Thursday, September 29, 2011 - A Short History of the Income Tax - Opinion: A Short History of the Income Tax


Before the modern era the federal tax system was manifestly unfair by any reasonable standard, grossly biased in favor of the well off. Ironically, attempting to fix that unfairness is what has brought us to the present moment, with a federal tax system that is grotesquely complex, often arbitrary, and corrupted by mutual back-scratching between members of Congress and influential lobbyists.

[After the Supreme Court rejected the 1894 income tax as unconstitutional, President Taft] came up with a brilliant, very lawyerly, alternative: He proposed a constitutional amendment to legalize a personal income tax, while meanwhile imposing a tax on corporate profits. In the early 20th century such a tax was, in effect, a tax on the rich. As the corporate income tax is technically an excise tax, there was no constitutional problem. Taft's solution was implemented and in 1913 the 16th Amendment was declared ratified, just as Taft was leaving office.

The new president, Woodrow Wilson, and the strongly Democratic Congress promptly passed a personal income tax. It kicked in at 1% on incomes above $3,000 (a comfortable upper middle-class income at the time) and reached 7% on incomes over $500,000. But there were many deductions, bringing the effective tax rates down sharply from the marginal ones—a feature of the tax system ever since.

Unfortunately the corporate income tax, originally intended as only a stopgap measure, was left in place unchanged. As a result, for the last 98 years we have had two completely separate and uncoordinated income taxes. It's a bit as if corporations were owned by Martians, otherwise untaxed, instead of by their very earthly—and taxed̵ 2;stockholders.

This has had two deeply pernicious effects. One, it allowed the very rich to avoid taxes by playing the two systems against each other.

The other pernicious consequence of the separate corporate and personal income taxes has been a field day for demagogues and the misguided to claim that the rich are not paying their "fair share."

Just as in the late 19th century, the tax code is now hopelessly arbitrary and unfair. It requires a complete overhaul.



Tuesday, September 27, 2011 - As Federal Crime List Grows, Threshold of Guilt Declines

This is not the first I’ve read on this topic, and the more I learn about this issue the more concerned I get.  Criminal intent (or extreme negligence in some cases) should be a given for those serving jail time, but for Federal law it often is not. - As Federal Crime List Grows, Threshold of Guilt Declines


For centuries, a bedrock principle of criminal law has held that people must know they are doing something wrong before they can be found guilty. The concept is known as mens rea, Latin for a "guilty mind."

This legal protection is now being eroded as the U.S. federal criminal code dramatically swells. In recent decades, Congress has repeatedly crafted laws that weaken or disregard the notion of criminal intent. Today not only are there thousands more criminal laws than before, but it is easier to fall afoul of them.

As a result, what once might have been considered simply a mistake is now sometimes punishable by jail time.

Back in 1790, the first federal criminal law passed by Congress listed fewer than 20 federal crimes. Today there are an estimated 4,500 crimes in federal statutes, plus thousands more embedded in federal regulations, many of which have been added to the penal code since the 1970s.

Under English common law principles, most U.S. criminal statutes traditionally required prosecutors not only to prove that defendants committed a bad act, but also that they also had bad intentions. In a theft, don't merely show that the accused took someone's property, but also show that he or she knew it belonged to someone else.

Requiring the government to prove a willful violation is "a big protection for all of us."  Generally speaking in criminal law willful means "you have the specific intent to violate the law."

Lawmakers on both sides of the aisle worry about the weakening of mens rea.  In a 2009 Judiciary subcommittee hearing on the growth of federal criminal law, Rep. Bobby Scott (D., Va.)., said that mens rea had long served "an important role in protecting those who do not intend to commit wrongful or criminal acts from prosecution and conviction."

But when legislators "criminalize everything under the sun," Ms. Coughlin says, it's unrealistic to expect citizens to be fully informed about the penal code." With reduced intent requirements "suddenly it opens a whole lot of people to being potential violators."

The erosion of mens rea is partly due to the "hit or miss" way American legislation gets written today… Some lawmakers simply omit criminal-intent provisions when they draft legislation. "Lots of members don't think about it, not out of a malevolent motive," he says. "They just don't think about it."





Thursday, September 22, 2011 - How About a Green Tea Party? - Opinion: How About a Green Tea Party?


It is time for a movement that brings environmental quality through economic prosperity. It's time for a Green Tea Party.

The GTP would not be for you if you think increasing Washington bureaucracy budgets will produce a cleaner environment. Most improvements came through cost-saving technologies in the private sector, not regulations.

The GTP's platform would be that only prosperity and incentives can drive environmental improvements. The first plank: Wealthier is healthier. From the U.S. to the former Soviet Union, data show that economic growth is necessary for environmental improvement, not its enemy. Such growth requires a strong private sector, not more federal spending and red tape. The second plank: Incentives matter. The GTP would use a carrot instead of the regulatory stick to improve environmental quality, and let energy markets and prices dictate energy sources. A replacement for fossil fuels will be found only when entrepreneurs can make a profit from cheaper, cleaner and more efficient energy.

Here are a few GTP environmental policies that make economic and common sense because they rely on market forces to discover what works:



Wednesday, September 21, 2011 - Do-Nothing Democrats? - Opinion: Do-Nothing Democrats?


President Obama's latest "pivot to jobs" has turned out to be more of a sharp left turn. First he announced a new $447 billion stimulus of new spending and temporary tax cuts. Then on Monday he proposed to offset it with $1.5 trillion over 10 years in permanent tax hikes. Mr. Obama knows that little of what he's proposing will pass the Republican-controlled House, so the conventional wisdom has it that the President is trying to emulate Harry Truman by setting up a "do-nothing Congress" as a re-election foil.

But the bigger news may be how much resistance Mr. Obama's ideas are drawing from the Democrats who control the Senate.

Mr. Obama will find it harder to run against a do-nothing Congress when his own party is rejecting his ideas.


Thursday, September 15, 2011 - Should Faking a Name on Facebook Be a Felony?

Scary. - Opinion: Should Faking a Name on Facebook Be a Felony?


Imagine that President Obama could order the arrest of anyone who broke a promise on the Internet. So you could be jailed for lying about your age or weight on an Internet dating site. Or you could be sent to federal prison if your boss told you to work but you used the company's computer to check sports scores online. Imagine that Eric Holder's Justice Department urged Congress to raise penalties for violations, making them felonies allowing three years in jail for each broken promise. Fanciful, right?

Think again. Congress is now poised to grant the Obama administration's wishes in the name of "cybersecurity."

The little-known law at issue is called the Computer Fraud and Abuse Act. It was enacted in 1986 to punish computer hacking. But Congress has broadened the law every few years, and today it extends far beyond hacking. The law now criminalizes computer use that "exceeds authorized access" to any computer. Today that violation is a misdemeanor, but the Senate Judiciary Committee is set to meet this morning to vote on making it a felony.

The problem is that a lot of routine computer use can exceed "authorized access."

Breaching an agreement or ignoring your boss might be bad. But should it be a federal crime just because it involves a computer? If interpreted this way, the law gives computer owners the power to criminalize any computer use they don't like.

If that sounds far-fetched, consider a few recent cases….




Tuesday, September 13, 2011 - What Job 'Training' Teaches? Bad Work Habits

One of the problems with government programs is the focus on intent instead of results.  While most everyone likes the idea of job training programs, history has shown the Federal government can’t deliver the desired results. - Opinion: What Job 'Training' Teaches? Bad Work Habits< o:p>


Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.

…For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA "actually reduced the earnings of male out-of-school youths." Young males enrolled in JTPA prog rams had 10% lower earnings than a control group that never participated.

In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled "investing in low-income youth and adults." Yet such programs have been blighting work ethics for decades.

The GAO warned in 1969 that many teens in federal summer jobs programs "regressed in their conception of what should reasonably be required in return for wages paid." A decade later, it reported that most urban teens "were exposed to a worksite where good work habits were not learned or reinforced." And in 1985, a National Academy of Science study found that government jobs and training pro grams isolated disadvantaged youth, thus making it harder for them to fit into the real job market.

Earlier this year, the Government Accountability Office reported that there were 47 different federal employment and training programs, costing taxpayers $18 billion a year. There is massive overlap and duplication, and few programs seriously evaluate their impact on trainees.

If federal job training efforts worked, Congress would not have thrown out the programs it has created every decade or so and enacted new ones. In reality, government training has always been driven by bureaucratic convenience, or politicians' re-election considerations. There is no reason to believe the latest round of proposals will be any dif ferent.




Thursday, September 8, 2011 - Why the Stimulus Failed

Even though Pres. Obama won’t mention “stimulus” tonight, remember that all government spending has an opportunity cost, i.e. the money spend by government won’t be invested by the private sector (which is much better at picking more productive investments). - Opinion: Why the Stimulus Failed


The Keynesian theory was that a burst of new government spending would take up some of the slack in aggregate consumer demand. This was justified… based not on real-world observation but on abstract macroeconomic models that depend on the assumptions of the authors. The Congressional Budget Office's quarterly studies—often cited to claim the stimulus created tens of thousands of new jobs—are based on such a model. By informative contrast, Messrs. Jones and Rothschild interviewed actual people who received stimulus dollars and asked how they spent the money.

"As is often the case when economic models are transferred from the blackboard to actual public policy, there was a gap between theory and practice."

A dollar that eventually will be taken out of the private economy through borrowing or higher taxes to fund pointlessly expensive projects is not the way to nurture a recovery.

The lesson of such on-the-ground knowledge is that the stimulus was a lost opportunity. In practice it became a shotgun marriage between an economic theory justified by computer models and 40 years of liberal social priorities (clean energy, Medicaid expansions and the rest).

The economy would have benefitted far more if the government had instead improved the incentives for people and businesses to invest, produce and grow.




Tuesday, September 6, 2011 - Can the World Still Feed Itself? - Opinion: Can the World Still Feed Itself?


The energy stored in a bushel of corn can fuel a car or feed a person. And increasingly, thanks t o ethanol mandates and subsidies in the U.S. and biofuel incentives in Europe, crops formerly grown for food or livestock feed are being grown for fuel. The U.S. Department of Agriculture's most recent estimate predicts that this year, for the first time, American farmers will harvest more corn for ethanol than for feed. In Europe some 50% of the rapeseed crop is going into biofuel production while "world-wide about 18% of sugar is being used for biofuel today."

Today, with nearly seven billion mouths to feed, we produce so much food that we think nothing of burning tons of it for fuel.  Or at least we think nothing of it in the West. If the price of our breakfast cereal goes up because we're diverting agricultural production to ethanol or biodiesel, it's an annoyance. But if the price of corn or flour doubles or triples in the Third World, where people "are spending 80% of [their] disposable income on food," hundreds of millions of people go hungry.

Add to that, especially in Europe, a paralyzing fear of genetically modified crops, or GMOs. This refusal to use "available technology" in agriculture has halted the multi-decade rise in agricultural productivity that has allowed us, so far, to feed more mouths than many people believed was possible.

"If politicians of this world really want to tackle food security, there's only one decision they have to make: No food for fuel. . . . They just have to say 'No food for fuel,' and supply and demand would balance again."

The world's population is projected to hit nine billion by mid-century, up from 6.7 billion today. So, can we feed all those people? Mr. Brabeck-Letmathe doesn't hesitate. "We can feed nine billion people," he says, with a wave of the hand. And we can provide them with water and fuel. But only if we let the market do its thing.





Thursday, September 1, 2011 - T-Immobile - Opinion: T-Immobile


'Within the next five years, we'll make it possible for businesses to deploy the next generation of high-speed wirele ss coverage to 98% of all Americans." So President Obama said in his January State of the Union address. His Justice Department seems to have other ideas.

We're talking about the lawsuit that Attorney General Eric Holder's Antitrust Division filed yesterday to block AT&T's proposed $39 billion takeover of T-Mobile USA. Justice claims the deal, which would combine the country's second- and fourth-largest cellphone companies, would reduce competition, raise prices and retard innovation. In the government's view, the U.S. needs at least four major wireless carriers to have a competitive market, and it has its ancient, theoretical, antitrust market-share models like the Herfindahl-Hirschman Index to prove it.

W hat it doesn't have is evidence that this has, or will, hurt consumers.

It isn't clear that leaving an independent T-Mobile USA will guarantee a more competitive market in any case. The company has been bleeding market share, and its German parent company, Deutsche Telekom, has wanted out of the U.S. so it can invest in Europe. If Justice rejects this deal, T-Mobile USA will probably be sold to another player, which may not be able to use T-Mobile's assets as efficiently as AT&T can.

Justice also wants influence over who can buy which telecom assets, and how big telecom companies can be. This ignores the benefits of economies of scale in an industry that requires huge investments to compete. AT&T said it wou ld spend $8 billion to refurbish its network and invest in next-generation technology. That improves consumer choice and quality, while creating jobs.