If at first you don't succeed, try again?

Though it has been tried many times the world over, Great Britain is considering a supplemental tax on the wealthy.  If the goal is to reduce the number and wealth of wealthy Britons, the tax will be a success.  Every time the wealthy have been singled out for special taxes, the taxing authority has found itself surprised by lower revenues than expected and fewer wealthy people to tax. 

At some point this outcome should cease to be a surprise. 


As to why taxes on the wealthy never work the way they are sold, it is really very simple.  People like to keep what they perceive as theirs.  Doesn't matter if you believe this is a moral, ethical, desire, it is a true and common desire.  Combine this desire with the reality that the most wealthy in any jurisdiction possess substantial ability to legally move their wealth and/or themselves out of any tax jurisdiction.  Presto chango! Wealth rapidly moves out of areas where it is made to feel unwelcome. 

Such relocation of wealth has shown itself to be true regardless of the size of the taxing authority.  Cities, counties, districts, states, countries, trading blocks - all have been "surprised" by the unsurprising. 

If this proposal is implemented, Great Britain will see a decrease in the amount of personal wealth possessed by Britons and subject to British taxing authority.  They will very likely see a decrease in the number of subjects that possess such wealth.

Of course, that just may very well be the point.  

Blog Changes

Argh!  Lots of white!  I'm making some changes to the layout of the blog.  Basically I was unhappy with the narrow column format of the old layout.  Patience grasshopper.

Proper Estimation of Capital Gains Taxes

When looking at the percentage of taxes paid by an individual, you should always look at the amount of money retained by the individual vs the amount of money paid in taxes.  Essentially then, the tax rate paid is the amount by which in-pocket money is reduced compared to total earnings. 

This works pretty well for income taxes.  Capital Gains Taxes are a slightly different matter.  These are taxes on investment, which typically means taxes on profits from stocks. 

If corporate profits are disbursed to you, a stockholder, that is money in your pocket.  On that MiyP you than pay income tax.  But wait - there would be even more MiyP but for business taxes as well.  See, b/c the corporate profit is being disbursed to you, if the business didn't pay taxes you would get more MiyP from your investment.  So given that we are looking at effective tax rate as money in pocket vs total earnings, a business tax paid by a business you own stock in IS a tax on your income. 

If you apply this to the wealthy, who tend to gain a large portion of their income through capital gains, you realize that far from only paying 15% on their capital gains income, the government also gets whatever corporate income tax is paid on the portions of companies they own. 

Upshot?  This article talks about Mitt Romney specifically, but it is applicable to everyone in his general situation.  They pay a lot more than 15% taxes.  And, seeing as the average American pays between 10-15% effective tax rate, that means they pay more than the great majority of us. 

Is There a Doctor in the House?

According to this article, 83% of surveyed doctors claimed that Obamacare has caused them to consider leaving the profession. This article adds urgency to the discussion, saying that even now we are not training enough doctors and of those we train, many of them choose specialty fields rather than primary care. 

I don't even has to explain how that fact is bad for you and all of us.

The major cause of both articles is that doctors are not being compensated sufficiently to account for the increasing hassle/cost of being/becoming a doctor.

But wait, aren't healthcare costs zooming skyward?  Yes, they are, but at the same time payments to doctors by the various government healthcare plans are being seriously squeezed.

Essentially doctors are being asked to handle more risk, more limitations, and more paperwork without any increase in compensation, while at the same time more and more people demand services.  And somehow the government expects ever increasing numbers of people to joyfully leap into the abyss of providing primary care.  

Federal Spending and Debt

A selection of facts and charts about national debt, spending, and the drivers of deficit. 

This is a key chart:

National Honesty

The Honest Tea company ran an experiment this summer to see how honest people were in various location around the country over this summer.  Results HERE. 

I was a little surprised to see that even at the least honest location, the significant majority of Americans are honest.  At least in this test. 

Honesty is very important to economics.  Without an understanding and cultural prevalence of honesty, the enforcement mechanisms of government (or even voluntary association) would rapidly be overwhelmed.  The ability to conduct business, execute contracts, have friends watch your bag for a minute, would be buried in a loss of effective property rights. 

Data: European VS US Crime Rates

Short version, the US has much lower violent crime rates than Europe.  Lower property crime than most of Europe as well.  This despite (or is it because) the significantly greater freedom of self defense and weapons in the US.  In fact, the authors themselves called out this point as a potential cause.  Yet more information, data, to highlight the fallacy of American violence. 

Some charts from the article.  Of note is the huge increase of violence in the UK, where not only guns, but also knives and even tools not required by your activities are illegal. 

How is the economics?  Data, statistics, unintended consequences, etc.... 

Moment of Clarity

I recently had a moment of clarity while watching this video.  Whittle is right.  Ryan on the R ticket not only is an excellent tactic to win, but is important even if Obama wins reelection.  Ryan on the ticket means some form of the Ryan plan.  Which means a mandate for fiscal responsibility if R&R win, and a refusal of America to face the music if BO wins.  If America, as a representative republic, is unwilling to elect politicians espousing fiscal restraint, then things are going to get much worse before they get better. 

GAO: EPA Rules Will Increase Electric Cost

The GAO has released a study showing how the EPA's regulations will result in a decrease in the number of coal-fired power plants and an increase in the price of electricity.  Explanation here.

This is essentially the result that was expected by myself and most other economists.  No big surprise. 

CBO Predicts Recession(ish)

The CBO recently released their Budget and Fiscal Outlook.  Among other interesting things, they predict that a slow recovery will continue through the end of this year, to be followed in 2013 by a slight recession.

Their prediction of a recession is predicated on a couple of things all happening at once.  The Bush tax cuts are expiring, automatic spending cuts are scheduled to take place, doctors will be reimbursed less for medicaid, and various stimulus programs are ending.  Though some of these indicators reveal a Keynesian perspective, said perspective really isn't too overwhelming.

As always with CBO numbers, the biggest problem is that they are constrained by law to work with the assumptions politicians give them, to only work with the data in front of them, and to not engage in guesswork about what may happen.  And honestly in this case I am not sure it matters.

I think the massive tax increases headed our way next year are going to do massive damage to our economy.  In fact, the mere expectation of tax increases has already put a damper on business growth and development.

I do not, however, think the other factors mentioned by the CBO are going to create much harm/damage.

Patterns of Charity

Ran across a website with some really interesting information about how Americans give to charity.  Go HERE. 

A few interesting points:
1) Cities tend to give less.
2) Red states tend to give more, while blue states tend to give less.
3) Wealthy people living around other wealthy people give much less than wealthy people living in economically mixed areas. 

Papa John's Pizza and ObamaCare

Papa John (pizza chain founder) has gone on the record stating that ObamaCare will necessitate price increases for pizza sold by his company. 

He also briefly states that, where possible, companies pass costs on to final consumers - a fact well known but often overlooked by most people.