Economist in NYT: Abolish corporate income tax

From one of the more unlikely corners of the interwebs — the op-ed section of the New York Times — comes a call to abolish the corporate income tax:

The United States may well have the highest effective marginal corporate income tax rate of any developed country. Jack Mintz, a public finance economist and director of the School of Public Policy at the University of Calgary, puts the rate close to 35 percent, which is also the statutory rate. Other economists, using different techniques, calculate the marginal rate to be as low as 23 percent. But both figures are miles above zero.

They are also miles above our 13 percent average corporate income tax rate — the ratio of corporate taxes to total corporate profits. The fact that the marginal tax rate, whether 23 percent, 35 percent or somewhere in between, is so much larger than the average rate suggests that a sizable share of corporate profits and production is ending up overseas and untaxed.

Making, rather than just stating, this case requires constructing a large-scale computer simulation model of the United States economy as it interacts over time with other nations’ economies, and then seeing how the model reacts when you change the American corporate income tax. I’ve developed such a model with three colleagues through the Tax Analysis Center, a nonpartisan research group. Our findings make a very strong, worker-based case for corporate tax reform.

The author, economist Laurence Kotlikoff of Boston University, argues that eliminating the corporate income tax will produce “rapid and dramatic increases in American investment, output and real wages, making the tax cut self-financing to a significant extent.” It’s an idea even President Obama embraced, at least partially — in 2012, he proposed lowering the corporate income tax a few points. Kotlikoff’s plan is considerably more radical, although he also calls for raising personal income tax rates to make up any decrease in revenues, and taxing capital gains at the same rate as income, among other reforms. Elsewhere, Kotlikoff has proposed what he calls a “Common Sense Tax” plan, which assesses a 13% flat tax on payroll and a 25% tax on personal income above $100,000.

Nobody in the mainstream press ever seems to want to propose ideas to make government do a lot less of what it does now, and thereby reduce the need for taxation, period, let alone “reform”. But talking about lowering or eliminating taxes in the Newspaper of Record is still a pretty good step forward.

Uber’s “surge pricing” again angers people who don’t understand economics

Uber, the car-service startup striking fear into city bureaucrats and taxi cartels everywhere, is catching flack from some New Year’s Eve revelers who discovered they were charged hundreds of dollars for a ride home:

…there were a ton of complaints on New Year’s Eve from customers caught by surprise by some hefty fares. In fact, if you look at Uber’s Twitter feed right now, it’s dominated by a series of apologies for the “sticker shock” it caused last night.

Meanwhile, several angry customers have been tweeting screenshots of their sky-high Uber fares. Some are as much as $350 for just a few miles, which was almost enough to get you a booze-filled evening at the Applebee’s in Times Square.

Uber surge pricing notice“Caught by surprise” is rather subjective, as Uber took great pains to warn users that surge pricing, its policy of multiplying fares during periods of high demand, would be in effect on New Year’s Eve. Furthermore, the Uber app requires users to acknowledge when surge pricing is in effect, even going so far as requiring manual input of the fare multiplier before hailing a car.

So whose fault is it that users were rung up for $350 car rides? Nobody’s, of course. Uber’s surge pricing policy is not only legal, but entirely fair and rational. Rapidly adjusting pricing to meet short periods of high demand helped ensure that cars were available to people who really wanted them. Anybody wishing to avoid high fares could find an all-night diner or someplace safe to relax until demand dropped and surge pricing was no longer in effect.

There’s another name for this practice, used by people who don’t like free markets: “price gouging”. Most commonly, this pejorative refers to rapidly increasing prices of essential supplies in the aftermath of a natural disaster. This is illegal in many states, and it’s easy for the media to demonize “gouging” when people have lost their homes and are looking for food, water, fuel, and shelter. Yet the principles which make it okay for Uber to raise fares so drunks can get home should apply to states of emergency as well. Price gouging, or surge pricing, helps ensure that resources are allocated as efficiently as possible. Preventing businesses from setting their own prices via threat of prosecution invariably leads to the kind of shortages that hamper relief efforts.

This also helps explain why taxicabs are virtually impossible to find on any big party night: their fares are regulated, set by the local taxi or public utilities commission, and neither companies nor drivers are free to raise prices when there’s high demand. Private car services like Uber, meanwhile, are unregulated, which is why you can always find someone to drive you home after the ball has dropped and the last bottle of champagne is drunk — if you’re willing to pay for it.

America’s First Legal Marijuana Purchase Happened a Long Time Ago

TMZ calls 32-year-old Coloradan Sean Azzariti “the first man to make a legal weed purchase in the United States…  ever.”

But of course that’s wrong — and not just because people have been buying it legally for years in California, where getting a “prescription” couldn’t be much easier and marijuana shops abound in strip malls.

People somehow forget — or don’t know — that marijuana was legal in most of the country for most of U.S. history and everything was just fine.

So for those who aren’t familiar with this history, here’s a brief overview from my book, Libertarianism Today:

Cocaine and narcotics prohibition came about for dubious reasons — pleasing China, the pharmaceutical industry’s desire to eliminate competition, bigotry, World War I, and fanatical temperance activists — but the decision to prohibit marijuana was even less justifiable.

In 1930, the government established the Federal Bureau of Narcotics, led by Commissioner Harry Anslinger. In his position, Anslinger essentially decided who could legally manufacture narcotics for medical purposes in the United States, and he granted that privilege to just a handful of companies. In exchange for favorable treatment, these companies would otherwise do Anslinger’s bidding; specifically, they would provide Congressional testimony as needed, including, when Anslinger wanted it, testimony as to the great potential harm of marijuana.

It is odd that anyone would have pursued marijuana prohibition in the 1930s, if only because so few people used it, but Anslinger targeted it anyway. No one is sure why, but one suggested reason is because, like any bureaucracy, the Federal Bureau of Narcotics had to justify its budget, particularly during the Great Depression. Plus, some suggest, Anslinger and the bureau wanted publicity.

During the 1930s, Anslinger and the Federal Bureau of Narcotics launched a propaganda campaign against pot. In speeches, Anslinger declared: “Take all the good in Dr. Jekyll and the worst in Mr. Hyde — the result is opium. Marihuana may be considered more harmful. . . . It is Mr. Hyde alone.” The bureau was eager to provide “information” on the putative dangers of marijuana to journalists; marijuana horror stories began to appear in newspapers and periodicals, virtually all of them acknowledging Anslinger’s bureau or its publications for their “facts.” A 1934 St. Louis Post-Dispatch article described the effects of marijuana:

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Power Has Failed Us

The morning after I saw “Catching Fire,” part two of the film series based on the Hunger Games novels, I was scheduled to give a lecture on the nature and functioning of the state. I had vast notes I had prepared over the previous six months for it.

After seeing the movie, I was tempted just to toss them out; in fact, I nearly suggested that we all just leave the lecture hall and go to the movies. That’s because this one movie reveals more about the state than practically any book I could suggest.

It’s a great thing when popular culture becomes a teacher of truth, and I believe this is precisely what is happening in our time. Not every movie and not every show, but the biggest grossing of them are all centered on a theme. That theme is this: powerful people are not our friends but our enemies – so if we want to have a free and flourishing life, we are going to have to get busy and figure out how to make it happen.

The fictional government in the Hunger Games wants a static and unthinking population that is dedicated to compliance as a first principle. Everyone must stay in his or her assigned district (there are 12 remaining “districts” in Panem, the country that was once the United States); there is no social mobility; and the citizens are told to be grateful for this because, after all, there is no revolutionary threat anymore. To keep that possible, the people must be constantly punished for the last time anyone challenged the central authority. That punishment consists of an annual lottery that sends children to their death in fights that pit district against district in a highly televised gladiator event know as the Hunger Games.

In Catching Fire, we see a population beginning to discover that the real enemy is not the other districts; but the people at the top of the heap in the Capital – the capital city of Panem that belongs to no district, is disproportionately wealthy compared to the districts despite not producing anything themselves, is excluded from the Hunger Games lottery, and is where opulence prevails and whose people live without a care for the well-being of the rest of the population. The Capital sounds a lot like our non-fiction capital.

Here’s the thing: the command-and-control apparatus that was given life in the 20th century is in the process of falling apart. It can’t do anything right. As David Wiegel has pointed out in his blog on Slate.com, “Americans are rarely in love with our government, but rarely have we despised it like we do right now. A December 5-8 Gallup poll found that 72 percent of us consider ‘big government’ the greatest threat, the highest in 48 years.”

This is completely rational: the last several wars have yielded horrible body counts, but not improved lives; public services are nearly universally shabby compared with private ones; and people are starting to look at their taxes and scratch their heads, wondering what they are paying for.

The NSA spying scandal was a PR disaster for government. Did they really expect that the people would discover that all our phone calls, and emails, and even our browsing habits are being monitored and say in a collective voice “Oh thank you, big brother, for protecting us from bad things”? The nearly universal response was outrage, so much so that even the Obama administration has had to back away from responsibility.

Then there’s Obamacare. It was just last year that the now-president was bragging about having his name attached to it; after all, this was the “progressive” dream dating back many decades. The idea is that if we just let government run the system, we’ll get fabulous healthcare for next to nothing. The experts worked diligently to think through every contingency.

Finally the great day arrived where the dream could finally be translated into reality. What followed is routinely described as disaster. Fewer people are insured today than before the program was implemented. This was a mess made in D.C., but D.C. cannot and will not fix it. That’s the essence of the issue. Our problems have mostly been made by a bad idea that wasn’t ours to begin with, and now it is up to us to make the difference in our own lives and get out from under Panem’s – I mean Washington’s – control.

This is an idea that is indeed catching fire. The world of markets and the information they disseminate are breaking down the structures of power, and the great dream of Liberty.me is to push this trend further and provide a crowdsourced clearing house for chronicling and encouraging this great trend. We need this space and we are making it happen.

2014: the year of the sweet leaf

Tomorrow, the country’s first legal retail shops to sell recreational marijuana will open for business in Colorado. This comes 14 short months since the state’s voters approved the legalized possession, use, and sale of marijuana. Washington state, which also passed a pot legalization measure, will soon follow, probably sometime in June. It’s even happening internationally: Uruguay became the first country to legalize marijuana at the national level — which may spark a “tidal wave” of legalization across South American countries that have grown weary of the expensive and bloody U.S.-led war on drugs.

The impact of this historic milestone is more than just legal or political; it is a signal of the mainstream acceptance of a product which for decades has been subject to fearmongering propaganda and sometimes brutal interdiction by a state desperate to eradicate its use. Now that Colorado and Washington have opened the gates to legalization, there is no hope for the drug warriors to stop the flood. Not that they won’t try: even now they continue their dire and uninformed warnings about the dangers of pot.

Perhaps the biggest change will come in how marijuana-related stories are covered by the news media. The Denver Post has launched a new Web site, TheCannabist.co — so far the only major daily newspaper in the country with a site dedicated to marijuana. (The Seattle Post-Intelligencer has a marijuana blog as part of their main site.) Pot will be covered — in reviews of shops and strains, stories of events and crimes — in much the same way as alcohol. Alongside reviews of pinot noirs, you might find evaluations of Purple Kush. This coverage has existed for years, of course, in states where medical marijuana is legal, but now that 21-plus year-olds can buy the stuff like they can a bottle of wine, societal attitudes will likely shift as well. Lifting the stigma of illegality means no more furtive discussions of pot in public and back-alley deals. We may well be arguing about the relative merits of various strains like we do micro-brews.

Legalization isn’t perfect. There are now many more rules to follow for people who wish to engage in the marijuana trade, and it’s clear that Colorado’s current rules favor the established players in the medical marijuana industry. Banks are still restricted in accepting money from businesses tied to illicit drugs, which marijuana remains classified as at the federal level, so it’s a cash-only business for now. Taxes on retail marijuana will be punitively excessive, reaching as high as 30% in Denver. There are also limits on how much pot one can possess, and strict bans on public consumption.

But for those who can find a private place to light up with their newly-purchased bud tomorrow, they may very well believe what Ozzy Osbourne sang over 40 years ago: “Soon the world will love you, sweet leaf.”