Quotulatiousness

August 2, 2017

Ontario has scared off foreign home-buyers, but bureaucratic delays still make housing more expensive

Filed under: Bureaucracy, Business, Cancon, Economics — Tags: , , , , — Nicholas @ 04:00

Josef Filipowicz and Steve Lafleur explain why Ontario’s recent crack-down on foreign home-buyers in the Greater Toronto Area still leaves one of the biggest barriers to affordable housing untouched:

The Ontario Legislature in Queen’s Park, Toronto. (via Wikimedia)

According to a recent announcement from Queen’s Park, 4.7 per cent of properties purchased in Ontario’s Greater Golden Horseshoe (between April 24 and May 26) were acquired by foreign individuals or corporations. This in the wake of the raft of measures announced in April including a 15 per cent “Non-Resident Speculation Tax” ostensibly aimed at improving housing affordability.

It’s difficult to say how this portion of the housing market — foreign buyers — ultimately impacts the cost of buying or renting in Canada’s biggest urban region, and it’s far too soon to estimate the effects of the myriad of policy changes the Ontario government is introducing. But what we do know is that the laws of supply and demand apply to housing, and it’s hard to believe that a small percentage of buyers are responsible for the massive appreciation of housing prices in the GTA over the past decade. Rather than focus on a small tranche of buyers, we should focus on ensuring that regulations don’t prevent the supply of new housing from meeting demand.

[…]

So what’s preventing cities in the Greater Golden Horseshoe from issuing more building permits?

In short, red tape at city hall. Between 2014 and 2016, Fraser Institute researchers surveyed hundreds of homebuilders across Canada to better understand how government regulation affects their ability to obtain permits. In the Greater Golden Horseshoe, it typically takes one-and-a-half years to obtain a permit in this region, and per-unit costs to comply with regulation amount to almost $50,000. Approval timelines can also be affected by the need to rezone property. Approximately two-thirds of new homes in the region require this procedure, which adds 4.3 months (on average) before builders can obtain permits.

Another deterrent to more supply is local opposition to new homes. Survey results show that council and community groups in Toronto, King Township and Oakville are more likely to resist the addition of new units in their neighbourhoods, effectively preventing newcomers from moving in.

Update, 3 August: Mission accomplished. Toronto home sales plummeted 40 percent in July.

July 20, 2017

Words & Numbers: The Illinois Budget is a Mess

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 05:00

Published on 19 Jul 2017

This week on Words & Numbers, Antony Davies​ and James R. Harrigan​ tackle the disaster that is the Illinois state budget crisis.

Pro-tip: Don’t let it happen to your state.

July 11, 2017

Norway’s experiment with inviting people to pay more tax than they owed

Filed under: Europe, Government — Tags: , — Nicholas @ 03:00

Tim Worstall reports on the results of a Norwegian initiative to encourage taxpayers who felt their taxes should be higher to voluntarily pay more:

It is a standard contention of our times that people really would love to pay more tax. The things they get in return from government are so wondrous that obviously everyone will be emptying their wallets to feed the diversity advisers. Norway tried this — they managed to raise an extra $1,325 in tax revenues.

That’s not bad, $1,325 per capita in additional tax revenues multiplied by the Norwegian taxpaying population is … oh, you mean that was the total amount?

This does not bode well for the general contention, does it?

What we have here is of course that classic economists’ point, the difference between expressed preferences and revealed ones. We’ll all say all sorts of things but the correct guide to what we really want is to watch what we do. Which isn’t, even in Norway in any large manner, pay more tax:

    Hammered by the opposition for slashing taxes and going on a spending spree with the country’s oil money, the center-right government has hit back with a bold proposal: voluntary contributions.

    Launched in June, the initiative has received a lukewarm reception, with the equivalent of just $1,325 in extra revenue being collected so far, according to the Finance Ministry.

It is possible to cavil about this a bit. It’s all rather new for example.

    The program was decried as a political distraction from the left-of-center opposition party, who said that if the government was really serious about making up for recent revenue shortfalls then it would go after multinational companies like Google and Facebook. Launched only this past June, the opposition has argued that the scheme already costs more than it makes.

Well, yes, they would say that too. Quite clearly everyone prefers it to be that person over there getting taxed, not little ol’ me.

You don’t have to be Norwegian to take advantage of this wonderful offer to give the government more than your share: that option has been available to Canadians for many years. Her Majesty, in right of Canada, would be happy to accept any amount you wish to donate. As Tim points out in the article, the US and UK governments also accept gifts in excess of tax owed.

QotD: The non-profit scam

Filed under: Bureaucracy, Business, Government, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

Oddly, another form of this non-profit scam exists in my industry. As a reminder, my company privately operates public recreation areas. Several folks have tried to set up what I call for-profit non-profits. An individual will create a non-profit, and then pay themselves some salary that is equal to or even greater than the profits they would get as an owner. They are not avoiding taxes — they still have to pay taxes on that salary just like I have to pay taxes (at the same individual tax rates) on my pass-through profits.

What they are seeking are two advantages:

  • They are hoping to avoid some expensive labor law. In most cases, these folks over-estimate how much a non-profit shell shelters them from labor law, but there are certain regulations (like the new regulations by the Obama Administration that force junior managers to be paid by the hour rather than be salaried) that do apply differently or not at all to a non-profit.
  • They are seeking to take advantage of a bias among many government employees, specifically that these government employees are skeptical of, or even despise, for-profit private enterprise. As a result, when seeking to outsource certain operations on public lands, some individual decision-makers in government will have a preference for giving the contract to a nominal non-profit. In California, there is even legislation that gives this bias a force of law, opening certain government contracting opportunities only to non-profits and not for-profits.

The latter can have hilarious results. There is one non-profit I know of that is a total dodge, but the “owner” is really good at piously talking about his organization being “cleaner” because it is a non-profit, while all the while paying himself a salary higher than my last year’s profits.

Warren Meyer, “The New Rich – Living the High Life Through Your Non-Profit”, Coyote Blog, 2015-09-29.

June 22, 2017

The Netflix tax is dead (again) – “This thing was a turkey, and Trudeau was right to wring its neck.”

Filed under: Business, Cancon, Government, Media — Tags: , , , , , — Nicholas @ 05:00

Chris Selley rejoices in the demise of the so-called “Netflix tax” proposal, but also pours scorn on yet another proposal to prop up Canadian print media organizations:

Justin Trudeau wasted little time last week rubbishing the Heritage Committee’s so-called “Netflix tax,” and no wonder. If you’re determined to raid people’s wallets to fund journalism they’d rather not pay for and Can-con programming they’d rather not watch, you’re far better off doing it shadily than with a shiny new tax on something people love. The sound bytes winging around in the idea’s favour were, in a word, pathetic: “it’s not a new tax, but an expanded levy!”; “we already tax cable, why not Internet?”; “we already subsidize magazines, why not newspapers?”

Good God, why any of it? This thing was a turkey, and Trudeau was right to wring its neck.

Newspaper publishers and union bosses remain undaunted in pursuit of unearned public funds, however. “Canada’s newspaper industry unites to advocate for Canadian Journalism Fund,” proclaimed a headline at News Media Canada, the publishers’ lobby group. They’re savvy enough to propose tying subsidies to employed journalists’ salaries — 35 per cent to a maximum of $30,000 per head — rather than just cutting cheques. That might fend off Executive Bonus Rage, but it won’t fend off sticker shock: the suggested eventual cost is a whopping $350 million a year.

As a taxpayer I would much rather subsidize Canada’s journalists than Canada’s legacy media companies — but I would sure as hell rather subsidize neither. The more beholden to government a country’s journalists, the less free its press. Magazine writers in this country know their publications get a top-up from Ottawa in the form of the Canadian Periodical Fund. That’s not ideal. But under News Media Canada’s proposal, we would know our jobs literally depended on government largesse. I’ll take a hard pass on that.

Publishers’ and union bosses’ claims of unanimous support notwithstanding, many unionized journalists, and many of your non-unionized friends here at the National Post, hate the idea. It risks narrowing Canada’s already remarkably narrow spectrum of acceptable ideas and arguments. It risks — no, guarantees — alienating the very consumers we need to attract. In the case of some legacy media outlets it would simply extend the runway for business models that everyone knows will never fly again. In any event, the sums being bandied about wouldn’t solve the crisis as a whole unless the solution was permanent and ever-greater government dependency. I’m amazed to see how many journalists, including some very nearly pensionable ones, support the idea.

June 14, 2017

The Articles of Confederation – III: Finding Finances – Extra History

Filed under: Government, History, USA — Tags: , , — Nicholas @ 04:00

Published on 20 May 2017

With the newly United States on the verge of bankruptcy, Congress reaches out to the most able financier in the nation: Robert Morris. His ambitious plans attract the aid of Alexander Hamilton, but fall to ruins when the states abandon him.

May 17, 2017

QotD: Britain’s post-Brexit access to the single market

Filed under: Britain, Business, Economics, Europe — Tags: , , , — Nicholas @ 01:00

You see, they think they are granting us a privilege by allowing us to sell them things. This is ludicrous of course, it is imports which make us richer, not exports. But let us humour their delusion for a little. The standard EU position is that if the companies and people of a country are to gain access to the Single Market then they must pay for that privilege. This cannot be about the imports that those people gain from the Single Market of course because that is always under their own domestic control. No, the EU’s insistence really is that if Switzerland gets to sell cuckoo clocks into the EU, Norway can ship fermented sharks heads and the like, then this is a privilege. And that access to the Single Market means that Switzerland and Norway must pay the EU for that privilege. And they do.

[…]

If you get to sell things in Europe then you’ve got to pay the tithe to the EU itself. Reminds me rather of Fat Tony and friends running a nice little protection racket but then much of the EU reminds me of that.

OK. But who should be paying that tithe?

Well, actually, the first question is whether that tithe is worth paying. As up above, it’s imports that make us all generally richer and that’s all under our control anyway. Exports do make some people richer – the people who profit from making exports of course. And that’s not us in general, that’s not Britain, nor the British, and it’s most certainly not the taxpayers who are made richer by exports. So, obviously, it should not be the taxpayers paying the tithe in order to gain access to that market for those exports which don’t profit them.

The people who should be paying the tithe are the people who profit from the tithe having been paid. Those very exporters. Which gives us the solution to who should be paying the tithe. And an interesting side effect of this will be that we will find out whether it’s worth paying at all.

The people who should be paying the tithe are the people who profit from the tithe having been paid. Those very exporters. Which gives us the solution to who should be paying the tithe. And an interesting side effect of this will be that we will find out whether it’s worth paying at all.

Actually, we could in fact argue that a payment into the EU budget in return for Single Market access is illegal state aid. And thus not allowed under the usual rules of trade with the EU. Because it is state aid. Exporters will face tariffs if the payment is not made. The payment thus benefits exporters. But the payment is made by taxpayers, this is thus aid from taxpayers to exporters. It’s a subsidy for exports – something that isn’t allowed.

[…]

The crucial point is that the benefits, as far as the UK is concerned, of Single Market access lie with those making the exports. Thus those making the exports should be those paying the cost of Single Market access. If those who benefit think it not worth the cost then no one should be paying such bribes illegal state aid access fees. And simply by applying the costs, correctly, to those who benefit we find out which is the truth.

It’s very difficult indeed, nay impossible, to see the down side of this suggestion. If exporters want Single Market access then exporters can pay for it, not taxpayers. If they won’t pay it then it’s not worth it, is it?

Tim Worstall, “Absurd But It Works – Ensure EU Single Market Access Post-Brexit With Export Taxes”, Forbes, 2016-06-27.

April 16, 2017

The tale of unsalted butter in French cuisine

Filed under: Bureaucracy, Business, France, History — Tags: , , — Nicholas @ 05:00

At his new blog, Splendid Isolation, Kim du Toit explains the historical roots of a French culinary oddity:

One of the quirks of French cuisine is that most often the butter is unsalted, and at a French dinner table you will usually find a tiny cruet of salt with a microscopic spoon inside, so that you can salt your butter (or not) according to taste. To someone like myself, accustomed only to salted butter, this seemed like an affectation, but it wasn’t that at all: it was the result of taxation, and this is one of the things changed forever by Napoleon’s administrative reforms.

One of the best parts of our U.S. Constitution is the “interstate commerce” clause, which forbids states from levying taxes on goods and services passing from one state to another, and through another in transit. This was not the case in pre-Napoleonic France. Goods manufactured in, say, Gascony or Provence would pass through a series of customs posts en route to Paris, and at each point the various localities would levy excise taxes on the goods, driving up the final price at its eventual destination.

Which brings us to salt. French salt, you see, was produced mainly on the Atlantic coastline, and was a major “export” of Brittany to the rest of France. Butter, of course, was produced universally — in and outside Paris and ditto for every major city — but the salt for the butter came almost exclusively from Brittany, and having been taxed multiple times by the time it reached points east like Paris or Lyons, it was expensive. So the cuisine and eating habits in those parts developed without the use of salt — or, if salt was requested, at an added cost. It’s why, to this day, many French recipes use unsalted butter as an ingredient. (In contrast, butter for local consumption in western France was [and still is] almost always salted, because salt was dirt cheap there.)

Napoleon’s reforms did away with all that; he saw to it that the douane locale checkpoints and toll booths along the main roads were abolished (causing salt prices in eastern France to plummet and become a mainstay of French cuisine at last). And when the towns and villages protested about the loss of tax revenue, Napoleon made up the shortfall with “federal” funds out of the national treasury.

Of course, the French treasury had in the meantime been emptied out by, amongst other things, the statist welfare policies of the Revolutionary government (stop me if this is starting to sound familiar). Which is why, to raise money, Napoleon invaded wealthy northern Italy and western Germany (as it is now), pillaged their rich cities’ treasuries and garnered revenue from the wealthy aristocracy, who paid bribes to avoid having their palaces sacked and their wealth confiscated.

April 14, 2017

Alberta’s new problem of “rising income support caseloads”

Filed under: Cancon, Economics, Politics — Tags: , , , — Nicholas @ 04:00

Colby Cosh sounds a warning note for Alberta’s NDP government:

… there is a danger — I say this with glum certainty that this centuries-old accepted truth will incite tantrums — in permitting the dole to grow too large. One need only look at the United States’s current addiction to federal and other disability programs. The U.S. reformed welfare as Alberta (and eventually Ontario) did, but disability schemes involving armies of doctors, lawyers and administrative judges became an equally huge species of para-welfare.

The result is a national orgy of prescription opioids and suicide, as policy inertia encourages millions to make a bad back or a trick knee the centre of an unproductive, isolated life. The bottle of OxyContin absolves and soothes; Donald Trump wins a presidential election.

I want no part of anything like this for Alberta. During my lifetime the province has been an economic colony, obsessed with competitiveness and quite short on the state’s version of “compassion.” We all knew we would get NDP economic policy when we voted NDP. They have un-flattened taxes, revived groovy ’70s industrial planning, taxed carbon, regulated farms, run planet-sized deficits, and sheltered the bureaucracy while businesses choked and private-sector workers struggled.

Only the very inattentive could have been unprepared for most of this, as a price to be paid for hosing out the Conservative stable, or even as a desirable correction. Welfare numbers signify a more fundamental, threatening change. It is one that the New Democrats may find more dangerous to its electoral future than all the rest put together, if Ontario history is any guide.

The growth in welfare rolls that can take place in a year may take 10 to reverse. And, of course, such growth suggests that other NDP nostrums, like hiking the minimum wage, aren’t working out. Why would anyone at all require state income support in labour’s paradise? Do NDPers need to look far to find a stalking, wrathful, hyperconservative Mike Harris figure in Alberta?

April 13, 2017

Words & Numbers: Even Economists Can’t Do Their Own Taxes

Filed under: Economics, Government, USA — Tags: — Nicholas @ 04:00

Published on 12 Apr 2017

In honor of Tax Day, Antony Davies & James R. Harrigan talk about the absurdity of the US tax code. If your tax situation is more complicated or more uncomfortable than you like dealing with, you can pay another human being to do your taxes so you don’t have to. There are dependents, mortgages, deductions from energy-efficient household additions, charity, student loan interest … even with a Ph.D. in economics, it’s hard to understand!

April 11, 2017

The return of Jane Galt

Filed under: Economics, Politics, USA — Tags: , , , , , — Nicholas @ 05:00

Megan McArdle, who used to blog as “Jane Galt”, did an Ask Me Anything on Reddit:

I’m Megan McArdle, a columnist for Bloomberg View, covering business, economics, public policy and the latest in kitchen gadgets. Ask me anything!

[…]

[–]LegalInspiration 5 points 6 hours ago*

In the short, medium, and long terms, generally speaking, would you say the US as a political and civil society is screwed? If so, how screwed would you say it is? If that’s too argumentative, maybe a more polite way to phrase it is: Do you see the gradual disruption of national unity post WWII as something that will cycle within a set of sustainable boundaries, or will the trend continue long term to the point where the US is no longer sustainable as a coherent and singular entity?

    [–]janegalt[S] 4 points 5 hours ago

    A couple of decades ago, I toyed with the idea of writing a novel where the US broke up into two countries: Liberalstan and Fundamentalistalia. Back then I thought it was a metaphor; now I’m less sure. The country feels more divided than it has in my lifetime, or that of my parents. It may be the worst it’s been since the Palmer Raids; maybe the worst since the Civil War.

    That said, to quote Adam Smith, “There’s a lot of ruin in a nation”. I think we have plenty of room to turn it around. But I think to do so, we need to think creatively about a kinder, gentler nationalism. Not the kind that says “Whee, let’s invade other countries”, but the kind that emphasizes love of country and the things we have in common–not the love we’ll grudgingly dole out after the nation has perfected itself, nor the things we’ll have in common after all those wretches in the other half of the country see the light and/or die. But love of each other right now, despite our many flaws.

    Every country needs a certain amount of myth making, and a certain amount of irrational pride in itself to hold it together. That’s particularly true for America, which can’t derive a national identity from, well, not being America. I think a lot of people imagined that tearing down all the myth making, and disparaging that irrational love of country, would turn us into good global citizens. Only it turns out that the opposite of nationalism isn’t globalism; it’s tribalism. And the tribes are gearing up to make war on each other in a way that the US hasn’t seen for a long time.

[…]

[–]TJIC1 4 points 6 hours ago

You are libertarian – but a “pragmatic” one who suggests / acknowledges that gov is necessarily going to end up in pretty much every corner of everything, and that the space of reasonable policy debate is small changes at the margin. This seems to suggest that we will never repeal FDR innovations like ignoring the 9th and 10th amendment, changing commerce clause to read “Federal gov can do whatever it wants”, etc. What’s the best we can hope for for liberty? What we have today – a modern welfare state where USG consumes 30% of economy and regulates everything from toilet flushing to proper woods to make a guitar fretboard from?

…or a welfare state where USG consumes 50% of the economy?

…or 90%?

[–]janegalt[S] 5 points 5 hours ago*

    The gap between real and ideal for libertarians is certainly wide, and I am less hopeful than I was twenty years ago that we’ll ever close it. I hate the “read whatever the government wants to do into the Constitution” jurisprudence that was required to enable the New Deal, and the fact that judges have appointed themselves to replace poets as the unacknowledged legislators of the world.

    At some point as a commentator you have to decide whether to advocate for first best or eighth best policy. I’ve generally decided to advocate for what I think is politically realistic, rather than what I think is ideal. I think you need both kinds though–the compromisers need the hardline idealists to provide a sort of compass point, and the idealists need the compromisers to provide the actual movement in the right direction.

    That said, this last election was very bad for libertarian ideas, representing a rejection of both our ideas about social policy, and those about political economy. I think libertarians have a lot of hard work ahead thinking about where we can realistically make advances in the next decade or so. I wish I knew the answer to that. My best guess is: the middle class entitlement state is not going to be rolled back. There may be some room for progress on America’s incredibly inefficient regulatory state, which would be a great boon for both economic liberty, and growth. I think the GOP will try to do tax cuts, but will fail to accomplish anything significant, for much the same reasons that their health care bill failed: there’s no money, and no public appetite for a tax cut that mainly benefits the affluent-to-rich (as it will have to, because at this point, the middle class and below don’t pay significant income taxes).

    That said, we should also remember the progress that has been made on the liberty front. In 1944, FDR had the head of Montgomery Ward arrested for thwarting his war planning board; in 1952 Truman nationalized the steel mills. That stuff doesn’t happen any more, and a lot of the worst New Deal regulations have gone away. Police practices are way better than they were before Miranda and other decisions made sure that defendants knew their rights (I’m not saying they’re perfect, but they’re definitely better). And if you’re a minority or a woman, all sorts of legal discrimination has been erased over the last fifty years. Those are major victories for libertarians, and we shouldn’t think that there’s some golden age we’re falling away from. We’ve lost a few, but we’ve won a few too.

April 6, 2017

Words & Numbers: Taxing Robots Does Not Compute

Filed under: Business, Economics, Technology — Tags: , , , — Nicholas @ 04:00

Published on 5 Apr 2017

This week, Antony and James break down Bill Gates’ recent suggestion that companies that use robots instead of human workers should pay employment taxes in order to fund new welfare programs.

March 16, 2017

Words & Numbers: Blocked by a State’s Wall of Taxes

Filed under: Economics, Government, USA — Tags: , , , , — Nicholas @ 04:00

Published on 15 Mar 2017

This week, James & Antony discuss the case of Connecticut’s budget shortfall. The state hopes to solve their financial problems by raiding the retirement accounts of previous Connecticut government employees who have moved out of the state, and take 30% of those savings. This plan would hurt retirees, break promises, and trap many people in the state based on a policy that may be illegal.

March 14, 2017

“Most policy ideas are bad” (especially in US healthcare)

Filed under: Government, Health, Politics, USA — Tags: , , , , , — Nicholas @ 03:00

Megan McArdle says that the best plan the Republicans could come up with to deal with Obamacare is to do nothing, at least in the short-term:

For a policy columnist, “Don’t do that” is the easiest column to write. Most policy ideas are bad. If you simply blindly oppose everything that anyone ever puts forward, you’ll end up being right most of the time.

However, that’s not very useful for politicians. If they just sit around Congress playing tiddlywinks all day, voters will get cranky. Congress is supposed to do things. So, having spent a few days saying unkind things about the Republican health-care plan, it probably behooves me to state what I think they should do.

Well, boy, that’s a hard question. Here’s the thing: For all the unkind words I’ve said, I get the forces that have brought Republicans to this point. As I wrote Thursday, Democrats built a shoddy and unworkable structure out of the political equivalent of concrete: nearly impossible to repair or renovate, and darned expensive to demolish. The task is made even harder by the fact that Democrats currently control just enough votes in the Senate to keep Republicans from passing any sort of clean, comprehensive bill.

[…]

What would I do in this situation? Well, the first thing I’d do is accept, deep in my heart, that there are no great outcomes possible at this point. The second thing I’d do is remember that nothing is always a policy option: If you can’t do something better than the status quo, don’t do anything. It’s what I said to Democrats in 2009, and it’s what I’m saying to Republicans now.

So what would I do to minimize the damage, within the constraints of political reality? Well, I foresee two potential futures for the current status quo. One, the exchanges where individuals buy policies could fail, leaving people unable to buy insurance. Or two, the exchanges don’t fail, and we’re left with an unsatisfactory but still operational system.

In either case, the Republicans’ best option is to wait. Why? Because what they can do now — hastily, without touching the underlying regulations that have destabilized the individual market — is worse than either of those outcomes. The partial-reform structure they think they’ll be able to get through the Senate is likely to make the problems in the individual market worse, not better. And the fact that they’ve tinkered with the program means that Republicans will take 100 percent of the blame.

She also re-iterates her own ideal solution (which she admits wouldn’t fly with the American public):

Longtime readers of my column know that my pet proposal is a radical overhaul of the whole system in which we zero out all the existing subsidies and just have the government pick up 100 percent of the tab for medical expenses that exceed 15 or 20 percent of a family’s adjusted gross income: basically, a single-payer catastrophic-care system for expenses that no one can realistically save for. Let people buy insurance for expenses below that, or, if it’s not too expensive taxwise, let people set aside more money tax-free in Health Savings Accounts. And make some more generous provisions for people closer to the poverty line, such as prefunding Health Savings Accounts for them. That’s the whole program. It fits on a postcard, though the finer details — like which cancer treatments we’re actually willing to pay for — obviously aren’t.

However, this is completely politically infeasible, because voters don’t want genuine insurance, by which I mean a pool that provides financial assistance for genuinely unforeseeable and unmanageable expenses. Voters want comprehensive coverage that kicks in at close to the first dollar of spending, no restrictions on treatments or their ability to see a doctor, nice American-style facilities, and so forth. They are also fond of their health-care professionals and do not wish to see provider incomes slashed and hospitals closed, nor do they want their taxes to go up, or to pay 10 percent of their annual income in premiums. This conflicting set of deeply held views is one major reason that Obamacare — and American health-care policy more generally — has the problems it does.

March 5, 2017

The political Trojan Horse of “Pigouvian taxes”

Filed under: Business, Economics, Government, Politics — Tags: , , — Nicholas @ 03:00

Warren Meyer used to be quite positive about the introduction of Pigouvian taxes, but recently his opinion has changed:

Here is the Wikipedia definition of a Pigovian tax:

    A Pigovian tax (also spelled Pigouvian tax) is a tax levied on any market activity that generates negative externalities (costs not internalized in the market price). The tax is intended to correct an inefficient market outcome, and does so by being set equal to the social cost of the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. An often-cited example of such an externality is environmental pollution.

The Left often tries to justify new taxes based on their being Pigovian taxes. The classic example is a carbon tax — it is claimed there is a social cost to carbon-based fuel combustion (e.g. CO2 production and resulting global warming) that is not taken into account by market prices. By adding the tax, these other costs can be taken into account, likely raising the price of these fuels and thus both reducing their use and providing a higher price umbrella for alternatives.

For years, I accepted these arguments at face value. I might argue with them (for example, I think that the Left has tended to spot 10 of the last 2 true negative externalities), but I accepted that they really believed in the logic of the Pigovian tax. I am now becoming convinced that I was wrong, that the Left’s support of Pigovian taxes is frequently a front, a way of putting a more palatable face on what is really a naked grab for more taxpayer money by public officials.

Soon after discovering the concept of Pigouvian taxes, I suspected that — even if the economics were sound — no human government was going to implement such a tax in the pure form: there would always be “good reasons” to make the new tax non-revenue-neutral, because once a revenue stream has been established, it’s unlikely the government will actually shut it down afterwards. I have yet to be disappointed in this expectation.

Older Posts »

Powered by WordPress