Thursday, December 6, 2012

December 6, 2012

I See England, I See France - Where in the world have tax increases made things better?
by Matt Purple
December 6, 2012

The left and much of the center are launching a scorched-earth assault against the right's position on taxes.

Republicans are being told they must hike taxes on top earners if they're serious about paying down the debt. Grover Norquist is being portrayed as a mad sorcerer, staggering around and misfiring spells in fits of pique while his entranced minions slowly come to. Here in Washington, meaningless buzzwords are fluttering through the air like dead autumn leaves. "Serious." "Hostage takers." "Reality-based community." "Balanced approach."

The last of those terms might be the most amusing. President Obama's initial fiscal cliff plan was repeatedly lauded as a "balanced approach." On one hand, Democrats got tax hikes on the top earners. And on the other hand, Democrats got $200 billion in stimulus. Even-steven, you see.

But let's examine the plan's main provision and President Obama's loudest podium-thumper: the tax hikes on top earners. If passed, rates for the top two tax brackets would increase from 33% and 35% to 36 and 39.6% respectively, tax rates on capital gains would go up from 15% to 23.8%, and the top rate on dividends would skyrocket from 15% to 43.4%. The president's accountants claim this would raise $1.6 trillion over the next decade without slowing down the economy.

If that were true, it would be worth consideration. Conservatives like low taxes, but the overriding concern right now must be paying down the debt. $160 billion per year might be a drop in the bucket, but enough drops fill up.

The problem is it's not true. Raising taxes only makes things worse. The vintage conservative nostrums about higher taxes reducing revenue and enervating economies still hold.

Look at Great Britain where former Prime Minister Gordon Brown pushed through a tax hike shortly before voters booted him in 2010. Wealthy earners saw their rate increase from 40% to 50%. The top rate for capital gains also shot up 10%.

The results have been catastrophic for Britain's economy. In 2010, there were more than 16,000 people in Britain declaring income of 1 million pounds or more. With Brown's new taxes, that number dropped to just 6,000 as the wealthy either left Britain or trimmed their income to avoid taxation. Earlier this year, under Conservative Prime Minister David Cameron, the government announced it would drop that rate from 50% to 45%. Since then, the number of residents declaring 1 million pound incomes is up to 10,000.

Higher tax rates lead to fewer millionaires; lower tax rates lead to more millionaires. It's as clear an illustration as you'll ever see. And far from increasing revenue, Brown's tax burden actually cost the treasury 7 billion pounds. Britain's economy has stalled since Conservatives took power, leading various Krugmanians to reflexively scream "AUSTERITY!" every time they hear an English accent. Britain's recession is complicated but one of its real causes is surely "TAXES!"

Across the channel in France, Socialist President François Hollande is trying to mend his country's crumbling finances with a host of new taxes. The most lacerating one is a 75% income tax rate on millionaires. Also included are new taxes on capital gains, a hike in inheritance charges, and an exit tax for those selling their companies.

The question now isn't whether wealthy French will leave, but how many. The New York Times quoted one tax specialist saying the exodus wouldn't be limited just to millionaires, but also to up-and-coming entrepreneurs with six-figure incomes. Fleeing businessman Jean-Emile Rosenblum summed it up as only the French can: "France is no longer a sexy place to be.… With all the costs, the taxes, and the social pressure, France looks more like an old maid to me."

We can add French voluptuousness to the list of things progressive economists have ruined. Expect the usual consequences: fewer millionaires, less investment, less revenue, and slower growth.

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New York Times: Arms Shipments ‘Secretly’ Approved by Obama Admin. Ended Up in Hands of Islamic Militants 
by Jason Howerton
December 5, 2012

The Obama administration “secretly” approved arms shipments to Libyan rebels from Qatar last year, however, U.S. officials quickly became concerned as evidence suggested Qatar was handing the weapons over to Islamic militants, The New York Times reports, citing a number of United States officials and foreign diplomats.

There is no evidence available that suggests the U.S.-approved weapons were involved in the deadly terrorist attack on the U.S. compound in Benghazi, which left four Americans dead on Sept. 11. But the revelation is sure to ignite speculation.

More from The New York Times:
But in the months before, the Obama administration clearly was worried about the consequences of its hidden hand in helping arm Libyan militants, concerns that have not previously been reported. The weapons and money from Qatar strengthened militant groups in Libya, allowing them to become a destabilizing force since the fall of the Qaddafi government. 
The experience in Libya has taken on new urgency as the administration considers whether to play a direct role in arming rebels in Syria, where weapons are flowing in from other countries. 
The Obama administration did not initially raise objections when Qatar began shipping arms to opposition groups in Syria, even if it did not offer encouragement, according to current and former administration officials. But they said the United States has growing concerns that, just as in Libya, the Qataris are equipping some of the wrong militants. 
The United States, which had only small numbers of C.I.A. officers on the ground in Libya during the tumult of the rebellion, provided little oversight of the arms shipments. Within weeks of endorsing Qatar’s plan to send weapons there in spring 2011, the White House began receiving reports that they were going to Islamic militant groups. They were “more antidemocratic, more hard-line, closer to an extreme version of Islam” than the main rebel alliance in Libya, said a former Defense Department official.

“To do this right, you have to have on-the-ground intelligence and you have to have experience…If you rely on a country that doesn’t have those things, you are really flying blind. When you have an intermediary, you are going to lose control,” said Vali Nasr, a former State Department adviser who is now dean of Paul H. Nitze School of Advanced International Studies.

The startling revelations raise even more concerns regarding the Obama administration’s foreign policy in the Middle East.

The secret transactions began in the early months of the Libyan rebellion that ended in Qaddafi’s death. Various officials sought to assist the rebel forces trying to oust the Libyan dictator.

It was a short time later that Mahmoud Jibril, then prime minister of the Libyan transitional government, voiced his concerns to administration officials that the U.S. government was allowing Qatar to arm Islamist militant groups that were against the new Libyan leadership, anonymous U.S. officials said.

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Huh, that’s odd: Harry Reid declines to bring a vote on Obama’s cliff plan
by Erika Johnsen
December 5, 2012

On the Senate floor on Wednesday, Senate Minority Leader Mitch McConnell offered to give Democrats a chance to go on the record and demonstrate just how serious they are about averting the fiscal cliff by proposing a vote on the package that President Obama proposed last week. Take it away, McConnell:

If the President’s proposal was made in good faith, Democrats should be eager to vote for it. So I’m surprised the Majority Leader just declined the chance for them to support it with their votes. I guess we’re left to conclude that it couldn’t even pass by a bare majority of votes, and that they’d rather take the country off the cliff than actually work out a good-faith agreement that reflects tough choices on both sides. … I think folks should know who actually wants to raise taxes on family farmers and manufacturers, and who thinks we can solve our fiscal problems without doing anything serious to our real long term liabilities. Democrats are so focused on the politics of this debate they seem to forget there’s a cost. They’re feeling so good about the election, they’ve forgotten they’ve got a duty to govern. A lot of people are going to suffer a lot if we go off this cliff. That’s why we assumed Democrats wanted to avoid it. We thought it was the perfect opportunity to do something together. Apparently we were wrong.
And Senate Majority Leader Harry Reid’s response to this reasonable request? How dare these Republicans ask us to vote on a bill carefully designed and touted by our party leader — it’s a stunt, I say! A stunt!
“I reserve the right to object. I just a minute ago moved to the Russia trade bill,” said Reid. “The purpose of moving to this bill is to protect American jobs. If we don’t do this legislation, we’ll lose American jobs for sure and put American companies in even worse shape than they are with Chinese and European companies. So the question is really this: are we going to get serious here and legislate or is this more of the obstruction we felt so much during this last Congress? 
“The answer to that is really obvious. The answer is yes. Or are we going to continue the sort of political stunts that the Republican Leader is trying to pull today, now?”
Okay, sure: Let’s go ahead and accept Mr. Reid’s language that this is a Republican “stunt,” but it being a “stunt” isn’t why Mr. Reid objects to it — the real problem is that a vote on President Obama’s plan would expose exactly what’s really going on here. The White House insists that President Obama’s plan — to hike up all kinds of taxes and virtually eliminate the debt ceiling — is a substantive, credible, good-faith proposal, yet plenty of Democrats are conspicuously hanging back from endorsing it. Could it be that the White House really doesn’t care about compromise, avoiding the pain of the fiscal cliff, or reducing the deficit, but is actually just single-mindedly committed to their entirely reckless goal of merely hiking taxes on the wealthiest Americans — a plan that even most Congressional Democrats wouldn’t vote for?

…Oh, hey, check that out — they just admitted as much.

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