Losing Freedom to Envy

Envy, one of the seven deadly sins, is not unknown to Americans.

The income distribution in the US is so skewed that the rich are found in the top one percent. The truly rich with the accoutrements associated with that class are in the top half of one percent.

Those points were lost on those Americans who regard anyone slightly better off than themselves as "rich." A slightly bigger house in a better neighborhood, a BMW instead of a Toyota, and the ability to go on vacation without going into debt is all it takes to be rich in the minds of those whose eyes are green with envy.

This observation led me to the realization that freedom has been lost to envy.

Read more here.

A Failure to Stimulate (Economic Lessons)

It’s an election year, so it should be no surprise that politicians are in the market for votes. “Passed in record time” as a “gift to the middle class and those who aspire to it,” according to House Speaker Nancy Pelosi (D-CA), Congress gave final approval in early February to an economic stimulus package that supposedly will help avert a looming U.S. recession.

In no place but Washington would anyone think that putting hard-earned money back in the pockets from which it was taken in the first place is giving taxpayers a gift.

With a price tag estimated at $168 billion over two years, the bill, which President Bush has said he will sign into law, provides rebates of up to $600 for individual taxpayers and up to $1,200 for couples filing jointly, with additional payments of $300 per child. Gradually phased out for individuals with 2007 adjusted gross incomes of more than $75,000 and for couples with incomes over $150,000, the “richest” taxpayers get nothing.

The Democrats initially wanted considerably more. Senate Majority Leader Harry Reid pushed hard to include in the package more generous home-heating subsidies for low-income families, an extension of federal unemployment benefits, and tax credits for public utilities using alternative energy sources to generate power. Tax incentives for the coal industry and an expanded food stamp program also were in the proposal first put on the table by House Democrats. But after losing in the Senate by a single vote, the Democrats agreed to withdraw their much bigger package, in return for Republican support for payments to some 20 million social security recipients and 250,000 disabled veterans, who would not have qualified for tax rebates because they do not earn income.

To be sure, $168 billion, about $152 billion of which will be injected into the economy this year, sounds like a lot of money. But that sum is trivial in comparison to the $3.1 trillion federal budget President Bush has just submitted to Congress—and is a mere drop in the nearly $15 trillion U.S. gross domestic product bucket.

Experience with tax rebate initiatives in the past—the most recent being the $400 returned to individuals ($800 to couples) soon after 9/11—suggests that most of the money either will be saved or used to pay down existing credit-card debt. Neither stimulates any economic activity. The economy gets a boost if the rebates are spent, not if they are banked or used to pay for purchases already made.

The late Nobel laureate Milton Friedman could have explained why tax rebates are unlikely to boost consumption spending. Individuals rationally budget purchases of goods and services on the basis of their expected long-run or permanent incomes. Temporary fluctuations in disposable incomes have little impact on spending plans, because consumers realize that those ups and downs tend to average out over time, with transitory increases one year offset by transitory decreases the next. Changes in personal income, including those caused by tax policy, produce sustained changes in consumption spending only if they are lasting.

Only one provision of the stimulus package could possibly have the hoped-for effect. Allowing businesses accelerated depreciation schedules for new investments in plant and equipment, and doubling from $125,000 to $250,000 the amount of qualified property they can write off immediately will promote capital spending. Because capital investments by definition are undertaken with an eye on the long run, providing incentives for companies to expand or upgrade existing production capacity will energize economic activity.

Even so, there is another reason that any economic benefits ultimately generated by the stimulus plan will be fleeting at best. The federal government has no means of its own, so the $168 billion needed to finance the package can come from just three sources: taxing, borrowing, or printing money. For obvious political reasons, raising taxes is not an option during the run-up to an election. The economic stimulus plan thus will be paid for through a combination of new deficit spending and currency creation. The former implies higher future taxes to pay interest to bondholders and to retire the debt when it matures; the latter adds to the inflationary pressures already evident in the economy. Both impose a heavier burden on the private sector, and auger slower rates of economic growth in the years to come.

If our elected representatives truly were interested in jumpstarting a sluggish economy, they would have acted to reduce uncertainty about future tax bills by cutting marginal income tax rates now and forevermore. Predictably, they chose political grandstanding instead.

William F. Shughart II is a Senior Fellow at The Independent Institute, F.A.P. Barnard Distinguished Professor of Economics.

Taxes

Tax his land,
Tax his wage,
Tax his bed in which he lays.
Tax his tractor,
Tax his mule,
Teach him taxes is the rule.

Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.
Tax his ties,
Tax his shirts,
Tax his work,
Tax his dirt.

Tax his tobacco,
Tax his drink,
Tax him if he tries to think.

Tax his booze,
Tax his beers,
If he cries,
Tax his tears.
Tax his bills,
Tax his gas,
Tax his notes,
Tax his cash.

Tax him good and let him know
That after taxes, he has no dough.

If he hollers,
Tax him more,
Tax him until he's good and sore.

Tax his coffin,
Tax his grave,
Tax the sod in which he lays.
Put these words upon his tomb,
'Taxes drove me to my doom!'

And when he's gone,
We won't relax,
We'll still be after the inheritance TAX!!

Accounts Receivable Tax,
Building Permit Tax,
CDL License Tax,
Cigarette Tax,
Corporate Income Tax,
Dog License Tax,
Federal Income Tax,
Federal Unemployment Tax (FUTA),
Fishing License Tax,
Food License Tax,
Fuel Perm it Tax,
Gasoline Tax,
Hunting License Tax,
Inheritance Tax,
Inventory Tax,
IRS Interest Charges (tax on top of tax),
IRS Penalties (tax on top of tax),
Liquor Tax,
Luxury Tax,
Marriage License Tax,
Medicare Tax,
Personal Property Tax,
Property Tax,
Real Estate Tax,
Service charge taxes,
Social Security Tax,
Road Usage Tax (Truckers),
Sales Taxes,
Recreational Vehicle Tax,
School Tax,
State Income Tax,
State Unemployment Tax (SUTA),
Telephone Federal Excise Tax,
Telephone Federal Universal Service Fe e Tax,
Telephone Federal, State and Local Surcharge Tax,
Telephone Minimum Usage Surcharge Tax,
Telephone Recurring and Non-recurring Charges Tax,
Telephone State and Local Tax,
Telephone Usage Charge Tax,
Utility Tax,
Vehicle License Registration Tax,
Vehicle Sales Tax,
Watercraft Registration Tax,
Well Permit Tax,
Workers Compensation Tax.

Not one of these taxes existed 100 years ago, and our nation was the most prosperous in the world. We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.

What happened?

And we still have to 'press 1’ for English.