More TR2
More evidence to support our ‘tax revolt II’ thesis, but first, we should acknowledge that TR2 is a blatant misnomer. There have, of course, been many tax revolts before the 1970s and today, and several in between. But TR2 is easier to type than “tax revolt current edition”, so we’re going to stick with it.
First is a letter to the WSJ editorial page by our friend Ray Galkowski at Par Capital, LLC, in response to an op-ed by Berkeley economist and Clinton Labor Department chief Robert Reich:
Mr. Reich argues that the primary philosophical difference between Messrs. Reagan and Obama is that Reagan tried to advance economic growth with “top-down” policies, while Mr. Obama is working through the more egalitarian “bottom-up” approach…
In fact, it is Messrs. Obama and Reich who are attempting to manipulate from the top down by taking resources from every American and allocating it as they, the central planners, see fit. It is Messrs. Obama and Reich who are disregarding what we the people want. What could be more conceited than that?
In his letter, Ray captures the traditional American sentiment towards taxation rather well. But are his letter and the similar ones accompanying it a harbinger of a national tax revolt? We think it depends on how heavy the overall tax burden gets in coming years. Because tax revolts unfold at the margin, each increase is a potential catalyst. And on that count, there has been evidence of increasingly heavy handedness by government treasuries. In the U.S., Congress is pushing tighter loopholes for expatriates, and the President’s budget allegedly imposes a less generous tax schedule on estates in 2010 (that’s according to the WSJ editorial page – we haven’t read the legislation yet). By themselves, these aren’t likely to catalyze much. However, as the proverb notes, every straw in the camel’s hay bale counts.***
It’s also worrisome that expatriate initiatives appear to be spreading, which could put globalization at further. In Bahrain for example, a new labor tax was enough to spur protests, while India has been pursuing a parallel tack on citizens employed abroad by multi-nationals.
If there’s any upside, it’s that some countries, such as Canada and Brazil, continue to lead in positive directions on taxes. Who would have thought fifteen or twenty years ago that those two countries would become the western hemisphere’s leading lights on economic policy? It boggles the mind.
***Tobacco excise taxes could be a stronger catalyst, given the larger number of people impacted, and the intensely contradictory thinking behind them, ie: the tax will produce revenue for desired programs like health insurance for children, AND it will also deter the undesirable behavior from which those revenues are derived. If the deterrence aspect proves effective, where’s the slack going to be made up? By cutting other programs? Not without a tax revolt. Higher tobacco taxes should also provide a small windfall for Indian reservations and nicotine smugglers, in addition to tobacco companies, who have reportedly already raised their prices, although this could be due to tax induced demand spikes (an ironic side note in that last linked article – a grandson of tobacco giant RJR’s founder heads a foundation called Smokefree America – we’re speculating, but would assume that he’s able to do so at least in part because of the wealth amassed from dear old grand dad’s cancer sticks!).
URLs:
http://en.wikipedia.org/wiki/Tax_revolt
http://ballotpedia.org/wiki/index.php/Tax_revolt
http://online.wsj.com/article/SB123846479778072325.html
http://online.wsj.com/article/SB123819895769662043.html
http://online.wsj.com/article/SB123431935722571333.html
http://in.reuters.com/article/indiaDeals/idINIndia-38724720090326
http://in.reuters.com/article/governmentFiling
sNews/idINSPG00024520090330
http://www.kpmg.ca/en/services/tax/documents/20082009General_English_Jan312009_WEB.pdf
http://news.google.com/news?um=1&ned=us&hl=en&q=tobacco+taxes
Tags: Public Policy, Tax Revolt II
News and Views | art March 31, 2009
