No Truce With Kings

Here’s the start an op-ed piece by Ryan Ellis, tax policy director at Americans for Tax Reform. There’s some interesting history in it.

The income tax: A century of bigger government

On February 3, 2013, taxpayers will celebrate a very dubious centennial: the 100th anniversary of the Sixteenth Amendment’s ratification. The Sixteenth Amendment gives Congress the power to levy income taxes.

We can derive a couple of lessons from this somber occasion.

First, taxes which are foisted upon us by politicians with the promise that they will only be assessed on “the rich” will eventually fall on much of the population, including the poor.

Second, higher taxes lead to more government spending and even more and higher taxes.

Update (2/4/13). Dan Mitchell chimes in

The 100th Anniversary of the Income Tax…and the Lesson We Should Learn from that Mistake

[…] Let’s not get bogged down in details. The purpose of this post is not to re-hash history, but to instead ask what lessons we can learn from the adoption of the income tax.

The most obvious lesson is that politicians can’t be trusted with additional powers. The first income tax had a top tax rate of just 7 percent and the entire tax code was 400 pages long. Now we have a top tax rate of 39.6 percent (even higher if you include additional levies for Medicare and Obamacare) and the tax code has become a 72,000-page monstrosity.

But the main lesson I want to discuss today is that giving politicians a new source of money inevitably leads to much higher spending.

Here’s a chart, based on data from the Office of Management and Budget, showing the burden of federal spending since 1789.

Since OMB only provides aggregate spending data for the 1789-1849 and 1850-190 periods, which would mean completely flat lines on my chart, I took some wild guesses about how much was spent during the War of 1812 and the Civil War in order to make the chart look a bit more realistic.

But that’s not very important. What I want people to notice is that we enjoyed a very tiny federal government for much of our nation’s history. Federal spending would jump during wars, but then it would quickly shrink back to a very modest level – averaging at most 3 percent of economic output.

So what’s the lesson to learn from this data? Well, you’ll notice that the normal pattern of government shrinking back to its proper size after a war came to an end once the income tax was adopted.

Via Maggie’s Farm

The appearance of this makes me wonder whether it was really printed in some newspaper and then clipped and copied. But maybe I’m too suspicious; it may have come from the Miller County Liberal in Colquitt, Georgia.

It’s a good reminder, regardless of its source.

And, no, the point is not that we’re treating poor people like animals. The point is that all animals, including people, respond to incentives.

For example, I know a woman who worked for years and made good money – over $100,000 per year in her last job. She’s married to man who’s doing very well in his engineering career. (He earns more than she was earning.) Their children are grown. So when she lost her last job, it was a loss of income but couldn’t be considered a hardship by any means. Nonetheless, she collected unemployment compensation while she was eligible just because it was available. (I don’t believe she was actually planning to return to work but I may be wrong about that.)

And another point is that the USDA seems to be in overdrive these days about enrolling as many as possible in its food stamp programs. To me, that looks more like a bureaucracy trying to expand its empire than a compassionate agency taking care of needy people.

Penn Jillette wrote, "Helping poor and suffering people is compassion. Voting for our government to use guns to give money to help poor and suffering people is immoral self-righteous bullying laziness." In other words, people have responsibilities.

So Amen, Mr. Fleming.

Tip o’ the hat to Jeff G.

Here’s an interesting article about jury nullification, prompted by a new law in New Hampshire, the Live Free or Die state. (Is that the best state motto or what?)

Jury nullification, like many things, is a two-edged sword. My guess is that O.J. Simpson’s acquittal for the murder of his wife was a case of jury empathy — the flip side of white juries in the Deep South which refused to convict those who assaulted or murdered blacks.

But on the whole, I think it’s good for juries to keep their options in mind. They can judge the law and its application as well as the case against the accused people.

Jury Nullification Law Signed by New Hampshire Governor

June 27, 2012 @ 4:27 PM by Tim Lynch

With all the buzz and anticipation surrounding the final rulings by the U.S. Supreme Court the past week, there has been little attention to an interesting legal development in New Hampshire: On June 18, Governor John Lynch (no relation) signed HB 146 into law and it becomes effective on January 1, 2013. HB 146 concerns “the right of a jury to judge the application of the law in relationship to the facts in controversy.” It’s popularly known as “the jury nullification bill.” In this post, I will try to explain what impact this new law may have in the New Hampshire courts.

By way of background, Cato co-published the most comprehensive book on this subject back in 1998, Jury Nullification: The Evolution of a Doctrine by Clay Conrad. So pick that up if you’re interested in the full legal and historical treatment. If you’re not ready for the book, do check out this book review by University of Tennessee law professor Glenn Reynolds.

For purposes of this post, I am going to sidestep the question of whether or not jury nullification is a good idea. My purpose is not to “make the case for HB 146.” Rather, my purpose is to briefly explain what jury nullification is, provide a very brief history of the law on that subject, and, finally, explain how the recently enacted statute in New Hampshire may alter existing law and practices there.

Here’s an interesting proposal at the American Enterprise Institute’s The American. It’s not much longer than this excerpt so RTWT.

Would You Settle Your Claims on Social Security for 80 Cents on the Dollar? (I Would)

Current headlines read: “Social Security’s Financial Forecast Gets Darker”; “Stress Rises on Social Security.”

Well, yes: but who is surprised?

Certainly not young people, who are rightly skeptical about whether Social Security in the future will be able to give them back the money it takes from them today.

The problem is pretty basic: According to the new calculations of the Social Security Trustees’ 2012 Report, Social Security’s future costs are a lot bigger than its future income. […]

Many observers, considering this insolvency, quickly conclude that you must force Americans to either pay more in Social Security taxes or mandate a cut in their benefits.

But there is another, voluntary alternative. Give people a choice? Imagine that!

I have previously asked, “Would you settle your claims on Social Security for 83 cents on the dollar?”—and answered, “I would—in a heartbeat.”

And here’s another interesting alternative for reforming Social Security. This one’s longer but packed with interesting details so it’s worth your time too.

Social Security by Choice: The Experience of Three Texas Counties

Stock market volatility remains one of the primary objections to switching from the current pay-as-you-go method of funding Social Security benefits to a system of prefunded personal retirement accounts. However, three Texas counties that opted out of Social Security 30 years ago have solved the risk problem.

Galveston County opted out of Social Security in 1981, and Matagorda and Brazoria counties followed suit in 1982. County employees have since seen their retirement savings grow every year, including during the recent recession. Today, county workers retire with more money, and have better supplemental benefits in case of disability or an early death. Moreover, the counties face no long-term unfunded pension liabilities.

If state and local governments — and Congress — are really looking for a path to long-term sustainable entitlement reform, they might consider what is known as the “Alternate Plan.”

The Alternate Plan. The Alternate Plan does not follow the traditional defined-benefit or defined-contribution model. Rather, employee and employer retirement contributions are pooled and actively managed by a financial planner — in this case, First Financial Benefits, Inc., of Houston, which both originated the plan and has managed it since inception.

Like Social Security, employees contribute 6.2 percent of their income, with the county matching the contribution (Galveston has chosen to provide a slightly larger share). Once the county makes its contribution, its financial obligation is done. As a result, there are no long-term unfunded liabilities.