If one was looking for fiery, crowd pleasing, political rhetoric from former Speaker Newt Gingrich as he addressed CPAC today, they were likely disappointed. What Gingrich did do was run through a litany of policy solutions he claimed he has committed to implement immediately upon taking office in January of 2013.

Contrasting an America that can versus an America that can’t, Gingrich compared America’s speed and might in winning WWII versus her current inability to seal its own border. In a lighter moment, the former Speaker contrasted the efficiency of package tracking by Federal Express with the government’s inability to track illegal immigrants, suggesting sending each one a package may be the best way to apprehend the latter.

He also mentioned repealing Obamacare, Dodd Frank, and Sarbanes Oxley on his first day in office. He stated his desire to be a “paycheck president” versus a “food stamp president,” a term he used to denigrate Barack Obama.

Calling for a Fall campaign focused on substance, Gingrich also mentioned eliminating the Capital Gains tax and implementing 100% expensing for all new equipment written off in one year to help get the economy growing. Additionally, he called for a modernization of the workforce, proposing that unemployment compensation be linked to business training programs to avoid paying people for 99 weeks “for doing nothing.” (more…)

Charles Sykes is a longtime Milwaukee talk-radio host and the prolific author of a number of books that helped to shape my personal political worldview, including 1988’s eye-opening “Profscam,” and 1993’s “A Nation of Victims,’ two works as timely today as they were decades ago.

“A Nation of Moochers: America’s Addiction to Getting Something for Nothing” (St. Martin’s Press) was just released, and the fact that I’m writing this at the very moment President Barack Obama is announcing yet another government plan (his fourth, I think) to “bail out” those “victims” who bought homes they couldn’t afford, makes this informative and engaging page-turner feel about as urgent and timely as any author could hope for.

What you need to know up front is that “Moochers” isn’t an attack on the poor or needy or, for that matter, a specific political party. In fact, from beginning to end, Sykes makes clear that as a country we have an obligation to feed the hungry and offer shelter to the homeless. Moreover, he isn’t even targeting a particular group, which would be impossible without a sawed-off shotgun anyway, because America’s moochers come from every level of our society.

What Sykes is targeting is a mentality, a dangerous and un-American mentality that infects almost every aspect of our culture, and one that is currently being bred into our children by those on both the left and right who are empowered by fomenting and excusing the dependence, greed, and selfishness of others. From corporate welfare to school lunches for the well-to-do to Wall Street bailouts to paying millionaires not to grow crops to tax breaks for Hollywood gajillionires to unending unemployment benefits to disaster relief for those who haven’t suffered disasters to TARP, and finally, to the shameless who walk away from mortgages they can afford to pay — what Sykes is exposing is that we are on the march to becoming Greece. Not just a European welfare state, but the kind of welfare state where the populace has been engineered by a nanny state to riot at the very thought of not being able to mooch the life to which they have become accustomed.

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Leftists want higher tax rates and they want greater tax compliance. But they have a hard time understanding that those goals are inconsistent.

Simply stated, people respond to incentives. When tax rates are punitive, folks earn and report less taxable income, and vice-versa.

• When tax rates increase, sometimes they engage in tax avoidance, lowering their tax liabilities legally.
• When tax rates change, sometimes they choose to alter their levels of work, saving, and investment.
• And when tax rates go up, sometimes they resort to illegal steps to protect themselves from the tax authority.

In a previous post, I quoted an article from the International Monetary Fund, which unambiguously concluded that high tax burdens are the main reason people don’t fully comply with tax regimes:
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One year ago, I wrote about how the French government was getting unexpected additional revenues following the implementation of lower tax rates.

This is the Laffer Curve in action, and it’s happening again in France, only this time because the government reduced the wealth tax.

Here’s part of the story at Tax-news.com.

France’s solidarity tax on wealth (l’impôt de solidarité sur la fortune – ISF), which was radically reformed by the government in June last year, has served to yield much greater fiscal revenues for the state than initially predicted. …the government agreed that the solidarity tax on wealth would in future comprise of only two tax brackets: a 0.25% tax rate imposed on individuals with net taxable wealth in excess of EUR1.3m (USD1.7m), and a 0.5% tax rate levied on individuals with net taxable assets above EUR3m. Previously, the entry threshold at which wealth tax was applied was EUR800,000, with the rates varying between 0.55% and 1.8%. To alleviate any threshold effects, a discount mechanism was also instated applicable to wealth of between EUR1.3m and EUR1.4m, as well as to wealth of between EUR3m and EUR3.2m. Although the new provisions provide for lower tax rates and for the abolition of the first tax bracket, effectively exempting around 300,000 taxpayers from the tax, according to latest government figures, the tax yielded around EUR4.3bn in 2011, almost EUR60m more than originally forecast in the collective budget.

This is not to say that France is an example to follow. There shouldn’t be any wealth tax, and income tax rates are still far too high.

And it’s also worth remembering that tax policy is just one of many factors that determine economic performance.

That being said, nations that shift from terrible tax policy to bad tax policy will enjoy better economic performance, just as nations that go from good policy to great policy also will reap benefits.

In other words, incremental changes make a difference. That’s even the case when the politicians impose a “Snooki tax” on indoor tanning services.

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The Internal Revenue Service (IRS) loves you and has a wonderful plan for your life. It wants to ease your mind about compliance with the tax code and make April 15 as stress-free as possible.

Sound too good to be true? Of course it is. Their real goal is to extract more tax dollars out of your pocket without having to muster the political courage to advocate a tax increase, and to do so in the most cynical way possible—by taking advantage of the least-sophisticated and lowest-income workers.

Some of our elected officials and the revenue establishment are convinced that there is a $345 billion annual “tax gap” between what people actually owe or should be paying and what the IRS actually collects. Of course, in a voluntary compliance system—the alternative to which is a police state—there is always going to be some gap in compliance. Not surprisingly, the IRS doesn’t mention the certainty that many people actually pay more than they owe because they fail to take advantage of deductions available to them.

Does the revenue establishment fault the tax code’s inherent complexity and Congress’ failure to reform it as responsible for the supposed shortfall? Guess again.

Slowly, over the past several years, the IRS has been insisting that more and more information be submitted from employers and from the savings and investment industry directly to them. At the same time, they’ve been tightening down on who can and who cannot prepare tax returns. Have you noticed?

And today, the IRS will hold its second hearing on what they call the “Real-Time Tax System,” which they claim is intended to give the IRS the ability to identify tax non-compliance in real time. Of course, the Real-time Tax System will require even more information from taxpayers, employers, banks and brokerage firms, but of course it’s being done to “reduce the burden for taxpayers.”

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I don’t blame the Democrats for wanting to seduce Republicans into a tax-increase trap. Indeed, I completely understand why some Democrats said their top political goal was getting the GOP to surrender the no-tax-hike position.

I’m mystified, though, why some Republicans are willing to walk into such a trap. If you were playing chess against someone, and that person kept pleading with you to make a certain move, wouldn’t you be a tad bit suspicious that they weren’t trying to help you win?

When I talk to the Republicans who are open to tax hikes, they sometimes admit that their party will suffer at the polls, but they say it’s the right thing to do because of red ink.

I suppose that’s a noble sentiment, though I find that most GOPers who are open to tax hikes also tend to be big spenders, so I question their sincerity (with Senator Coburn being an obvious exception).

But even if we assume that all of them are genuinely motivated by a desire to control deficits and debt, shouldn’t they be asked to provide some evidence that higher taxes are an effective way of fixing the fiscal policy mess?

I’m not trying to score debating points. This is a serious question.

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In a recent column for the Wall Street Journal, I explained why Mitt Romney’s interest in a value-added tax is deeply troubling.

One of my key points was that the VAT is a money machine for big government.

But don’t believe me. Look at Japan, where the politicians see increases in the VAT as a way of financing a much larger burden of government spending. Here’s some of what is being reported by Bloomberg.

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015… Japan’s finances are “getting worse and worse every day, every second,” Takahira Ogawa, Singapore-based director of sovereign ratings at S&P… Japan’s aging population is also weighing on Noda’s struggle to achieve fiscal health. Social-security expenses have more than doubled in two decades and will account for 52 percent of general spending for the year starting in April, according to a budget proposal the cabinet approved last month.

The key point in this excerpt is that the VAT is a substitute for entitlement reform. Without the VAT, politicians might actually reform the welfare state. But because of the VAT, they want to take the easy (but extremely destructive) route and boost the tax burden.

This is why I get so agitated about the threat of a VAT in America, as illustrated by this recent appearance on Larry Kudlow’s show.

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My Iowa caucus predictions from yesterday were hopelessly wrong, probably because I was picking with my heart rather than my head. As I noted a couple of weeks ago, Mitt Romney’s openness to a value-added tax makes him a dangerously flawed candidate, and I hoped Iowa voters shared my concern.

In a column for today’s Wall Street Journal, I elaborated on those concerns, explaining why a VAT is bad fiscal policy. I had three main points. First, I noted that the big spenders need a VAT in order to achieve a European-sized welfare state in America.

… the left needs a VAT. It is the only realistic way to collect the huge amount of revenue that will be necessary to finance the mountainous benefits promised by our entitlement programs. Which is exactly what happened in Europe, where welfare-state policies only became feasible after VATs were adopted, beginning in the late 1960s.

Second, I explained that the left favors this giant tax on the middle class because they want more money and soak-the-rich taxes don’t generate much revenue.

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The United States is at a fork in the road regarding which way we will go as a people. The 2012 election could be the most important in our lifetime, and conservative leaders have reached a consensus on how to channel the energy and concerns of the American people to realize historic change this year.

The status quo will not survive the year. Our debt and spending have reached catastrophic proportions in the context of global financial difficulties and political upheaval. Consequently, by the end of 2012, America will either have taken a decisive step toward socialistic collectivism in the name of “equality” and “social justice,” where businesses and owners are punitively taxed to “pay their fair share,” or America will take a major step in the direction of returning to our Founders’ constitutional government, restoring the rule of law, federalism, free enterprise, and individual initiative and responsibility.

The American people will decide which path to take in the 2012 elections, not only in the general election on November 6 but also in the nominating process in primaries over the next several months for all major offices, including the presidency. Conservatives must act in a concerted and informed fashion in all of these contests to shape the public dialogue and thoroughly vet the candidates.

To achieve these ends, top conservative leaders acting under the umbrella of the Conservative Action Project have released “A Conservative Consensus for 2012” announcing agreement on major policies. These issues span all three wings of the conservative movement: economic, social, and national security.

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Last year, I came up with a saying that “Bad Government Policy Begets More Bad Government Policy” and labeled it “Mitchell’s Law” during a bout of narcissism.

There are lots of examples of this phenomenon, such as the misguided War on Drugs being a precursor to intrusive, costly, and ineffective money laundering policies.

Or how about government healthcare subsidies driving up the price of healthcare, which then leads politicians to decide that there should be even more subsidies because healthcare has become more expensive.

But if you want a really stark example of Mitchell’s Law, the internal revenue code is littered with examples.

The politicians created a nightmarishly complex tax system, for instance, and then decided that enforcing the wretched system required the erosion of civil liberties and constitutional freedoms.

The latest example of this process involves the Foreign Account Tax Compliance Act, a piece of legislation that was imposed in 2010 because politicians assumed they could collect lots of tax revenue every single year by getting money from so-called tax havens.

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The designer of Ronald Reagan’s economic plan is endorsing former Speaker Newt Gingrich for the Republican nomination for president. Arthur Laffer, chairman of Laffer Associates, and the Laffer Center for Supply-Side Economics, also co-authored “Return to Prosperity: How America Can Regain Its Economic Superpower Status” (Threshold, 2010) with Stephen Moore, senior economics writer for the Wall Street Journal editorial page, and a member of the Journal’s editorial board.

Mr. Laffer, who plans to join Mr. Gingrich in Iowa on Thursday for a formal announcement of his endorsement, said, “Newt has the best plan for jobs and economic growth of any candidate in the field.”

Mr. Laffer added:

Like Ronald Reagan’s tax cuts and pro-growth policies, Newt’s low individual and corporate tax rates, deregulation. and strong dollar monetary policies will create a boom of new investment and economic growth leading to the creation of tens of millions of new jobs over the next decade. Plus, Newt’s record of helping Ronald Reagan pass the Kemp Roth tax cuts and enacting the largest capital gains tax cut in history as speaker of the House shows he can get this plan passed and put it into action.

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There’s been a lot of discussion about Mitt Romney’s appeal – or lack thereof – among supporters of limited government.

To put it mildly, many libertarians and conservatives are underwhelmed by his less-than-stellar record on healthcare, his weakness on Social Security reform, his anemic list of proposed budget savings, and his reprehensible support for ethanol subsidies.

Notwithstanding this dismal track record, some advocates of free markets argue that anybody would be better than Obama.

But that’s not necessarily the case. Economic history shows that the burden of government often expands the most under Republicans, with Nixon and Bush (either one) being obvious examples.

On the other hand, even a skeptic like me has admitted that Romney’s record in Massachusetts is difficult to assess because he was governor of a very left-wing state and he had to deal with a state legislature with heavy Democratic majorities.

That being said, there’s a new development that suggests Romney may be an unacceptable alternative to Obama. In an interview with the Wall Street Journal, he basically said he is willing to consider a value-added tax for the United States. Here’s the relevant passage.

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This is the first installment of a multi-part series on suggested economic policies for the next government to consider.  These are meant to be long-term solutions.  Our current economic downturn is temporary and has some short-term causes but a large part of the explanation lies in the worldview and longer term thinking that governments of both parties have adopted, in small ways since maybe Abraham Lincoln but in significant ways since Franklin Roosevelt and in exaggerated extremes since Lyndon Johnson.  The federal deficit, the mess we call a tax code and so forth were created over a long time and while the solutions can be implemented with greater haste it will take some time for the transition and full effects to be felt and the returns to be realized.  The political class has seldom shown signs of long term thinking and the greater population seems less so, we can only pray and hope the message gets through.  My first installment is on the tax code.

Axiom 1 of Taxation: Higher rates are counter-productive: They do not collect more revenues and provide incentives to engage in non-productive behavior.

Policy application of Axiom 1: Lower the top rate to increase revenue collected and reduce the incentives for unproductive defensive actions.

Axiom 2 of Taxation: Income is income; its source is irrelevant.

Policy application of Axiom 2: Eliminate the corporate tax and the different tax treatment for capital gains.  All income should be taxed at the time it is realized and at the same rate.

Axiom 3 of Taxation: The tax code should not destroy the incentive or ability to save or to transfer wealth.

Policy application of Axiom 3: Eliminate taxation on the interest earned on savings accounts, certificate of deposit and other interest bearing bank accounts as well as the gift tax and inheritance tax.

Axiom 4 of Taxation: The tax code should be easy to understand and easy to comply with.

Policy application of Axiom 4: The tax code needs a massive simplification; fewer brackets, shorter forms more universal treatment of income.  The first tax form fit on one page, it should again.

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The Communist Party USA/Democratic Socialists of America aligned Congressional Progressive Caucusis pushing a huge government jobs bill.

Reps Grijalva and Ellison at the Capitol press conference

“Responding directly to national demand for a massive jobs program”, members of the Congressional Progressive Caucus, December 13, 2011, introduced the Restore the American Dream for the 99 Percent Act into the House of Representatives.

The bill would create more than 4 million jobs and reduce the deficit by more than $2 trillion over the next 10 years, making it the biggest government effort thus far to marshal the resources needed to address the economic crisis.

While no one expects the bill to pass in the Republican-controlled House, the left views the Bill as a blueprint of what must be done by the Obama Administration must do hold “progressive” support in 2012. The socialist wish list is all there, from the Works Progress Administration like works schemes, so successfully colonized by the communists in the ’30s, trade protectionism, tax increases, a financial transactions tax, to massive increases in government intrusion into health and education.

This “jobs” bill even calls for “eliminating unneeded weapons systems” and the reduction by half of US forces in Europe. No doubt the Communist Party’s old allies in Russia will be very happy about this one.

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John Case

One of the Communist Party USA’s leading economic commentators John Case, has come out in support of President Barack Obama’s recent agenda setting speech at Osawatomie High School in Kansas.

Case sees the speech for what it was – a signal to Obama’s “progressive” base that the president will fight next year’s election from the left, on a program of government jobs schemes, guided investment, increased union power , and amped up state direction of the economy in the interests of reducing “inequality”.

Comrade Case writes in today’s People’s World;

President Obama’s speech last week in Osawatomie, Kansas was the true “pivot” towards jobs and away from the austerity debates of last summer for which workers, occupy protesters and tens of millions more have been waiting. As (Communist Party vice chair) Jarvis Tyner commented, “we can criticize Obama and when it is done in a united front way he has shown that he can be moved.” We can also note that no amount of unemployment, suffering, wage-cuts, or desperation appears to move any Republican candidate for president in the slightest degree.

The Osawatomie speech was an important and revealing look at Obama’s domestic policy agenda as the election year begins in earnest. He clearly judges the possibility of serious compromise with the Republicans before the voters cast a judgment next November as minimal. He took a big step toward a serious jobs program while embracing the principle of bipartisanship by invoking the progressive side of Republican Teddy Roosevelt’s campaign against the rising inequality of his time. Obama anchored all his arguments with an assault on the growing inequality in the US today, clearly showing the impact of the Occupy movement, and the labor-led victories in Ohio, New Jersey, Wisconsin, Arizona and Maine.

Case thoroughly approves of Obama’s tactics – invoking the program of Republican president Teddy Roosevelt in order to calm Middle America, and even appeal to moderate Republicans, and hopefully split his opposition. Never mind that Roosevelt was a “progressive” Republican, a man of the left, a position common in the GOP of that era;

Without negating any of the downside of TR (his racism, for example) Obama’s association with the progressive side of TR’s reforms was an artful tactic. A tactic that appeals to the moderate Republican constituencies whose support he hopes to-in fact must-split away from the Republican agenda. Dividing the enemy is an art most trade unions excel in, but some on the left seem to have an allergy to it. Fear of somehow being seduced by the dark side is involved I think. But one need not be concerned that associating TR with a modern assault on reducing inequality will weaken the movement-when reducing inequality is beginning to look like a revolutionary demand to the right-wing monopolies.

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We are currently having a rather asinine federal tax rate debate – how to offset on the federal ledger the one year extension of the payroll tax diminishment.

Lost, sadly, is the discussion of whether or not we should be so doing.

This is in fact not a “tax cut” at all – not in the income tax sense of the word.  It is a reduction in the payments made to the Social Security program (SSI).

A reduction which – definitively – does nothing to create jobs or “stimulate” the economy.

Because no one in the private sector makes any permanent decision based upon temporary government policy.

If they can’t afford to permanently hire you, a temporary tax cut doesn’t make it any more feasible.  A part of why our egregious unemployment problem has persisted under the current, temporarily lower payroll tax rates.

This lack of policy permanence – which has been rampant throughout the Olympic-ly overactive Obama Administration – is a large contributor to the uncertainty that has plagued us and our economy lo these last nearly three years.

Meanwhile, the per person Social Security payment reduction is tiny – about $20 a week.

Keynesian dreams aside, government spending doesn’t “stimulate” the economy.  2009’s $787 billion – plus inordinate interest – didn’t.  Twenty bucks a week per employee certainly won’t.

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Freshman Senator Pat Toomey (R-PA) was one of twelve members of the so-called Super Committee which failed to reach an agreement late last month to cut at least $1.5 trillion in savings. In an interview with The Heritage Foundation, Toomey explained that not every member was on board with reaching a deal.

Again, to be fair, I think several of the Democrats on the committee really wanted to find a way to reach an agreement. In the end, what they were not willing to do was to stand up to the most liberal wing of their caucus. And the pressure pushing them away from a deal was significant.

But despite the Super Committee’s failure, Toomey has been very vocal that we cannot now ignore our nation’s fiscal crisis and that a deal to tackle our mounting debt must still be reached.

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We last week passed the $15 trillion national debt mark.  It continues hurtling upward, almost completely unabated.

We the People did our job and then some in the historic 2010 election, delivering more than 70 new Republicans to the Congress – on their promises to rein in out-of-control Washington spending.

We sent these folks to D.C. in large part to prohibit President Barack Obama and his Democrats from continuing to explode the budget – and the deficits and debt along with it – the way they had when exclusively in the Majority in 2009 and 2010.

So when President Obama campaigns asking for reelection and more D.C. Democrats – to undo this “do nothing” Congress – remember that stopping Obama and his Party colleagues was what We the People elected these “do-nothings” to do.

Serving as an impediment (modest though it may be) to the Democrat fiscal train wreck is, in fact, doing something.

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Faced with a $315 million budget shortfall, Cook County Board President Toni Preckwinkle has proposed serious changes to how county officials spend taxpayers’ money. She’s challenging the public employee union bosses to come to the negotiating table. She aims to utilize private sector contractors to keep costs low. These all are necessary and commendable steps. Less so are the tax increases she has proposed: hiking the vehicle tax, raising county taxes on beer, wine and liquor, and redefining certain tobacco products (like cigars and smokeless) so taxes could be levied on them.

Last Monday, the four Republican members of the county board signed off on increases and provided the necessary margin for passage in the finance committee. The package of fee and tax hikes will cost residents an astounding $51 million, even as taxpayers are still reeling from January’s state income tax hike.

Targeting politically incorrect products may seem easy, but that doesn’t make it right. When you buy a bottle of liquor in Chicago, you already pay eight taxes: a county sales tax of 1.25 percent, county excise tax of $2/gallon, city sales tax of 1.25 percent, city excise tax of $2.68/gallon, state excise tax of $8.55/gallon, state sales tax of 6.25 percent, federal excise tax of $13.50/proof gallon, and a transport tax of 1 percent. Add these all together and it turns out a whopping 58 percent of the average bottle cost goes to taxes and fees. One sip for Uncle Sam, one sip for you.

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