Month: February 2017 – כ״ד בשבט תשע״ז

Many Americans who have wrestled with a 1040 form, or who have paid someone to prepare their taxes, no doubt cheered the news that Congress will soon resume working on tax reform. However taxpayers should temper their enthusiasm because even in the unlikely event tax collection is simplified, tax reform will not reduce the American people’s tax burden.

Congressional leadership’s one nonnegotiable requirement of any tax reform is “revenue neutrality.” So any tax reform plan that has any chance of even being considered, much less passed, by Congress must ensure that the federal government does not lose a nickel in tax revenue. Congress’s obsession with protecting the government’s coffers causes reformers to mix tax cuts with tax increases. Congress’s insistence on “offsetting” tax cuts with tax increases creates a political food fight where politicians face off over who should have their taxes raised, who should have their taxes cut, and who should have their taxes stay the same.

One offset currently being discussed is an increased tax on imports. This “border adjustment” tax would benefit export-driven industries at the expense of businesses that rely on imported products. A border adjustment tax would harm consumers who use, and retailers who sell imported goods. The border adjustment tax is another example of politicians using tax reform to pick winners and losers instead of simply reducing everyone’s taxes.

When I was in Congress, I was often told that offsets do not raise taxes, they simply close loopholes. This is merely a game of semantics: by removing a way for some Americans to lower their taxes, closing a loophole is clearly a tax increase. While some claim loopholes are another way government distorts the market, I agree with the great economist Ludwig von Mises that “capitalism breathes through loopholes.”

By allowing individuals to keep more of their own money, loopholes promote economic efficiency since, as economist Thomas DiLorenzo put it, “private individuals always spend their own money more efficiently than government bureaucrats do.” Instead of making the tax system more “efficient” by closing loopholes, Congress should increase both economic efficiency and economic liberty by repealing the income tax and replacing it with nothing.

The revenue loss from ending the income tax should be “offset” with spending cuts. All federal spending, whether financed by taxes or by debt, forcibly removes resources from the private sector. Thus, all government spending is, in essence, a form of taxation. Therefore, cutting income and other taxes without cutting spending merely replaces one type of taxation with another. Instead of directly paying for the big government via income taxes, deficit spending means citizens will be hit with an increase in the inflation tax. This tax, imposed on the people with the Federal Reserve’s monetization of debt, is the worst form of tax because it is both hidden and regressive.

Unfortunately, while Congress may make some small cuts in domestic spending, those cuts will be dwarfed by spending increases on infrastructure Keynesianism at home and military Keynesianism abroad. As long as Congress refuses to make serious reductions in spending, the American people will be subject to the tyranny of the IRS and the Federal Reserve.

The suffering will only get worse when concerns over government debt cause the dollar to lose its status as the world reserve currency. This will lead to a dollar crisis and a major economic meltdown. The only way to avoid this fate is for the people to demand a return to limited government in all areas, sound money, and an end to the income tax.

From Lewrockwell.com, here.

Drugs are a charged subject everywhere. Longtime readers know that although I personally abstain from drugs and generally eschew the company of users, I think they should be 100% legal.

Few people consider how arbitrary the current prohibition is; up until the 1920s, heroin and cocaine were both perfectly legal and easily obtainable over the counter. Some people “abused” them, just like some today “abuse” fat and sugar (because they’re enjoyable).

But drugs are no more of a problem than anything else; life is full of problems. In fact, life isn’t just full of problems; life is problems. What is a problem? It’s simply the situation of having to choose between two or more alternatives. Personally, I believe in people being free to choose, and I rigorously shun the company of people who don’t.

Hysteria and propaganda aside, the fact is that most recreational drugs pose less of a health problem than alcohol, nicotine, or simple lack of exercise.

Conan Doyle’s Sherlock Holmes (of whom I’m a great fan) was an aficionado of opium products. Sigmund Freud enjoyed cocaine. Churchill is supposed to have drunk a quart of whiskey daily. Dr. William Halsted, the father of modern surgery and co-founder of Johns Hopkins University, was a regular user throughout his long and illustrious career, which included inventing local anesthesia after injecting cocaine into his skin.

Insofar as recreational drugs present a problem, it arises partly from overuse, which is not only arbitrary but can be true of absolutely anything. The problem comes, however, mainly from the fact that they’re illegal.

Alcohol provides the classic example. It wasn’t much of a problem in the US before the enactment of Prohibition in 1920, and it hasn’t been one since its repeal in 1933. Making a product illegal artificially and unnecessarily turns both users and suppliers into criminals.

Because illegality makes any product vastly more expensive than it would be in a free market, some users resort to crime to finance their habits. Because of the risks and artificially reduced supply, the profits to the suppliers are necessarily huge—not the simple businessman’s returns to be had from legal products.

Just as Prohibition of the ’20s turned the Mafia from a small underground group of thugs into big business, the War on Drugs has done precisely the same thing for drug dealers. It’s completely insane and totally counterproductive.

Frankly, if you want to worry about drugs, it would be more appropriate to be concerned about the scores of potent psychiatric drugs from Ritalin to Prozac that are actively pushed in the US, often turning users into anything from zombies, to space cadets, to walking time bombs. But that’s another story more relevant to address at some point—likely years in the future when it’s again time to consider whether US drug stocks are buys.

The whole drill impresses me as being so perversely stupid as to border on the surreal. Insofar as the Drug War diminishes the supply of product, it raises prices. The higher the prices, the higher the profits. And the higher the profits, the greater the inducement to youngsters anxious to get into the game. The more successful it is in imprisoning people, the more people it draws into the business.

Meanwhile, a trumpeted “success” tends to increase funding from the US government. Some of that money succeeds in driving up prices to the benefit of producers, but a lot of it finds its way into the pockets of officials. That further entrenches corruption at all levels.

The only answer to the War on Drugs is the same as that to the equally stupid and destructive War on Demon Rum fought during the ’20s—a repeal of prohibition.

These are arguments entirely apart from the most important one, which deals with ethics. The question is really whether you have a right to control your own body and what you ingest. There’s little question that caffeine, cocaine, nicotine, heroin, alcohol, marijuana, sugar and a thousand other things aren’t good for you, at least not in quantity. But I can’t see how that’s anybody’s business but your own. Once it becomes a matter of state concern, then everything becomes an equally legitimate subject of state attention. Which is pretty much where we are today—well on the way to a police state.

Reprinted with permission from Doug Casey’s International Man.

From Lewrockwell.com, here.