Friday, April 27, 2007

Tax Cuts For The Wealthy Will Balance The Budget

Obviously, I don't think that the Bush tax cuts are only for the wealthiest Americans. However, if you insist that they are, you have to consider that tax receipts have been growing since they went into effect. In addition, non-withheld tax receipts (or taxes paid on capital gains and not on wages) are at an all time high. That means, that more people are investing their money and then paying capital gains tax on it. Since the capital gains rates have been reduced to 15% (due to the Bush tax cuts), people have more incentive to invest their money, which causes companies to grow, which means more taxable income, which means more tax receipts. So, cut tax rates, collect more money. Seems counterintuitve and since we don't emphasize financial acumen for our youth, most people in the U.S. won't understand it, which is why Democrats will try to roll back the cuts if they win in 2008.

It's best summed up in this exchange between Larry Kudlow, Art Laffer (of Laffer Curve fame), and Liz MacDonald (HT: TheCorner):

KUDLOW: Here's another one for the record books. Get this: US tax nonwithheld receipts from individuals hit a record one day $48.7 billion increase on April 24th. The prior record was a year ago at $36.4 billion. This reflects, almost always, capital gains tax receipts from the bullish market at the record low 15 percent marginal tax rate on investment. Did someone say Laffer curve?

This is big stuff. It's been playing at the top of the Drudge Report all day. $48.7 billion dollars for the April 24th tax date. That is the largest in history, Arthur, the largest in history. It's almost all from cap gains, nonwithheld.

I did a little math, Art. Since the Bush tax cuts of mid-'03, the fiscal years '04, '05, '06 and we're almost halfway through '07, nonwithheld tax receipts up $144 billion, or 59 percent. Now, Art, I know you take a lot of flak in government accounting circles. They say lower tax rates lose revenues. This says lower tax rates increase revenues. Could you comment for us? Could you teach us something here?

LAFFER: Well, I just love these numbers, Larry. And, frankly, the one area where you can really expect to see this type of response is in capital gains, in the nonwithheld areas. I mean, the size of this one day receipt is so much larger than the next largest day's receipt, it's amazing. If you look all around this country, I don't see how people can think that you really should let these tax cuts expire. We're almost in balanced budget right now. It's coming very close. Just let this thing keep going. Don't stop it. I don't know why these people want to stop it, Larry.

KUDLOW: Liz, I just want to ask you. Last night we ran a segment, Goldilocks and the three bears. Goldilocks being the Bush tax cuts, the three bears potentially being Hillary, Obama and Edwards, who want to reverse the tax cuts. What's your thought? What Arthur is saying about the cap gains revenue yield, does that link to this bull market in stocks?

LIZ MacDONALD: Absolutely, and I think the world of Art Laffer. I privately call him Saint Art Laffer. Because God bless him, because he's really shown the way here. And here's the deal: the capital gains tax is a voluntary tax. In other words, people will sit on it and not pay it if the tax rates are high. When they go low, they will unlock those assets, right? And this is the best noninflationary liquidity that you can bring into the market. So yes, I am worried about the Democratic Congress coming in and removing these very powerful forces that are driving the stock market forward.

Friday, April 20, 2007

Before You Accuse Me, Take A Look At Yourself

No, it's not a post about Eric Clapton, but about the "gun culture" in the United States versus the rest of the world. I think you will find the results very interesting:

From TCS Daily

'Only in America'? Gunning Down a Claim

In response to the horrible mass shooting at Virginia Tech on Monday, overseas leaders as well as many Americans have condemned the "gun culture" of the United States. Perhaps these overseas leaders and American citizens would be less hard on our country if we discuss what has been happening in other countries.

Major news outlets reported on April 18 about the shooting deaths of at least 19 gang members in Rio de Janeiro by rival gangs and police. These shootouts occurred despite Brazil's strict gun control laws.

Also in Wednesday's newspapers are reports about Tuesday's shooting death of the mayor of Nagasaki, Japan. Japan has some of the strictest anti-gun laws in the industrialized world.

In Scotland authorities are enacting knife control policies because violent crime has continued to climb (with knives as a weapon of choice) in the wake of the nation's gun bans. Should Americans speak contemptuously of Scotland's "blade and booze" culture?

Last November in Emsdetten, Germany, a teenager shot and wounded more than a dozen persons before killing himself. In 2002 in a school in Erfurt, Germany, a gunman killed 17 people and himself.

Five years ago I did research for an article on mass shootings. Here are a few of the headlines I came across:

"8 slain at council meeting"
"Teen wounds 5 in tech school"
"Suspected gang shooting leaves 4 dead, 2 injured"
"Man kills ex-bosses, principal, himself"
"Gunman kills self, 7 others"

The incidents these headlines describe occurred in France, the Netherlands, Japan, Germany and Italy, respectively. In the five years since that research, crime rates have continued to climb in many other countries with far stricter gun control laws than those in the United States.

In 1996 in Port Arthur, Australia, a crazed man shot and killed more than 30 people. After learning of the mass shooting at Virginia Tech, Australian Prime Minister John Howard told reporters this about his nation's response to the Port Arthur horror: "We took action to limit the availability of guns and we showed a national resolve that the gun culture that is such a negative in the United States would never become a negative in our country."

Prime Minister Howard neglected to say anything about the "culture" in Australia that prompted a man to commit a mass shooting. He also neglected to mention Australian government figures that show five years after the Port Arthur-inspired gun crackdowns, homicides had climbed 3.2 percent, assaults had gone up 8.6 percent, and, astoundingly, armed robberies had soared 45 percent. Crime rates remain high in Australia despite the confiscation of hundreds of thousands of firearms, and gun bans.

On September 28, 2001, in peaceful Switzerland, a man shot and killed 14 people, including 11 members of a local canton council.

In the 2002 presidential election in France, many political observers cited soaring crime as the Number 1 issue. Nationwide strikes by thousands of France's police officers a few months before the election heightened the issue. The strikes came in response to what police said are growing dangers from gun-wielding criminals. They had strong evidence to cite, including the recent shooting deaths of two police officers during an armed robbery in a Paris suburb.

I've heard people say "only in America" in the aftermath of the Virginia Tech shootings. Clearly, though, it's not only in America. Terrible incidents like these have occurred and are occurring in countries across the world, including countries that severely restrict or ban the private ownership of firearms, and countries with a reputation of peace and harmony.

Steve Stanek is a freelance writer and editor in McHenry, Ill., and research fellow at The Heartland Institute in Chicago.