Applying wisdom from the wealthy to government
The author of How Rich People Think spent decades interviewing millionaires and establishing what makes their thinking patterns distinct. Many of us, myself included, are eager to know — so a recent Yahoo Finance summation with the "21 Ways Rich People Think Differently" garnered plenty of traction.
What became immediately apparent, however, was that many of these ways of thinking could be applied well to government policy. The first and most important example led to this week’s headline: "Average people think money is the root of all evil. Rich people think poverty is the root of all evil."
Unfortunately, a majority of North Carolinians would like to see even higher taxes on wealthy people for redistribution (Q. 12). Individuals polled by the Civitas Institute placed this redistribution, which merely disguises poverty, as a higher priority than actual prosperity, since more agreed than disagreed with the notion that higher taxes would impede economic growth and employment (Q. 14).
This means plenty of work remains for researchers at the John Locke Foundation and similar organizations. We ought to publicize two key truths.
(1) Contrary to public perception, the United States has the most progressive personal income tax burden and the highest corporate income tax rate of all developed nations. The OECD and even that conservative rag, the Huffington Post, have documented these findings.
(2) Economic freedom, including low taxes — as opposed to wealth redistribution — allows prosperity for all, particularly the poor. In fact, Gerald Scully of the National Center for Policy Analysis has documented in detail how "to a great extent, raising living standards and redistributing income are mutually exclusive goals."
"Countries that rank ‘mostly unfree’ or ‘repressed’ in the index have levels of poverty intensity, as measured by the United Nations’ new Multidimensional Poverty Index, that are three times higher than those of countries with more economic freedom," notes Edwin Feulner, president of the Heritage Foundation.
In just the past few years, the United States has been falling precipitously in terms of economic freedom. It now places behind Canada and, according to the Fraser Institute, even the United Kingdom. (That people are renouncing United States citizenship in record numbers is no surprise.) So this piece of wisdom from the wealthy, that poverty rather than money is the root of evil, merits meaningful attention.
The Yahoo Finance article has plenty of additional content to digest, but I shall save that for another day. There are other items I’d like to get to this week.
The easiest tax to get rid of
A tax that generates virtually no revenues, fosters an expensive avoidance industry, and dissuades saving and investment would appear to be a blatantly bad idea. The estate or "death" tax is just that, both in North Carolina and at the federal level, as affirmed by a new report from the Tax Foundation.
This tax generated just 0.32 percent of federal revenues in 2011, and 0.13 percent of North Carolina’s General Fund revenues (p. 19). To make this negligible revenue stream more embarrassing, the compliance costs associated with the estate planning industry exceed the revenues (p. 3). These specialists manage to shield much of the estate tax liability, which means the tax should more accurately be considered a subsidy to an economically wasteful and unnecessary industry, given the demand for services it generates.
Even the purported goal of reduced income inequality — a fool’s errand, as noted above — fails, since only 27 percent of wealthy households got that way through inheritance. Plus, efforts to bring this about promote a "die broke" approach, which decreases capital stock and reduces other tax revenue streams.
Rather than allow the federal estate tax to increase at the end of this year, congressional representatives would best do away with what is simply a counterproductive exercise. In North Carolina, as tax reform becomes likely next session, the estate tax can be the first to go with no pain and all gain.
Image on Keynesianism
Given my recent Fiscal Insight on monetary policy as no substitute for real underlying economic expansion, along with the latest announcement of further currency devaluation from the Federal Reserve, I couldn’t resist sharing this cartoon.
- The National Debt Relief Amendment has garnered more media attention, and I encourage people to familiarize themselves with it, along with the Article V amendment process. For almost two years now, I’ve been promoting this initiative, and it offers a compelling solution to the bipartisan stalemate at the federal level. Education on the matter will also dispel runaway convention fears and allow the process to work in the best interests of federalism.
- Do you know any individuals interested in exploring the philosophy of and political movement towards liberty? If so, please let them know that Students for Liberty will be hosting a regional conference in Chapel Hill on November 3, 2012. These conferences highlight the wave of articulate and passionate young liberty advocates and are for both students and non-students alike.
- On October 5, the $10 Million a Minute Tour is coming to Chapel Hill to quantify the nation’s debt problem. Sponsored by the North Carolina Association of Certified Public Accountants, it will explain how accounting tricks conceal the depth of the problem, and you can get more details here.
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