Joe Biden made a lot of promises during his truncated run for the White House. One of them, that he wouldn’t be Donald Trump, he’s kept. The others, most of which were grounded philosophically in the idea he was a moderate Democrat – an image the mainstream media cheerfully did its best to confirm, have gone out the window.
On economics, on cultural issues, even on foreign policy he’s not just reverting to the positions taken during the Obama years. No, he’s breaking new ground in so many areas it’s clear he’s trying to be a transformational president rather than the caretaker who brought us all together he suggested time and again that he’d be.
His latest foray into the grand schemes of central planning is his lately-much-discussed infrastructure proposal that’s starting to look like “the green new deal” – which he said repeatedly he wasn’t for – plus a lot of other things.
What he wants to do is bad enough. How he plans to pay for it is even worse. Now, the whole business is carrying with it an estimated $2 trillion price tag, a figure that is ambitiously modest. It’s going to cost a lot more and, as if the Democrats ever need a reason to do it, he’s going to suggest a slew of new taxes and tax hikes to get the money.
According to an analysis of the proposal released Tuesday by Americans for Tax Reform, the starting point for Biden will be an increase in the top corporate tax rate from 21 percent to 28 percent alongside the introduction of a 21 percent global minimum tax, an idea beloved by European advocates for enlarging the welfare state to end tax competition between nations.
If that were not bad enough, he’s also calling for a doubling of the capital gains tax to almost 40 percent, imposing a second death tax by ending step up in basis, and raising the top individual income tax rate to 39.6 percent.
What he wants is tax reform in reverse. The right way to do it is to broaden the base and cap or eliminate deductions the way Reagan and Trump did it. In both cases that acted as rocket fuel to a moribund U.S. economy. What Biden is proposing to do will choke off growth and reduce incentives to save and invest – making America more like Japan in the process, a big economy with no appreciable growth.
“Biden’s tax hikes,” ATR said, “will hit Main Street small businesses hard. Small businesses that are organized as pass-through entities (sole proprietors, LLCs, S-corps etc.) pay taxes through the individual code and will be hit by Biden’s plan to raise the top income tax rate to 39.6 percent.”
Moreover, the group said, the increase in the corporate rate – if Biden gets what he is said to want – will cause utility bills to go up. “Utility customers bear the cost of taxes imposed on utility companies. Utility companies pay the corporate income tax. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up. When Republicans enacted a corporate tax rate cut, utilities across the country lowered their rates.”
What that means is higher taxes for just about everyone, shattering his promise that those making less than $400,000 a year (even if that’s by household and not individually, a distinction the then-former vice president never made on the campaign trail) “Inclusive of state taxes and the Obamacare 3.8 percent Obamacare tax, Californians would face a capital gains rate of 56.7 percent, New Yorkers would face a capital gains rate of 52.2 percent, New Jerseyans would face a capital gains tax rate of 54.14 percent.”
That makes it clear why Democrats from those and other high-tax states are adamant about repealing the cap the Trump tax reform put on the deductibility of state and local taxes also called “SALT.”
Without the SALT cap, taxpayers in well-run red states end up subsidizing the inefficiency, bloat, and wasteful spending in the poorly run blue states like New York and Illinois. That may be outrageous but it’s also Biden policy – and what the Democrats stand for. Taking money from the people (and states) that have it and oversee it responsibly to subsidize those who manage what they have poorly if at all.
As ATR points out, the proposed Biden’s corporate tax hike would make the U.S. top rate higher than Communist China’s 25 percent, a nation not thought likely to join in the effort to establish a global minimum corporate tax. What the president is proposing is an incentive for American companies to move to China rather than bring their operations home, something the coronavirus pandemic demonstrated “IRL” might be a good idea whose time has come.
The Democrats used to criticize the GOP for supporting tax cuts for any reason. Now the worm has turned. Mr. Biden and the Democratic Party are now for higher taxes for any reason, the health of the U.S. economy be damned. His tax plan is a bad policy – bad for everyone, except maybe China.
Now that she’s a member of the tax-writing Senate Finance Committee, Massachusetts Sen. Elizabeth Warren plans to give the progressive agenda a boost by introducing a bill that would create the nation’s first-ever tax on total assets.
This so-called “wealth tax” would consider anything and everything owned by a taxpayer in computing the taxes owed. More than double taxation – which is taxing the same income twice as happened with the Death Tax – the taxes the former Democratic presidential candidate wants to put on the books would essentially tax savings, investments, and real property over and over and over again.
According to some early static estimates, Warren’s proposal could generate as much as $2.75 trillion per year – but that does not take into account any change in behavior that might occur on the part of the taxpayers on whom it would be assessed.
A study recently released by the non-partisan American Action Forum found a wealth tax would lead to a decrease in innovation and investment, drive down wages and cause unemployment and produce a $1.1 trillion shrinking in U.S. gross domestic product over the first ten years of its existence. In subsequent decades, GDP would be smaller by about $283 billion, a 1 percent annual decrease from current projections.
The Warren plan would impose this new tax, published reports indicate, on taxpayers with assets above $50 million at a top rate of 6 percent per year while giving the U.S. Internal Revenue Service far greater power than it currently enjoys. With a wealth tax on the books, the IRS would have to hire thousands of new agents and auditors to keep track of all the assets held by those of whom the tax falls, to account for them, and assign them proper valuation at tax time.
Also included in the draft of Warren’s plan circulating through the nation’s capital is a 40 percent “exit tax” to be imposed on anyone who seeks to leave the United States permanently and is reminiscent of the so-called “tax” forced upon Jewish individuals and families seeking to emigrate from Nazi Germany in the years prior to the onset of World War II.
There are some, even in Warren’s own party, who doubt the plan is legitimate.
“We are tax law professors who identify as liberal Democrats, donate to Democratic candidates, publicly opposed the Trump tax cuts, and strongly support higher taxes on the affluent,” Daniel Hemel and Rebecca Kysar recently wrote in the New York Times. “We are worried, though, that leading figures in our party are coalescing around an idea whose constitutionality is doubtful at best.”
Warren’s plan is one of several under consideration on Capitol Hill that, on paper, raise tremendous amounts of money for the U.S. government. Unlike tax changes that achieve such ends by stimulating economic growth, however, her plan would simply redistribute income already earned, long a progressive objective.
To date, there has been no comment from the Biden Administration on the Warren wealth tax or any of the similar proposals under consideration. For his part, President Joe Biden remains committed to his promised repeal of the Tax Cuts and Jobs Act in its entirety. If he’s successful, that would violate his repeated campaign pledge in which he vowed no American family making less than $400,000 per year would see their taxes go up “by one thin dime.”
California businesses are leaving the state in droves. In just 2018 and 2019—economic boom years—765 commercial facilities left California. This exodus doesn’t count Charles Schwab’s announcement to leave San Francisco next year. Nor does it include the 13,000 estimated businesses to have left between 2009 and 2016.
The reason? Economics, plain and simple. California is too expensive, and its taxes and regulations are too high. The Tax Foundation ranks California 48th in terms of business climate. California is also ranked 48th in terms of regulatory burdens. And California’s cost of living is 50 percent higher than the national average.
These statistics show why California’s business and living climate have become so challenging. But the frustrations that California entrepreneurs face every day present a different way of understanding their relocation decisions.
Erica Douglas, a young tech entrepreneur, moved her company, Whoosh Traffic, from San Diego to Austin, Texas, a few years ago. Here is what she had to say:
“I’m leaving you. I’ve struggled with a government that is notoriously business-unfriendly—with everything from high taxes on earning to badgering businesses to work more to comply with bureaucracy. I paid enough in California income tax in one year alone to hire another worker for my business. And you charge me $800 annually as a corporation fee, when most states charge just a few dollars.”
Not surprisingly, California businesses tend to relocate from the counties with the highest taxes, highest regulatory burdens, and most expensive real estate, such as San Francisco, and they tend to relocate to states where it is easier to prosper. Texas imposes just a 0.75% franchise tax on business margins, compared to California’s 8.85% corporate tax. As if this large difference weren’t enough of an incentive to leave, the city of San Francisco imposes a 0.38% payroll tax, and a 0.6% gross-receipts tax on financial service companies. Yes, if your business is in San Francisco, not only are your profits taxed by the state, but your payroll and your output are taxed as well. Not to mention that Texas has no individual income tax, compared to California’s current top rate of 13.3%, which may rise to 16.3% soon, and which would apply retroactively.
Speaking of California entrepreneurs leaving the state, there is Paul Petrovich. If you live near Sacramento, chances are your life has been made easier by Paul. He is a major commercial real estate developer whose projects include facilities involving Costco, Target, Walmart, McDonalds, Wells Fargo, and Verizon, among other major firms. But Petrovich has announced he will soon be leaving. For . . . drumroll please . . . Texas.
You see, California is discussing a wealth tax that may hit Petrovich. Known as AB 2088, lawmakers are so proud of this 0.4% tax on wealth that they proudly market it as “establishing a first-in-nation net-worth tax” that “will generate $7.5 billion in revenue.” Complicated as all get-out, it involves not just financial assets but real estate, farmland, offshore holdings, pensions, art, antiques, and other collectibles. Europe tried taxing wealth, and it has failed, leading almost all countries to abandon it. And the idea that it will generate $7.5 billion in revenue is laughable, though it will create additional income for tax attorneys and CPAs. The state also intends to make this law follow you for up to a decade should you leave. Clever politicians? Maybe, but just how will they convince other states to cooperate once you relocate? Not to mention whether this future provision is constitutional.
I am surprised that Petrovich stayed in California so long. As a developer specializing in developing infill projects, meaning developing unutilized or underutilized land, he has been involved in many lawsuits challenging his right to develop.
One has involved a mixed-use development project that includes a Safeway supermarket, senior living, shopping, and a gas station on a site of a former railway station, polluted and abandoned. What is not to like? For the city council, it is the gas station.
Petrovich has been involved in a legal battle over this project since 2003. All over a gas station. Twenty lawsuits and over $2 million in legal fees later, Petrovich appears to be winning, and winning against a city council that broke the law.
A state appeals court recently ruled that the Sacramento City Council denied Petrovich a fair hearing several years ago by acting in a biased manner. Sacramento Superior Court judge Michael Kenny wrote that one councilman demonstrated “an unacceptable probability of actual bias” and failed to have an open mind. The court found that the councilman was trying to round up votes against the gas station before it came before a hearing. Rather than accepting this ruling, the city council will appeal. They appear to be doubling down not only on bad behavior but on wasting resources as well .
Readers often ask me how California politicians have changed over time. An important and often overlooked factor is that politicians now have personal agendas that they aim to impose on other Californians, often without transparency or accountability. This is what is going on now with Petrovich, and is what is going on with AB 5, the new law that prevents many Californians from working as independent contractors that began on January 1. Voters must begin to hold politicians accountable for this if California is ever able to reform.
Mr. Petrovich, if you leave, I will be sorry to see you go. Your developments made life much easier and more prosperous for thousands. Thanks for your service. Your potential departure will be a loss for all of us.
Joe Biden likes to claim his plan to repeal the Trump tax cuts won’t cause most Americans to see their taxes rise. That’s wrong, say both a famed rapper and a noted anti-tax activist – a position backed up by a newly released study that also projects wages for an average American household will decline if his plan is enacted.
An analysis of the Biden plan released by Grover G. Norquist’s Americans for Tax Reform said the passage of Biden’s plan would lead to a top marginal rate of more than 60 percent on many households and small businesses.
This news did not sit well with the rapper 50 Cent – commonly known as “Fitty” – who threw his support to President Donald Trump, saying on Twitter “Yeah, I don’t want to be 20 Cent. 62 percent is a very, very bad idea.”
Under the Biden plan higher earners like the rapper, who was born Curtis James Jackson III, who are New York City residents could see their top rate go as high as 62 percent. “Are you out of ya (expletive deleted) mind?” he said through his social media account.
A separate study by Boston University economics professor Laurence J. Kotlikoff for the non-partisan Goodman Institute looked at the tax and Social Security changes that would occur under the Biden plan found that wages would decrease by $1,000 per year for households with income of $50,000 and by $2,000 per year for a two-earner couple making $100,000. Additionally, because the $400,000 threshold in the former vice president’s plan is not indexed, couples who start out with a modest income in their 20’s could end up “paying the Biden tax by the time they are in their 50’s.”
The Goodman study also found the tax discriminated based on age, with younger entrepreneurs facing “six times the extra burden on retirees with the same income in their 60’s, living off accumulated wealth.”
Biden has vowed to steeply raise personal income taxes and impose an additional 12.4 percent payroll tax (along with a doubling of the capital gains rate to 40 percent). New York has an 8.82 percent income tax and New York City takes another 3.876 percent. Ironically, his plan would have the biggest impact on taxpayers in blue cities and states – his base of support in the upcoming election – because they typically impose a higher tax burden on their residents.
“50 Cent speaks the truth when he says no one should have 62 percent of any dollar they earned taken by government. 50 Cent speaks not just for rappers but for millions of small businessmen and women who would be hit by the high tax rates threatened by Biden and New York,” Norquist said.
Other studies that have looked at the Biden plan, including those from The Tax Foundation, the Tax Policy Center, and Penn/Wharton all projected taxes will rise on all income groups if the Biden plan becomes law.
The California Legislature is back from its summer recess and has frantically resumed its quest for new revenue sources.
One of the latest ideas is Assembly Bill 1253. This proposed legislation would add new income tax brackets for high earners on top of the existing ones.
Income between $1 million and $2 million would receive a one percentage point surcharge, bringing the marginal rate to 14.3 percent. Those earning between $2 million and $5 million would pay an additional three percentage points, and those earning over $5 million would pay an additional 3.5 percentage points, bringing their marginal rates to 16.3 percent and 16.8 percent respectively.
This plan constitutes a continuation of California’s soak-the-rich approach to raising revenues.
While some seem to believe that high earners can provide unlimited resources, the evidence from prior tax hikes suggests that the introduction of these tax rates is not even likely to raise revenue for the state. At the same time, it will hammer job creation.
The problem is that high earners do not simply sit there and take it when the state goes after their income.
In a detailed study of the 2012 California ballot measure that raised the top state rate to 13.3 percent, Ryan Shyu and I found that just two years later, the state was only collecting 40 cents of every dollar that it had hoped to raise from the tax increase.
High income taxpayers affected by the 2012 tax increase suddenly began to flee the state at higher rates, especially to zero tax states like Nevada, Texas, and Florida.
Even more importantly for the state budget, those that stayed began declaring considerably less taxable income than they would have otherwise, apparently either scaling back their productive activities or engaging in tax avoidance.
The economist Arthur Laffer has famously argued that there is a tax rate beyond which a government’s revenue will decline if it raises taxes further, due to the disincentive effects of high taxes.
While the federal government may be helped by limits on what American citizens can do to escape federal taxation, state governments tread on much thinner ice when faced with the ability of taxpayers to move their residences and their earnings generation to other states.
In 2012, California was at least still at the point where raising top income tax rates led to some increase in near-term revenue, albeit with grave long-term consequences.
Today, however, the state is starting from a 13.3 percent tax rate that is the highest in the nation.
Furthermore, Congress has since moved to protect federal taxpayers against bloated state spending by placing a $10,000 cap on state and local tax deductions as part of the 2017 Tax Cut and Jobs Act.
So while the blow of a 3 percentage point tax increase in 2012 was strongly cushioned by deductibility against top-bracket federal rates, California taxpayers today would feel the full force of this proposed round of increases.
Once taxpayers have responded by voting with their feet, reducing their business activities, and re-upping with their tax attorneys, the state will likely lose revenue if it attempts to increase rates.
To make matters worse, Sacramento’s narrow focus on tax revenues ignores that fact that this tax avoidance behavior will lead to job losses. These rates also apply to business income to non-corporate entities (such as partnerships and LLCs) which account for over half of all employment in the US.
In another study, Xavier Giroud and I found that each percentage point increase in individual tax rates that the average state implements leads to losses of up to 0.4 percent of all non-corporate jobs in the state.
Starting from California’s already astronomical top rate, the impact would be expected to be even larger.
These job losses will negatively impact the well-being of Californians and further reduce state tax revenues.
California’s approach to relying on the taxation of top earners has sown the seeds of its own destruction. The top 0.5 percent of taxpayers pay over 40 percent of individual income taxes in the state.
Officials are blaming COVID-19 for the budgetary havoc, but this structure means that in any downturn, California revenues will tank due to the excessive reliance on both the ordinary income and capital gains of top earners.
If the Legislature is interested in promoting economic growth and prosperity in the California, and securing the state’s own fiscal future, it should reject further top income tax rate increases.
Instead, it should work towards putting the state back on a path towards being a competitive place for high-income individuals and businesses to locate their economic activity.
"This is the flip side (of) tax the rich, tax the rich, tax the rich. The rich leave, and now what do you do?" said New York Governor Andrew M. Cuomo on Feb. 4
After the Trump tax cut went into effect one year ago, we predicted that the Trump tax reform would supercharge the national economy but could cause big financial problems for the highest-tax states: New Jersey, Illinois, Connecticut, and New York.
The capping of the state and local tax deduction at $10,000 raised the highest effective state tax rates by about 66% (for example, in New York City, the rate on millionaires rose from about 8% to 13.3%). In New Jersey, the highest rate has risen from 7.5% to 12.75%.
Now, we have Andrew Cuomo conceding that the trend of rich people moving out of New York has caused the loss of $2.3 billion of tax revenue in Albany’s coffers. Cuomo called this tax change “diabolical.” We think it was a matter of tax fairness. No longer do residents of low-tax states have to pay higher federal taxes to support the blob of excessive state/local spending and pensions in the blue states.
As we predicted, the wealthy are fleeing these states. The new United Van Lines data were just released that are a good proxy for where Americans are moving to and from. Guess what four states had the highest percentage of leavers in 2018: 1) New Jersey, 2) Illinois, 3) Connecticut and 4) New York. Even high-tax California had more Americans pack up and leave than enter.
Ironically, liberals like Cuomo who argued for years that businesses don’t make location decisions based on taxes in their states are now forced to admit that the cap on the state and local tax deduction (which primarily affects the richest 1%) is depleting their state coffers. The rich change their residence by moving for at least 183 days of the year to low taxers such as Arizona, Florida, Tennessee, Texas and Utah.
We advised Cuomo and other blue state governors to immediately cut their tax rates if they wanted to remain even semi-competitive with low-tax states. They are doing the opposite. Connecticut, Illinois and New Jersey have led the nation in tax increases on the rich over the last three years, while “progressives” have cheered them on.
Last year, legislators in Trenton went on a taxing spree, raising the income tax on those making more than $5 million a year to 10.75% — now the third-highest in the country — and then enacting a health care individual mandate tax on workers, a corporate rate increase and an option for localities to impose a payroll tax on businesses. And they are still short of cash. Idiotically, these tax hikes were passed after the state and local tax deduction cap was enacted, thus pouring gasoline on their fiscal fires.
How has this worked out for them?
In addition to New York’s fiscal woes, the deficit in Illinois is pegged at $2.8 billion (with a $7.8 billion backlog of unpaid bills), and Connecticut faces a two-year $4 billion shortfall despite three tax increases in five years.
New Jersey has a $500 million deficit this year (even after the biggest tax hike in the state’s history) and Moody’s predicts that gap will widen to $3 billion over the next five years. This is all happening at a time when most states have healthy and unexpected surplus revenues due to the Trump economic boom and the historic decline in unemployment.
A Pew study published late last year on which states are bleeding the most red ink ranked New Jersey worst, Illinois second worst and Connecticut seventh worst. New York was also in the bottom 10.
Let us state this loud and clear in the hopes that lawmakers in state capitals across the country are paying attention: The three states that have raised their taxes the most now have the worst fiscal outlook.
Worst of all, things don’t look like they are going to get better in any of these states.
Last fall, Connecticut, Illinois and New Jersey voters elected mega-rich Democratic Govs. Ned Lamont, J.B. Pritzker and Phil Murphy, who have promised to sock it to the rich — the ones who haven’t yet left. In Illinois, Pritzker would eliminate the state’s constitutionally protected flat tax so that he can raise the income tax on the rich by as much as 50%. After raising income taxes three times in the last five years, Connecticut’s legislature now wants to raise the sales tax rate. No one in any of these progressive states even dares utter the words tax cut. In just one decade, New York lost 1.3 million net residents; Illinois 717,000, New Jersey 516,000 and Connecticut 176,000. California has lost 929,000.
There is also a useful warning for the soak-the-rich crowd of progressives in Washington. If a rise in the state tax rate from 8% to 13% because of the state and local tax deduction cap can have this big and immediate negative impact, think of the economic carnage from doubling of the federal tax rate from 37% to 70% as some want to do. The wealthy would relocate their wealth and income in low-tax havens like Hong Kong, the Cayman Islands and Ireland. That would do wonders for the middle class living in those countries.
We are sticking with our warnings from last year. If the four states of the Apocalypse — Connecticut, Illinois, New Jersey and New York — do not reverse their taxing ways and choose to keep making things worse, these once very rich and prosperous states will see thousands more rich taxpayers leave. The politicians in these states just don’t seem to understand math. A soak-the-rich tax rate of 8%, 10% or even 13% on income of zero yields zero income when the wealthy leave the state. Cuomo was right: The bleak outlook for the four states of apocalypse is “as serious as a heart attack.”
By Chris Edwards • National Review
Senator Elizabeth Warren is pushing a wealth-tax plan on the presidential campaign trail. She is promising that her tax would counter a rigged political system and raise enough money to pay for universal child care, a Green New Deal, student-loan relief, Medicare for All, and more housing subsidies.
Warren’s tax would be an annual levy of 2 percent on “net wealth” — meaning wealth minus debt — above $50 million and 3 percent on net wealth above $1 billion.
Wealth-tax supporters do not seem concerned about the likely damage to economic growth. But they should know that from a practical standpoint, wealth taxes in other countries have raised little money and have been a beast to administer.
More than a dozen European countries used to have wealth taxes, but nearly all of these countries repealed them, including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg, and Sweden. Wealth taxes survive only in Norway, Spain, and Switzerland.
By Victor Davis Hanson • The National Review
Californians brag that their state is the world’s fifth-largest economy. They talk as reverentially of Silicon Valley companies Apple, Facebook, and Google as the ancient Greeks did of their Olympian gods.
Hollywood and universities such as Caltech, Stanford, and Berkeley are cited as permanent proof of the intellectual, aesthetic, and technological dominance of West Coast culture.
Californians also see their progressive, one-party state as a neo-socialist model for a nation moving hard to the left.
But how long will they retain such confidence?
California’s 40 million residents depend on less than 1 percent of the state’s taxpayers to pay nearly half of the state income tax, which for California’s highest tier of earners tops out at the nation’s highest rate of 13.3 percent.
In other words, California cannot afford to lose even a few thousand of its wealthiest individual taxpayers. But a new federal tax law now caps deductions for state and local taxes at $10,000 — a radical change that promises to cost many high-earning taxpayers tens of thousands of dollars.
If even a few thousand of the state’s 1 percent flee to nearby no-tax states such as Nevada or Texas, California could face a devastating shortfall in annual income.
During the 2011-16 California drought, politicians and experts claimed that global warming had permanently altered the climate, and that snow and rain would become increasingly rare in California. As a result, long-planned low-elevation reservoirs, designed to store water during exceptionally wet years, were considered all but useless and thus were never built.
Then, in 2016 and 2017, California received record snow and rainfall — and the windfall of millions of acre-feet of runoff was mostly let out to sea. Nothing since has been learned.
California has again been experiencing rain and cold that could approach seasonal records. The state has been soaked by some 18 trillion gallons of rain in February alone. With still no effort to expand California’s water storage capacity, millions of acre-feet of runoff are once again cascading out to sea (and may be sorely missed next year).
The inability to build reservoirs is especially tragic given that the state’s high-speed rail project has gobbled up more than $5 billion in funds without a single foot of track laid. The total cost soared from an original $40 billion promise to a projected $77 billion. To his credit, newly elected governor Gavin Newsom, fearing a budget catastrophe, canceled the statewide project while allowing a few miles of the quarter-built Central Valley “track to nowhere” to be finished.
For years, high-speed rail has drained the state budget of transportation funds that might have easily updated nightmarish stretches of the Central Valley’s Highway 99, or ensured that the nearby ossified Amtrak line became a modern two-track line.
California politicians vie with each other to prove their open-borders bona fides in an effort to appeal to the estimated 27 percent of Californians who were not born in the United States.
But the health, educational, and legal costs associated with massive illegal immigration are squeezing the budget. About a third of the California budget goes to the state’s Medicare program, Medi-Cal. Half the state’s births are funded by Medi-Cal, and in nearly a third of those state-funded births, the mother is an undocumented immigrant.
California is facing a perfect storm of homelessness. Its labyrinth of zoning and building regulations discourages low-cost housing. Its generous welfare benefits, non-enforcement of vagrancy and public health laws, and moderate climate draw in the homeless. Nearly one-third of the nation’s welfare recipients live in the state, and nearly one in five live below the poverty line.
The result is that tens of thousands of people live on the streets and sidewalks of the state’s major cities, where primeval diseases such as typhus have reappeared.
California’s progressive government seems clueless how to deal with these issues, given that solutions such as low-cost housing and strict enforcement of health codes are seen as either too expensive or politically incorrect.
In sum, California has no margin for error.
Spiraling entitlements, unwieldy pension costs, money wasted on high-speed rail, inadequate water storage and delivery, and lax immigration policies were formerly tolerable only because about 150,000 Californians paid huge but federally deductible state income taxes.
No more. Californians may have once derided the state’s 1 percent as selfish rich people. Now, they are praying that these heavily burdened taxpayers stay put and are willing to pay far more than what they had paid before.
That is the only way California can continue to spend money on projects that have not led to safe roads, plentiful water, good schools, and safe streets.
A California reckoning is on the horizon, and it may not be pretty.
In the first two months of the new fiscal year, tax revenues are up. But so is the deficit. Why? Because spending continues to outpace revenues. So why do tax cuts keep getting blamed?
The latest monthly budget report from the Congressional Budget Office shows the deficit jumping $102 billion in just the first two months of the new fiscal year.
That sure looks like the deficit is “soaring,” as one news outlet claimed. But as the CBO makes clear, almost all that deficit increase was the result of quirks of the calendar. Depending on where weekends fall, significant sums of spending can get shifted into different months.
A true apples-to-apples comparison, the CBO says, shows that the deficit climbed by just $13 billion. Continue reading
by Haris Alic • Washington Free Beacon
Democratic Rep. Nancy Pelosi (Calif.) has yet to take the speaker’s gavel of the U.S. House of Representatives, but Democrats are already laboring to make it easier to dismantle the achievements of the Trump presidency.
The incoming chairman of the House Rules Committee, Rep. Jim McGovern (D., Mass.), confirmed to colleagues on Wednesday that he would not honor the three-fifths supermajority requirement to raise income taxes, as reported by the Washington Post.
McGovern’s decision overturns a rule implemented under outgoing Speaker Paul Ryan (R., Wis.) that mandated a three-fifths majority approve any proposed hike to the income tax.
The change comes after a standoff between Pelosi and her moderate allies in the Democratic conference, such as incoming Ways and Means Committee chairman Richard Neal (Mass.), and younger, more progressive members like Rep.-elect Alexandria Ocasio-Cortez (N.Y.). Continue reading
By Samuel Hammond • National Review
The ability of businesses to grow rapidly is a one of the most defining and precious features of the American economy. Amazon went from a fledgling online bookstore to an “everything store” and the second-largest employer in the United States in just two decades. Uber emerged from nowhere less than ten years ago to become a dominant transportation option in cities around the world. And earlier this month, Apple became the first U.S. public corporation to reach a $1 trillion valuation — a far cry from its sorry state in 1996, when it looked doomed to fail.
It’s not just the information sector. The United States is home to 64 percent of the world’s billion-dollar privately held companies and a plurality of the world’s billion-dollar startups. Known in the industry as “unicorns,” they cover industries ranging from aerospace to biotechnology, and they are the reason America remains the engine of innovation for the entire world.
Unless Elizabeth Warren gets her way. In a bill unveiled this week, the Massachusetts senator has put forward a proposal that threatens to force America’s unicorns into a corral and domesticate the American economy indefinitely.
Dubbed the “Accountable Capitalism Act,” Warren foresees Continue reading