Illinois Lost 1 Resident Every 4.3 Minutes In 2017, Dropped To 6th Most Populous State

Illinois is drowning under a mountain of debt, unpaid bills and underfunded pension liabilities and it"s largest city, Chicago, is suffering from a staggering outbreak of violent crime not seen since gang wars engulfed major cities from LA to New York in the mid-90"s.  Here is just a small taste of some of our posts on Illinois" challenges:

• Illinois Pension Funding Ratio Sinks To 37.6% As Unfunded Liabilities Surge To $130 Billion


• Illinois Unpaid Vendor Backlog Hits A New Record At Over $16 Billion


• The State Of Illinois Is "Past The Point Of No Return"


• "What The Hell Is Going On In Chicago" And Other Highlights From Trump"s Speech To FBI Grads

Given that, it"s hardly surprising that the Prairie State lost a net 33,700 residents in fiscal year 2017, according to the Census Bureau.  Also not surprising is the fact that the mass exodus from Illinois was the largest of any state in the country with lower taxed, lower cost of living states like Texas and Florida posting the biggest gains. 

Of course, the net population loss masks the true gross outflow of Illinois residents as it doesn"t account for natural births/deaths. Assuming that Illinois has the same natural population growth as the U.S. as a whole (0.7%) implies that the state lost a staggering ~125,000 residents in aggregate, or roughly 1 man/woman/child every 4.3 minutes.

Meanwhile, adding insult to injury, the domestic migration out of Illinois was enough to push the state down one notch on the state population ranking tables to just below Pennsylvania. Per Illinois Policy:

Of course, this is all terrible news for Illinois retirees whose pension obligations continue to grow every year and currently stand at nearly $130 billion...

While we could be wrong, the last we checked folks were no longer on the hook to pay Illinois taxes after making the decision to move to another state.  Meanwhile, efforts to offset the lost tax revenue will only result in an acceleration of population declines in the future...

Conclusion: Sorry, Illinois, but your ponzi scheme is slowly coming unraveled.

Grab A Beer Philadelphia, The Soda Is Too Damn Expensive

Via SovereignMan.com,

What happened:

Turns out when soda cost the same as beer, people choose to drink beer. That is what is happening in Philadelphia.

The city’s 1.5 cent per ounce tax on soda has made beer a cheaper option. But that isn’t the only effect of the ill conceived plan to raise revenue.

The tax didn’t raise the money expected, according t o a study by the Tax Foundation.

Stores have already seen huge declines in soda sales, meaning people are either going outside the city to buy, buying beer instead, or not drinking soda.

Now if the residents did cut down on soda, some might see this as a win, despite the low tax revenue. But from the outset, the Mayor was quite clear that the aim of the tax was to raise money, not to influence health.

The city claimed the tax revenue would fund pre-kindergarten programs. But less than half of the meager revenue is actually being put into the school system.

What this means:

Looks like “for the children” was just another excuse for government greed.

Governments refuse to believe in economics. They think they can just continue to pile the taxes on. But once the costs get too high, people change their behavior.

Sometimes that means going somewhere else to buy your soda. Sometimes that means making different choices, like beer instead of soda.

But hardly ever do governments get what they predict. The mayor even originally wanted the tax to be 3 cents per ounce. Some stores are reporting a 50% drop in soda sales, so you can imagine what would have happened at double the tax rate. Yet all the greedy politicians imagine is dollar signs.

The beer companies are really the only ones who made out on the deal.

Might make a conspiracy theorist wonder...

Chicago Cab Industry Collapsing As Medallion Foreclosures Soar

Chicago mayor Rahm Emmanuel has a lot on his plate these days between soaring murder rates, failing pension systems and the worst domestic migration trends in the country as residents see the tax-hike writing on the wall and are moving out of the "Windy City" by the 1,000s.  Now, it seems he can add a failing taxi industry and millions in additional annual tax revenue losses to his list of woes.

As the USA Today points out, the cab industry in Chicago is quickly hurdling toward extinction as nearly 50% of the city"s fleet sat idle in March 2017 and medallion foreclosures in 2017 have already exceeded 2016.

About 42% of Chicago’s taxi fleet was not operating in the month of March, and cabbies have seen their revenue slide for their long-beleaguered industry by nearly 40% over the last three years as riders are increasingly ditching cabs for ride-hailing apps Uber, Lyft and Via, according to a study released Monday by the Chicago cab drivers union.

More than 2,900 of Chicago’s nearly 7,000 licensed taxis were inactive in March 2017 — meaning they had not picked up a fare in a month, according to the Cab Drivers United/AFSCME Local 2500 report. The average monthly income per active medallion — the permit that gives cabbies the exclusive right to pick up passengers who hail them on the street — has dipped from $5,276 in January 2014 to $3,206 this year.

The number of riders in Chicago hailing cabs has also plummeted during that same period from 2.3 million monthly riders to about 1.1 million.

More than 350 foreclosure notices or foreclosure lawsuits have been initiated against medallion owners already this year, compared to 266 last year and 59 in 2015. Since October, lenders have filed lawsuits against at least 107 medallion owners who have fallen behind on loan payments, according to the union’s count.

Meanwhile, the value of Chicago medallions have crashed by 90% in less than four years after peaking at over $350,000 each back in 2013.

The value of Chicago medallions hit a median sales peak of $357,000 in late 2013, just before Uber arrived on the scene in Chicago. In April, one medallion sold for just $35,000, according to city data.

About 39% of Chicago’s medallions are owned by individuals or groups with four or few fewer medallions, while the majority of medallions are owned by companies that maintain large fleets of taxis and lease the permits and vehicles to licensed operators.

"It feels like the city is just watching us collapse," Aikins said. "Right now, there are a few people, the elderly and some others who refuse to take Uber because they are uncomfortable with it, that keep us going. But how many of those people are out there to sustain us?"

Not surprisingly, the cabbie union has done what unions do best by calling on local government officials to prop up the dying industry through tax incentives, measures which should buy them at least another month or two of operation.

The union is calling on the city take several actions to provide relief for the city’s struggling taxi industry, including changing rules so taxi drivers aren’t required to replace their vehicles as often, waive an annual $1,176 per taxi ground transportation tax fee, and eliminating a city medallion license renewal fee that costs owners $1,000 every two years.

“When they opened up ground transportation and taxi market to thousands of for-hire vehicles like Uber, Lyft and now Via . . . taxi driver income has been decimated and owner-operators are unable to keep up with loan payments for their medallions plus their high-operating costs,” said Tracey Abman , associate director at AFSCME. “As a result of that, hundreds of taxi owner-operators are facing foreclosures on their medallions and thousands more foreclosures are likely unless the city takes substantial action to reduce the financial burden on small taxi owners.”

Of course,Chicago cabbies aren’t alone in feeling the pinch.  In New York, ridership in the city’s iconic yellow cabs has fallen about 30% over the last three years. Last year, San Francisco’s Yellow Cab — the city’s largest taxi company — filed for Chapter 11 bankruptcy protection.  Los Angeles taxi ridership fell 43%, and revenue was down 24%, between 2013 and 2016.

Shocking that it is so hard to compete in an industry in which Uber is willing to burn billions of dollars per year to provide your service for a fraction of your operating costs.

Connecticut Credit Risk Soars To Record High As Tax Receipts Tumble

Connecticut’s general-obligation bonds are riskier than ever as plummeting income-tax collections and a $2.3 billion budget deficit moved all three credit rating companies to downgrade its debt.

As Bloomberg details, tax receipts for the current fiscal year ending in June will be about $451 million short of estimates from January, prompting Governor Dannel Malloy to empty the state’s already small budget stabilization fund. To help close the gap, public employees agreed to accept a 3-year wage freeze and to contribute more for their pension and health-care benefits under a tentative deal that would save more than $1.5 billion over the next two years.

As we previously detailed, The state of Connecticut has been hit hard by the double whammy of a deteriorating local economy, coupled with a plunge in hedge fund profits - as well as hedge fund managers permanently relocating to Florida - leading to a collapse in tax revenues. According to the the latest Connecticut budget released last week, the state is reeling from the consequences of sliding tax revenue from the super-rich, i.e. the state"s hedge fund managers. The latest figures showed that tax revenue from the state’s top 100 highest-paying taxpayers declined 45% from 2015 to 2016. The drop adds up to a $200 million revenue loss for Connecticut.

In a dramatic, if of questionable credibility, soundbite Department of Revenue Services Commissioner Kevin Sullivan says these wealthy people are “dramatically less wealthy than they were before.” He was referring to annual income, not actual asset holdings, because judging by the all time high in the S&P, the local financial elite have never had a higher net worth.

“When you look at the top 75, top 50 ... this is a group of wealthy people who are dramatically less wealthy than they were before,” said Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “These folks, for a number of reasons, are either not realizing as much income or don’t have as much income.”

Just don"t expect tears from the general public. Sullivan also noted how several international hedge funds have recently failed, resulting in “significant retrenchment” from investors. That drop in tolerance for risk brings smaller margins and ultimately less personal income for the state to tax, he added. It"s fascinating how the Fed"s central planning, superficially meant to restore "confidence" in a rigged, manipulated market is having such proound and adverse 2nd and 3rd order effects on state budgets.

Sullivan also acknowledged part of revenue decline can also be attributed to “a handful” of wealthy individuals who moved to more tax-friendly states — an issue frequently raised by legislative Republicans, who argue Connecticut’s tax policies encourage the state’s super-rich to move out.

None of this should be a surprise... it"s no wonder more people than ever are looking to leave the increasing tax burden of this troubled state?

3 Lessons Learned From Wisconsin's War On Foreign Butter

In February, a number of Irish citizens were surprised to find out that selling Kerrygold butter - a line of butter produced in Ireland - is a criminal offense in Wisconsin. Irish Central reports: 

Under a 1970 law all butter sold in the state must be subjected to scrutiny by a panel, which recently ruled Kerrygold was not compliant. Their problem with Kerrygold’s products was that the cattle who produce the milk for the cheese and butter are grass fed, something the panel ruled was against state law.

Any shopkeepers who continue to stock the brand face a $1,000 fine and up to six months in jail — something that has enraged consumers.

In response, Wisconsin consumers have taken to traveling across state lines to buy Kerrygold butter in Illinois. 

In March, a group of Wisconsin citizens took to the courts in the hopes of gaining the freedom to freely buy whatever butter they want: 

Tired of trekking across state lines to stock up, [Jean Smith] and a handful of other Wisconsin butter aficionados filed a lawsuit this week challenging the law, saying local consumers and businesses “are more than capable of determining whether butter is sufficiently creamy, properly salted, or too crumbly.” No government help needed, they say.

While the matter of butter may seem small, there are three valuable lessons we can learn from Wisconsin"s war against foreign butter. Moreover, all these lessons apply well beyond the world of dairy products. 

Lesson 1: "Public Safety" Is Really Just about Government Favors for Special Interests

In cases like these, it"s routine for state officials to claim that the law has something to do with public safety. More savvy consumers, of course, immediately suspected that the law isn"t about safety at all, but is about protecting Wisconsin dairies from consumers. 

They"re right to be suspicious. The Wisconsin agency that implements the effective ban on Kerrygold butter is called the Wisconsin Department of Agriculture, Trade and Consumer Protection. But, given the power of the dairy lobby in Wisconsin, one would have to be naïve in the extreme to assume that it"s a mere coincidence that Wisconsin is the only state in the Union to enact such stringent butter laws. 

Even the most basic sort of critical thinking is likely to lead us to the conclusion that Wisconsin tightly controls butter imports precisely because dairy farmers have an unusually large amount of power at the state legislature. 

Nor is this only true at the legislative level. Through the process of "regulatory capture" those agencies that are supposed to regulate the dairy industry end up doing the bidding of the industry"s most powerful and established firms.

The anti-competitive nature of the butter business in Wisconsin is likely working exactly how it"s supposed to. Unless the state legislature"s hand is forced by pressure from citizens, don"t expect any change. 

Moreover, while even the opponents of the law are calling it a "light-hearted" issue, the reality of the butter ban is the same as any other law: those who persist in ignoring the law are likely to find themselves on the wrong end of a gun held by a government agent. 

Indeed, a look at the relevant state statutes show the state is prepared to impose fines of more than $1,000 dollars for non-compliance, or six months to a year in county jail. 

Ridiculously, state agents have attempted to advertise their alleged magnanimity by stating that the state"s action on the regulations “has been limited to notifying retailers of what the law says.”

Of course, this only suggests that no merchants have taken to publicly flaunting state regulations and openly selling Kerrygold butter (or other banned products). And who can blame them? Most grocers are well aware of what happens if they ignore state regulations. The result is usually fines, raids, and even imprisonment for merchants who don"t comply. 

Lesson 2: Decentralization = Freedom

Fortunately for the residents of Wisconsin, the laws of Wisconsin on this matter only extend to the state line. Once outside the state, consumers can purchase a wider array of dairy products. 

Imagine, however, if the Wisconsin ban were a matter of national policy or — worse yet — imposed by international agreements like the TPP or NAFTA. 

Once nationalized or internationalized, escape from the whims of special interest groups would be nearly impossible for most people. Instead of merely traveling an hour or two over state lines, purchasing the products one prefers would become a matter of international intrigue. 

This illustrates for us, yet again, that political decentralization increases the freedoms and choices of everyone who is subject to the arbitrary edicts of government. Moreover, the smaller the political unit, the better. Just as Wisconsin"s moderate size is a boon to lovers of certain types of banned food, their situation would be improved all the more should butter regulations be made at a city or county level. Every city that banned a certain type of butter to protect a local industry, a neighboring town or city would be just as likely to legalize such products. 

And in many cases, of course, jurisdictions would simply give up on regulating butter since shoppers would travel to other nearby towns, thus robbing the prohibitionist jurisdiction of the sales tax revenue. 

This same reality applies to every sort of good or service, whether we"re talking about police powers, tax rates, marijuana laws, or butter bans. The more decentralization there is, the more options consumers and taxpayers have. 

Lesson 3: Free Trade Benefits Everyone (Except the Crony Capitalists)

Although the Wisconsin regulations on butter are not technically a tariff, they have the effect of a tariff because the burden of the regulations tend to fall disproportionately on foreign foods. Moreover, if the defenders of the status quo were honest with the public, they would just come out and admit that yes, the law exists to protect local dairy producers from outside competition.

Those who defend tariffs and other trade barriers, of course, should have no problem with this. After all, if excluding Mexican goods from US  markets is a wonderful thing and "saves" American jobs, why shouldn"t the Wisconsin legislature be free to do the same for domestic Wisconsin goods? Should not Wisconsin residents want to protect their domestic industries from "unfair" competition provided by Iowa firms? After all, median wages in Iowa are lower than in Wisconsin, and it would be unfair to allow cheaply made Iowa goods to simply flood into Wisconsin markets without a "border adjustment" tax. 

The truth is most people are happy to have access to goods produced outside their state or region or country. One problem the Kerrygold situation presents for protectionists is that it demonstrates in a concrete fashion how consumers are willing to circumvent the anti-trade laws when they get the chance. In turn, this consumer behavior also illustrates how local merchants and entrepreneurs are harmed by controls on trade.

Thanks to Wisconsin protectionism, every consumer that wants prohibited butter in Wisconsin is made poorer because he or she must now waste time and money driving to neighboring jurisdictions. Or, the consumer must simply do without a product he or she would like to have. In addition, many businesses — including restaurants and grocery stores — would have liked to provide consumers with what they want, but are prohibited from doing so.

"Oh, but we"re saving local jobs and local industries!" the anti-free-trade argument goes. In reality, of course, the "industry-saving" laws do nothing more than transfer wealth from one group of citizens to another. In this case, consumers, restaurateurs, and grocers suffer and are impoverished so a select number of government favorites can be spared from having to compete with outside products. 

The situation is exactly the same when federal regulations and taxes have the effect of limiting access to automobiles, food products, or anything else that consumers and business owners in the US might like to buy. Unfortunately, the sheer size of the US means it"s totally impractical for most Americans to drive across the border to buy the products they want from other jurisdictions. Were the US similar to Wisconsin geographically, however, we"d see the absurdity of protectionist trade policy put on display every day as consumers traveled to neighboring jurisdictions to circumvent the absurd laws prohibiting access to goods and services that are supposedly put in place for their own good. 

Prohibitions on butter may seem like no big deal, but the lessons learned here are no different when applied to medication, food staples, or products essential to entrepreneurs. When governments restrict access to medications, patients suffer. When governments control access to food, food prices increase. When governments limits access to anything small businesses need, fewer businesses open, and fewer workers are hired. 

The issues at work in butter markets are no different in any other industry. 

In Setback For Government, Swiss Voters Reject Plan To End Low Taxes For Multinational Corporations

In a setback for government efforts to abolish low tax rates for thousands of multinational firms while encouraging them to stay, the Swiss voted overwhelmingly against an overhaul the country"s corporate tax system. Swiss broadcaster SRF said voters rejected the tax plans by about 60% to 40%. As Reuters notes, Switzerland has been in the European Union"s firing line for years because Swiss cantons have a special tax status for foreign companies that means some pay virtually no tax other than an effective federal tax of 7.8%, an incentive to incorporate and stay on Swiss soil.

In 2014, the country agreed with Brussels to abolish this status because it allowed some foreign firms to pay far lower tax on overseas earnings - an attractive perk for around 24,000 multinationals looking to lower their tax bills, Reuters reports. To offset the introduction of higher tax rates the government proposed giving companies tax breaks on research and development in Switzerland, profits from patents developed there and deductions for excess company equity. In addition, many cantons said they would also reduce corporate tax rates for all companies to reduce the fiscal burden and dissuade multinationals from leaving.

Those backing the government say the reforms struck a balance between abolishing the tax breaks criticized by Brussels and new measures that will keep Switzerland competitive. Most Swiss citizens, however, , disagreed.

After parliament approved the measures last year, critics gathered the 50,000 signatures needed to trigger Sunday"s referendum, which can overturn the parliamentary vote. The No campaign was led by a coalition including the Social Democrats, Greens, trade unions and church leaders who feared the public would bear the brunt of reduced company tax revenue through cuts in public services or higher personal taxes.

While most Swiss recognize the country needs tax reform to avoid being blacklisted as a low-tax pariah, the new measures proposed to help companies offset the loss of their special status breaks had created deep divisions.

"It is so clear that you can already say the measure will fail," political analyst Claude Longchamp of the gfs.bern research and polling institute told SRF around half an hour after polls closed.

As Reuters adds, "the stakes are high for Switzerland, already coming to terms with the end its long-cherished tradition of banking secrecy. If multinationals pull out, the economy could suffer."

Furthermore, the changes also come at a time U.S. President Donald Trump is considering slashing corporate taxes - even if the plan is still missing much if any clarity - and Britain has hinted it could cut its rates when it leaves the EU. As such, a corporate tax hike could come at a time of global tax upheaval, which would make it even more attractive for domestic companies to "invert" themselves out of Switzerland and to more welcoming venues.

‘News’ is Advertising. “That’s economics son, and don’t you ever forget it.”

‘News’ is Advertising. “That’s economics son, and don’t you ever forget it.”

 By

Cognitive Dissonance

Back in the early 70’s I was deeply concerned with the direction the powerful nuclear power industry was taking. I had a deep distrust for the ‘partnership’ the industry had forged with the Atomic Energy Commission, the regulatory agency tasked with overseeing it while also promoting it. In my view this was a huge conflict of interest and could only lead to no good.

So concerned in fact that I participated in many (non violent) protests, both at the regional regulatory review committee hearings and the actual construction of several nuclear power plants in the area. At the time, nuclear power was promoted as the miracle cure for all the problems that ailed America. “Too cheap to even meter” was a popular propaganda slogan bandied about in the 50’s and 60’s in an effort to dispel any opposition.

Who doesn’t want cheap power to feed a hungry and growing nation?

Sell the sizzle, not the steak is the marching orders of any good salesman. Leave the technical details to the rocket scientists and just sell the benefits. So it stands to reason “We the Protestors” were not welcome anywhere we showed up because we were throwing cold water on their hot shower. The power plants meant construction jobs for the local population and huge tax revenue for the towns where they were sited.

One particular local newspaper did not treat our presence kindly, producing a front page story gloriously praising the previous day’s regulatory hearing where approval was finally granted along with a hatchet job on us, a small group of about 20 protestors who showed up for that final hearing and briefly disrupted it when we were unlawfully blocked from speaking during the public comments portion of the hearing.

Sufficiently indignant to work up a good lather, a friend and I marched down to the newspaper and demanded to see the editor. Who, we quickly found out, was also the owner. Within a few minutes we were ushered into a cluttered back office where a pudgy little man was seated behind a huge wooden desk overflowing with old newspapers and paperwork. The place was such a mess the owner had to clear two chairs so we could sit while we interrogated him.

To his everlasting credit, he was polite and respectful as he listened to us complain about his paper not meeting the ethical standards of proper unbiased reporting all newspapers were expected to meet. While we did not insult him by swearing or shouting, from the point of view afforded by more than 40 plus years of perspective, I can say with some embarrassment we were not kind to the man.

He did not interrupt us nor argue his case, but instead sat silently while we rapidly dissipated our built up frustration and righteous indignation. Clearly he was a veteran of verbal assault by outraged readers and seemed to understand the best way to deal with this type of situation was not to feed the fire, but instead to just let it burn out on its own.

Media, in whatever form it takes, is still little more than advertising.

Burn out we did and in less than 10 minutes time. It is truly amazing how quickly the flames of passion die when offered no resistance. It’s like boxing a ghost, quickly dispelling all your energy swinging impotently at thin air. That was a secret I utilized later in life as a professional salesperson and company problem solver. When someone is pissed at you, listen to what they have to say with respectful silence. They soon calm down and tell you what they really want other than just a punching bag to smack around.

When he saw we had played ourselves out he asked if we were done. I weakly nodded in the affirmative, not knowing what else to do. He then seamlessly launched into his rebuttal; once again it was glaringly obvious he was an old pro with his response memorized and well rehearsed. What follows, while written with “quotation marks” to aid in reader comprehension, is a paraphrased rendition of his polished but increasingly forceful diatribe.

“I don’t know why you labor under the delusion a newspaper must be unbiased in its reporting or why you think we should treat all sides equally regardless of its merit. You may have got that in school, but that’s not the way the world works.” He announced, pausing for effect.

To be perfectly honest, the last thing I expected was for him to admit to everything we had just accused him of. Secret number two; agree with your adversary without really agreeing with them. It takes the wind right out of their sails.

“See this?” he asked as he grabbed a copy of the day’s newspaper, the same one we were just pointing to as we explained to him our noble and honorable cause in front of the regulatory committee. He expertly flipped the newspaper to one of the pages in the back, then in one motion jabbed his thick finger at a full page automobile dealership ad while slapping the paper down on his messy desk.

“This is advertising. This dealer buys a full page ad in my newspaper twice a week and that’s what pays the bills around here.” Without missing a beat, he grabs the paper and quickly flips it back to the front page, then once again jabs his finger at it while smacking it down on the desk, this time with even greater force. Plainly he was getting a little worked up.

“You see this?” he questions once again as he points to the front page story about the regulatory hearing that approved the power plant.

“This is advertising. This also pays the bills around here.”

I sat transfixed, shocked and awed into silence. My friend, squirming in the seat next to me, was turning green at the gills. Without a doubt we were in way over our head and he was looking for some way to escape. While stunned speechless, I was fascinated and waited for him to continue, having never met anyone like him before.

He didn’t disappoint.              

“The people who read my newspaper and buy my ads want the power plant and the jobs and money that come with it. You might be right about radiation and floods and bad equipment. So what? This pays,” he declared as he repeatedly pokes at the story. “And you don’t,” he nearly spits as he moves his finger down to the protest story and stabs at the picture of “We the Protestors” being hauled away by the state police.

“I write what my people want to read. And they don’t want to read about you. I only put that story in because it’s news and that’s what a newspaper is supposed to do, report the news. But you don’t pay the bills,” he finished with a flourish.

“Understand?”

He had a good point.

We all spin our narrative to suit our pleasure and preference as we navigate life. Whether we are filtering ‘facts’ to fit our preferred point of view or lecturing some poor soul on the glorious mission of the social justice warrior to pleasure our ego, we produce what sells even if the only one buying is us.

While there are plenty of people who will strenuously disagree (if only to sooth our fragile ego) we are all propagandists to some degree or another. The owner/editor was unabashedly, and proudly, explaining how he was simply giving the people what they want and being fairly compensated for doing so. We all talk our book and wish to be affirmed in our beliefs, especially when we are emotionally invested or financially compensated.

I made my last stand, insisting he could have been less dismissive of us while writing the story. He was immediately amused, then snorted his contempt as he lunged forward to drive the sword home.

Speaking slower now to make sure the long haired dimwits seated in front of him understood what he was saying, he covered the same ground once again.

“You don’t pay the bills. The power plant does.” Now he really was spiting, with white flecks of saliva spraying the newspaper and us in the process.

“That dealer likes what he reads in my paper and he pays his advertising bill every month. The people in this town like what they read in my paper and they buy the dealer’s cars. What do you do for them or me?” With eyes wide and nose flared, the owner of the newspaper everyone liked except “We the Protestors” had just gutted his catch and was ready to feast upon the remains.

“That’s economics son, and don’t you ever forget it.”

I never have and I never will, though I still occasionally get righteously indignant. Just ask Mrs. Cog.

Cognitive Dissonance

02-12-2017

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Tax Foundation Analyzes Tax Plans: Trump Tops Clinton For GDP & Wage Growth

The Tax Foundation has an interesting analysis of Trump’s tax plan compared to Hillary’s.

Hillary is negative on GDP, capital investment, wage growth, and jobs. Trump is positive on all four under two different models.

Trump vs. Hillary Plan Comparison

Let’s dive into the discussion with a look at How do Clinton and Trump’s Tax Plans Compare?

Also consider Understanding the Candidates’ Tax Plans. Both articles are by the Tax Foundation. The following snips are from the second link.

Donald Trump Would Cut Taxes Significantly

Donald Trump’s tax plan would significantly cut taxes, while mostly steering clear of the more difficult task of broadening the tax base. His plan would cut the individual income tax for most taxpayers by cutting marginal rates and expanding the standard deduction. He would cut corporate income taxes by reducing the corporate income tax rate from 35 percent to 15 percent and allowing businesses to choose between a deduction for net interest expense and the full expensing of capital investments. His plan would also introduce a number of new childcare expense-related credits and deductions while eliminating both the personal exemption and head of household filing.

Trump’s plan would significantly reduce federal revenues. We estimated that his plan would cut tax revenue by between $5.9 trillion and $4.4 trillion over the next decade, depending on how his plan treats “pass-through” businesses. Most of the revenue loss from his plan comes from his significant individual and corporate rate cuts.

Trump’s plan would also significantly reduce marginal tax rates on work, saving, and investment. As a result, his plan would boost the long-run size of GDP by between 6.9 percent and 8.2 percent. The larger economy would mean higher wages (between 5.4 and 6.3 percent) and an increased level of employment (around 2 million full-time equivalent jobs). The biggest boost to the economy under his plan comes from the much lower corporate income tax rate. The larger economy would end up broadening the tax base and reduce the ultimate cost of his plan. We estimate that his plan would reduce revenues by between $3.9 trillion and $2.6 trillion on a dynamic basis.

Trump’s plan would also make the tax code less progressive than it is today. His tax plan would cut taxes across the board. On average, taxpayers would see an increase in after-tax income of between 3.1 percent and 4.3 percent. However, the plan would cut taxes most for those at the top. The top 20 percent of taxpayers would see an increase in after-tax income of between 4.4 percent and 6.5 percent and those in the top 1 percent would see up to a 16 percent increase in their after-tax income. Ultimately, taxpayers in all income groups would see an increase in their after-tax income once the economy adjusts to its high equilibrium.

Trump’s tax plan would eliminate many complex features of the tax system, such as the AMT, and many business credits. The elimination of these features of the tax code would make filing simpler for both individuals and businesses. However, his plan to change how pass-through businesses are taxed could add significant complexity to the tax code, depending on the final details of that proposal.

Hillary Clinton Would Raise Taxes, but Only on Top Earners

Hillary Clinton’s plan would raise taxes overall in order to fund new programs. Her plan would significantly raise taxes on high-income taxpayers by enacting a 30 percent minimum tax called the “Buffett Rule,” a cap on itemized deductions, and a 4 percent “surtax” on incomes above $5 million. Her plan would also significantly increase the estate tax, especially on very large estates. Her plan would cut taxes for middle-income taxpayers and small businesses. She would expand tax credits for middle- and low-income taxpayers, expand expensing for small businesses, and simplify their taxes.

Clinton’s plan would have the opposite impact on federal collections, but they would be more modest. We estimated that her plan would increase federal revenues by $1.4 trillion over the next decade. All of the next revenue from her plan would come from tax increases on high-income taxpayers.

And while Trump’s plan would reduce marginal tax rates, Clinton’s would modestly increase them. Under Clinton’s plan long-run GDP would be slightly smaller than it otherwise would have been (2.6 percent). This would reduce long-run wages by 2 percent and employment by 700,000 full-time equivalent jobs. The smaller economy would somewhat narrow the tax base. As a result, the plan would not raise as much revenue on a dynamic basis. We found that it would end up raising $663 billion over the next decade.

Clinton’s tax proposals would make the U.S. tax code more progressive. Clinton would increase taxes by 1.2 percent on average, but all of the tax increases would fall on the top. The top 20 percent of all taxpayers would see their after-tax incomes fall by 2.1 percent and the top 1 percent of taxpayers would see their after-tax incomes fall by 6.6 percent. At the same time, Clinton would cut taxes for the bottom 80 percent of taxpayers mainly by expanding the Child Tax Credit. However, we expect that taxpayers in all income groups would see a decline in their after-tax incomes once the economy has adjusted to its new equilibrium.

In contrast to Trump’s plan, Clinton’s tax plan would make the tax code notably more complex. Her plan would add a new minimum tax, a complex cap on itemized deductions, and a new surtax. Some high-income taxpayers may need to calculate their tax burden multiple times under her plan. She would also introduce a number of new credits for businesses to a system that is already littered with extraneous credits and deductions that benefit narrow groups of taxpayers. Although these additions will most burden high-income taxpayers, they do increase the cost of complying with the tax code.

I am not a fan of increased deficit spending. However, Clinton’s tax plan is an absolute disaster with expanded tax code, new minimum taxes, and increased tax code complexity.