-19 relief funds. They’ve driven local, state and federal government spending up to 43.5 percent of GDP, meaning that we’re already in financial trouble. Now they want to top it off with trillions more of wasteful spending, describing it as “infrastructure” spending, which arguably everyone likes. But once you look at what’s in the bill, you realize that the label is mere marketing for more handouts to politicians’ friends and payments for pet projects.

A large share of the plan, for instance, is a massive handout to private companies. The proposal includes $300 billion to promote advanced manufacturing, $174 billion for electric vehicles, $100 billion for broadband, $100 billion for electric utility industry, and more. This is interesting since Democrats never miss an opportunity to rail against big corporations while professing their love for small companies. Yet they’re eagerly subsidizing their big corporate friends whether these companies need it or not.

And in most cases, they don’t, since they are big infrastructure investors already. AT&T, Verizon and others are set to receive $100 billion for broadband despite their collective investment of more than $50 billion in broadband-related network infrastructure. The same is true of electric power companies, which are not only profitable firms but also massive investors in the electrical grid. In fact, during the pandemic, they actually increased their capital expenditures (or CapEx) to $141 billion from $121 billion. Yet, they will also get $100 billion.

Freight railroads, which will get a share of that $80 billion, are very lucrative, too. As former budget director David Stockman explains in a recent newsletter, freight railroads “have prodigiously reinvested in tracks and rolling stock.” He adds that these companies don’t need help, “especially not Warren Buffett, who owns a big chunk of the Burlington Northern Santa Fe… The latter, in fact, posted $23.5 billion of sales, $5.5 billion of net income and $3.6 billion of CapEx during 2019. And the figures for the other big publicly held railroad companies are similar.”

Biden’s plan also includes hundreds of billions that have nothing even remotely to do with infrastructure. One example is a $400 billion handout to expand access to long-term, home- and community-based care services under Medicaid and extend its Money Follows the Person program. While this has nothing to do with infrastructure, The Wall Street Journal explains how it has everything to do with bolstering unions, writing that Biden’s proposal highlights that “his home-care plan would ‘create good middle-class jobs with a free and fair choice to join a union… and the ability to collectively bargain.’ This is where the SEIU comes in.” The Service Employees International Union, they write, “has been able to exploit Medicaid home-care programs to expand its membership with help from state Democratic lawmakers.”

Finally, this plan would be paid for by eliminating tax preferences for fossil fuel companies, raising the corporate tax rate to 28 percent from 21 percent, doubling the top capital gains rate and imposing a large minimum tax on the overseas earnings of U.S. companies. To the extent that Democrats are trying to pay for this spending with taxes, they’re doing it in a way that belies their claim that this plan will result in a boost in quality infrastructure. That’s because, as the Cato Institute’s Chris Edwards reminds us, these tax hikes would punish the investors and corporations that drive infrastructure and own 65 percent of nondefense, nonresidential infrastructure. The federal government only owns 5 percent of it, with state and local governments owning 30 percent.

The Tax Foundation estimates that Biden’s tax increases would reduce investment in fixed assets by more than $1 trillion. That means fewer infrastructure investments, too. This is unfortunate since a 2016 Congressional Budget Office report finds that private sector investments deliver twice the economic returns of federal investments. But as Edwards notes, “Biden’s proposed green and labor union regulations would further undermine infrastructure investment.”

There’s much more to say about this plan and its backers (who continue to assert that it will grow the economy and finally fix our allegedly “crumbling” infrastructure). But for now, just remember that it’s best described as a crony anti-infrastructure plan.

 

Pres. Biden Will Go Down as the President Who Poisoned Baseball

 

Baseball’s greatest day was April 15, 1947. It was the day when Jackie Robinson broke baseball’s infamous color line to become the first Black player ever to play in a major league game.

Finally, after centuries of racial discrimination, there was a sense that merit, not skin pigment, was what was to be valued in America’s life. Because baseball was America’s game.

What has been baseball’s worst day?

Just last week, when the corporate suits of Major League Baseball stripped Atlanta of this year’s All-Star Game. Why? They caved to the racial demagoguery of the most powerful man in the world:

Joe Biden, president of the United States.

He’s the president who pushed baseball into taking the All-Star Game from Atlanta because Georgia’s politics offend him. He poured his own politics into sport, something that should unite us all. He politicized something that should not be politicized.

Biden’s legacy?

He’s the president who poisoned baseball.

Just months before, as major league teams were preparing for spring training, Biden made that speech at his inauguration promising to end America’s “uncivil war” pitting red states against blue states.

Remember?

“We must end this uncivil war that pits red against blue, rural … versus urban, conservative versus liberal,” Biden told the nation. “We can do this if we open our souls instead of hardening our hearts. If we show a little tolerance and humility, and if we are willing to stand in the other person’s shoes — as my mom would say — just for a moment, stand in their shoes.”

But the other day, Biden opened his baseball soul on ESPN and a demagogue came out.

There was nothing remotely civil, tolerant or humble about the president falsely and repeatedly using the race card to attack Georgia’s new election integrity voter law by comparing it to the horrors of the apartheid Jim Crow South.

Even the rabidly pro-Democrat and pro-Biden Washington Post gave Biden four Pinocchios for lying about Georgia.

Georgia’s new election integrity law expands voting and isn’t as restrictive as Democrats insist. Other states, including Democratic New York, headquarters of Major League Baseball, and Biden’s own Delaware, are in some ways more restrictive. And Democrats say nothing. Are these racist states?

Georgia did strengthen requirements for voter identification, but is that racist when we’re all required to show ID to get on a plane or buy liquor?

What’s poisonous is that Biden used the weight of the presidency to pressure baseball into punishing the people of Georgia for deciding on their own election laws according to the Constitution.

Once he said he’d “strongly support” a move to strip Atlanta of hosting the All-Star Game, it was done.

“The very people who are victimized the most are the people who are the leaders in these various sports,” Biden said on ESPN just before opening day. “And it’s just not right. This is Jim Crow on steroids, what they’re doing in Georgia and 40 other states.”

Biden and many Democratic allies in media continue to compare voter integrity laws to Jim Crow, even though they know it’s not true.

We may reasonably disagree on the critical need for election integrity in America. But I don’t think we can reasonably disagree on this:

The Georgia voter law isn’t remotely Jim Crow. And those who use that language are demagogues.

Under Jim Crow apartheid, schools were separated by race, with separate washrooms and separate water fountains and no service for Blacks at restaurant lunch counters. Blacks were lynched.

This is not that. If so, then New York and Biden’s Delaware are Jim Crow states.

Jackie Robinson was baseball’s answer to much of that hate. His excellence and courage in the face of all that forced white Americans to deal with what was happening to Black Americans.

Atlanta is a majority Black city and stands to lose at $100 million as a result of moving the game to majority white Denver, and many Atlanta businesses are Black-owned.

Notice that Biden isn’t demanding that the Masters Tournament at Georgia’s Augusta National be moved.

Baseball is a game for families that buy cheap seats and plan summers around those $1-a-hot dog bargain days. The Masters is for the masters, the wealthy elite, such as the commissioner of baseball and Washington lobbyists.

Asked Tuesday if the Masters should be moved out of Georgia, Biden punted:

“I think that’s up to the Masters,” he said. “Look, you know, it is reassuring to see that for-profit operations and businesses are speaking up about how these new Jim Crow laws are just antithetical to who we are.”

As the Biden-driven all-star boycott of Georgia took shape, as panicked corporations sided with the president and against Georgia lest they themselves be shamed by the media as racists, an odd thing happened:

Georgia’s failed Democratic gubernatorial candidate Stacy Abrams began panicking, calling for a stop to boycotts, saying minorities in the state would be hurt. Abrams doesn’t want to wear the jacket for Black business owners losing out on that $100 million.

But she will. It suits her.

Years ago, America was in love with those church-of-baseball movies. One of the most popular was “Field of Dreams.”

“America has rolled by like an army of steamrollers,” said James Earl Jones. “It’s been erased like a blackboard, rebuilt and erased again. But baseball has marked the time.”

Now Biden, Democrats and the woke corporations caving to woke activists have rolled over the game.

They’ve left their mark. And Biden has his legacy.

Tuesday, April 06, 2021

Hunter Biden: That ‘Russian Disinformation’ Laptop ‘Absolutely’ Could’ve Been Mine, Actually

 

In the 2020 election’s home stretch, the New York Post published a story about the Democratic nominee’s son.  The Democratic nominee’s campaign immediately and angrily dismissed the story as ‘Russian disinformation,’ without evidence — and without actually denying that the Post’s sourcing was authentic.  Much of the media fell in line, uncritically repeating that denial, and certainly not demanding supporting proof from the Democratic nominee’s campaign.  Large social media platforms censored the story, or intentionally made it harder to access.  Twitter blocked the newspaper’s entire account for weeks.  In case you’ve forgotten the details, here is an excerpt from the original report:

Hunter Biden introduced his father, then-Vice President Joe Biden, to a top executive at a Ukrainian energy firm less than a year before the elder Biden pressured government officials in Ukraine into firing a prosecutor who was investigating the company, according to emails obtained by The Post. The never-before-revealed meeting is mentioned in a message of appreciation that Vadym Pozharskyi, an adviser to the board of Burisma, allegedly sent Hunter Biden on April 17, 2015, about a year after Hunter joined the Burisma board at a reported salary of up to $50,000 a month. “Dear Hunter, thank you for inviting me to DC and giving an opportunity to meet your father and spent [sic] some time together. It’s realty [sic] an honor and pleasure,” the email reads. An earlier email from May 2014 also shows Pozharskyi, reportedly Burisma’s No. 3 exec, asking Hunter for “advice on how you could use your influence” on the company’s behalf. The blockbuster correspondence — which flies in the face of Joe Biden’s claim that he’s “never spoken to my son about his overseas business dealings” — is contained in a massive trove of data recovered from a laptop computer. The computer was dropped off at a repair shop in Biden’s home state of Delaware in April 2019, according to the store’s owner.

Numerous allegations about the younger Biden’s overseas business affairs have been raised and substantiated by at least some evidence, calling into serious question his father’s blanket denials.  The Biden campaign and their news media and Silicon Valley allies effectively squelched this potentially-unhelpful issue by deploying the baseless ‘Russian disinformation’ claim, to which former intelligence officials eagerly lent their reputations and expertise.  Months later, after Biden was elected president, we learned that Hunter Biden had in fact been the subject of a federal investigation related to these matters since 2018.  Politico reported the probe focused on Biden’s taxes, foreign ties, and possible money laundering.  As for the infamous laptop, many observers noted that the campaign had never explicitly denied that it was real, in spite of their credulously-parroted ‘disinformation’ misdirection.  In a new interview, Hunter Biden admits that the computer “certainly” could have been his:

Months after it was alleged that a laptop revealed Hunter Biden’s business interests in China and Ukraine, the president’s son tells Tracy Smith that the laptop “could be” his

Watch the full interview this weekend on #CBSSunday pic.twitter.com/DhtY5IcPeg— CBS Sunday Morning ?? (@CBSSunday) April 2, 2021


It could have been his, or he could have been hacked, or it could have been stolen, or it could have been Russia.  He doesn’t know.  “For real.”  What an answer.  Who knows whether the underlying controversy or scandal would have altered the outcome of the election if it had been properly covered and adjudicated, rather than censored and downplayed by people whose job is to be skeptical of politicians’ claims.  There’s a case to be made the in a close election — remember, Trump only lost the decisive states by roughly 44,000 total votes — that it could have made a difference.  There’s also a case to be made that there were much bigger factors on voters’ minds than this kerfuffle, even if it had received substantially more attention.  Regardless, the coordinated effort to nip this possible threat in the bud among the Democrats, the media, and Big Tech — at the eleventh hour, with very high stakes — is instructive and highly disturbing.

The censorship occurred against a bona fide news story, with documentation.  The actually unverified claim was the “Russian disinformation” deflection, which served as the basis for crushing the news story.  Talk about collusion.  And the people who did the crushing continue to present themselves as society’s vanguards of truth against misinformation.  Feeling reassured yet?  Finally, how could Hunter Biden (supposedly) not know whether is laptop was stolen?  It turns out he has an alleged history of misplacing personal belongings.  This recent story never gained much steam:

On Oct. 23, 2018, President Joe Biden’s son Hunter and daughter in law Hallie were involved in a bizarre incident in which Hallie took Hunter’s gun and threw it in a trash can behind a grocery store, only to return later to find it gone. Delaware police began investigating, concerned that the trash can was across from a high school and that the missing gun could be used in a crime, according to law enforcement officials and a copy of the police report obtained by POLITICO.  But a curious thing happened at the time: Secret Service agents approached the owner of the store where Hunter bought the gun and asked to take the paperwork involving the sale, according to two people, one of whom has firsthand knowledge of the episode and the other was briefed by a Secret Service agent after the fact. The gun store owner refused to supply the paperwork, suspecting that the Secret Service officers wanted to hide Hunter’s ownership of the missing gun in case it were to be involved in a crime, the two people said. The owner, Ron Palmieri, later turned over the papers to the Bureau of Alcohol, Tobacco, Firearms, and Explosives, which oversees federal gun laws.

The White House has denied the president had any knowledge of or involvement in the bizarre and partially-disputed incident.  And they’d never lie to us, would they?

Pompeo Leaves the Door to 2024 Bid Open

Former Secretary of State Mike Pompeo hinted at a potential 2024 presidential bid, as speculation about the field of contenders for the nomination continues. Before serving as the top diplomat in the Trump administration, Pompeo served as the Director of the Central Intelligence Agency (CIA) from 2017-2018. Predating his tenure in the administration, Pompeo represented Kansas’ 4th congressional district.

Pompeo joined Ruthless podcast on Thursday after traveling to campaign for various Republicans, and left the door open to a possible 2024 bid for the GOP nomination. Like most Republican leaders, though, the former secretary of state is laser-focused on winning back Republican majorities in the House and Senate.

“You know, I love this country. I am always up for a good fight. We are in an enormous fight with the progressive left. There’s no doubt about that. I’m going to focus on the next year, year and a half, making sure that they don’t own both houses of Congress come January of 2023, and then everything else will settle out. We’ll see what happens after that. It was fun to be up in Iowa,” Pompeo said when asked about a potential run. “Everybody still understands that the challenges that America faces are in a better place today because of what we did these past four years, but they’re under assault today and so they’re anxious to get back at and it was fun to be up there with them and help them think through how we should approach that.”

Pompeo is one of a growing number of Republicans, including former Trump administration officials, to be thought of as a 2024 contender. Others include former U.N. Ambassador Nikki Haley and Florida Governor Ron DeSantis.

Pompeo’s full interview can be found below:

Great time on the @RuthlessPodcast. Thanks for having me @HolmesJosh @ComfortablySmug!

Listen here: https://t.co/ylg1LOvePH— Mike Pompeo (@mikepompeo) April 1, 2021