Revenue isn’t the problem

Yesterday’s post dealt with the precarious financial situation Uncle Sam is in.  Interestingly, today I happened to stumble onto U.S. News and World Report’s ranking of the “Best States for Fiscal Stability.”

The top three are Tennessee, Florida, and South Dakota, in that order.  What do all of these have in common?

They are three of the eight U.S. States that still don’t have a personal income tax.  Tennessee does tax dividend — investment — income, but not wages.  But it relies mostly on sales taxes to pay its bills.  So why is it so stable?

For one thing, its Constitution requires a balanced budget.  Spending in a given year cannot exceed revenue collections and reserves.

Maybe Uncle Sam should take a trip to Nashville before he has to face the music.

UPDATE: as I was saying

Tariffs and national self-interest

Patrick Buchanan provides a succinct summary of why Trump’s emphasis on tariffs in the relationship with China is hardly unprecedented.  In fact, one could say it’s a return to the policies that once made a young nation great:

A tariff may be described as a sales or consumption tax the consumer pays, but tariffs are also a discretionary and an optional tax. If you choose not to purchase Chinese goods and instead buy comparable goods made in other nations or the USA, then you do not pay the tariff.
China loses the sale. This is why Beijing, which runs $350 billion to $400 billion in annual trade surpluses at our expense is howling loudest. Should Donald Trump impose that 25% tariff on all $500 billion in Chinese exports to the USA, it would cripple China’s economy. Factories seeking assured access to the U.S. market would flee in panic from the Middle Kingdom.
Tariffs were the taxes that made America great. They were the taxes relied upon by the first and greatest of our early statesmen, before the coming of the globalists Woodrow Wilson and FDR.
Tariffs, to protect manufacturers and jobs, were the Republican Party’s path to power and prosperity in the 19th and 20th centuries, before the rise of the Rockefeller Eastern liberal establishment and its embrace of the British-bred heresy of unfettered free trade.
The Tariff Act of 1789 was enacted with the declared purpose, “the encouragement and protection of manufactures.” It was the second act passed by the first Congress led by Speaker James Madison. It was crafted by Alexander Hamilton and signed by President Washington.

As Buchanan mentions, tariffs were once an integral part of an economic policy that became known as “The American System” — a policy so successful that other nations emulated it.  It’s worth noting the Federal government undertook its first infrastructure projects with almost no other source of funding other than tariffs (land sales being the main exception).  I’ll admit: I’m not a fan of the Federal government doing public works projects.  But the limited revenue stream tariffs provided kept such activity modest in the early republic, and for the most part it’s easy to see the wisdom of such projects as lighthouses, postal routes and the Cumberland Road.

Still, public works projects were controversial, even then.  Many in the South believed tariffs disproportionally benefitted northern industrial interests through protectionism and infrastructure.  Tariffs sparked the Nullification Crisis in South Carolina, and was cited as one source of discontent as States left the Union after Lincoln’s election in 1860.  Sectionalism aside, the nature of tariffs as a voluntary tax that promotes national self-reliance and internal growth recommends it as one of the best ways to fund a limited government.  Certainly, the explosive growth of Uncle Sam after institution of the Income Tax is evidence of that.  I’ve said before that a national sales tax would be preferable to an income tax (provided it didn’t result in both being in effect).  Many of the same reasons apply to tariffs.

Buchanan rightfully points out that abandoning so-called “free trade” for a tariff system that enforces fair trade will be painful in the short term, much like a junkie getting over their addiction.  American wages have been stagnant in inflation-adjusted terms since the 1970s.  The only reason we appear to have a higher material standard of living is the influx of overseas goods that appear cheap on the price tag, but which in reality take a heavy toll on the nation in terms of lost industries, disappearing jobs and a growing economic dependency on outsiders.  That doesn’t even take into account that many of the reasons goods made in places such as China are ‘cheaper’ is that they lack protections for workers and the local environment — impacts we considered so important here that we willingly added them to the economic burden of production.  In short, “free trade” as it’s currently practiced is an apples-to-oranges comparison that hides or downplays the negative aspects of globalism.

A feature, not a bug

So Congress has only passed 12 laws so far this year?  Great!  That’s still probably close to a dozen more than are necessary.

Democrats flush with a new House majority after nearly a decade in the minority are sending over a rash of bills most political watchers believe have little chance of passing the Senate, such as universal background checks for gun purchases, net neutrality, climate change, congressional ethics, expanding voter access, raising the minimum wage and more.  ((“a rash of bills,” or “a lot of rash bills?  — Jemison))

The Senate was designed to be a speed brake on ill-considered legislation (of which there appears to be a considerable amount of late). Congress should be judged by the wisdom of its output, not its quantity.  So here’s an agenda I’d offer Congress:

  1. Pass next year’s Federal Budget BEFORE the end of the current fiscal year for once
  2. Repeal the 16th Amendment, abolish the IRS and institute a national sales tax
  3. Confirm or reject whatever nominees remain before the Senate
  4. Go home and let the American people live their lives for the next year.
  5. Repeat #1, #3 and #4 annually

Who’s with me?

A very taxing system

Americans for Tax Reform have put out a nice infographic about how the U.S. income tax has morphed into a monstrosity since we let the Constitution be amended in 1913 to have one.  That such a tax was one of the ten planks of Marx’s Communist Manifesto should have given Americans more pause.

ATR HISTORY OF TAX FINAL

I’ve said it numerous times: to stop a fire you have to take away its fuel and starve it of oxygen.  The income tax paved the way for the Leviathan our government has become.  Starving it of revenue by getting rid of the income tax would begin the process of returning to a limited government.

Remember: the nation got along just fine for 137 years without the ability to reach directly into our wallets.