Shocking, but not surprising: “The House Ways and Means Committee [yesterday] released emails from Lois Lerner, former head of the Internal Revenue Service’s tax-exempt organizations division, in which she uses a vulgar anatomical expletive to refer to conservatives and says ‘it’s our own crazies that will take us down,'” Heritage reports. You can read the emails in question, dated 2012, via the Ways and Means committee. Lerner criticized, among others, people claiming “we’ve bankrupted ourselves” and “we’ll never be able to pay off our debt and are going down the tubes.” Memo to Lerner: It is out-of-control government bureaucrats and the politicians who enable them who threaten to take us down.
Again following in the footsteps of FDR, Barack Obama is threatening to take political action against U.S. companies that justifiably seek to legally reduce their onerous U.S. tax burdens. Reuters reports, “Obama could bypass congressional gridlock and restrict foreign tax-domiciled U.S companies from using inter-company loans and interest deductions to cut their U.S. tax bills.” At issue are so-called “inversions.” What are those, you ask? Investopedia states, “Re-incorporating a company overseas in order to reduce the tax burden on income earned abroad. Corporate inversion as a strategy is used by companies that receive a significant portion of their income from foreign sources, since that income is taxed both abroad and in the country of incorporation. Companies undertaking this strategy are likely to select a country that has lower tax rates and less stringent corporate governance requirements.” Alternately, the U.S. government could stop chasing companies oversees with insanely burdensome corporate taxation.
The following article by Linn and Ari Armstrong originally was published April 27 by Grand Junction Free Press.
Last week self-proclaimed “progressives” rallied at the state capitol for higher taxes. But there’s nothing progressive about forcibly confiscating other people’s wealth. Real progress comes from respecting people’s rights and banning coercion—the initiation of force—from social relationships.
The tax-hikers build their case on obfuscation. Consider an email distributed on Tax Day by the absurdly named ProgressNow Colorado, more accurately identified as CoercionNow. This group led a “proud to pay” taxes campaign, claiming that taxes produce “smart, educated kids,” fix “potholes and shaky bridges,” leave the state better than we found it, and affirm that “we’re all in this together.”
Somehow CoercionNow failed to mention that its members are “proud to pay” taxes to finance corporate welfare, bail out banks and auto unions, finance “nation building” exercises around the world at fantastic cost to U.S. life and productivity, incarcerate fellow citizens for actions that violate nobody’s rights, persecute ebook publishers, enforce wage controls that devastate employment opportunities for the poor, stop grocery stores from selling regular-strength beer (and enforce thousands of similarly absurd “regulations”), and create widespread dependency.
But let us focus on the more positive tax expenditures that CoercionNow cherry picks. The idea that government-run schools produce especially “smart, educated kids” is laughable, especially in relation to the enormous cost. What we’re really producing are rich, politically powerful “public” unions that back the “progressive” agenda.
True, some teachers in government schools are excellent, and some classes help students learn what they need. But U.S. schools regularly lag behind those of other nations, and often they utterly fail the poorest students. If we want to see education thrive and effectively serve the needs of students, we must introduce free markets in education. Then parents, who normally will finance their own children’s education (rather than pay a lifetime of taxes to educate other people’s children), will have both the ability and incentive to ensure their children end up in great schools. And individuals can contribute to voluntary charity programs to expand the opportunities available to the poor.
As for roads, the gasoline tax is supposed to link use of the roads with their financing. Insofar as the government operates various services (and the matter of whether it should operate roads lies outside the scope of today’s column), it should finance them through use taxes. Those are far different from the redistributionist schemes of the “progressives.” CoercionNow’s reference to roads is merely a bait-and-switch: the group advertises the paving of roads for the purpose of expanding the welfare state.
Beyond education and roads, CoercionNow turns to bromides and vague generalities. “I want to leave Colorado better than I found it.” Who doesn’t? The best way to do that is to expand liberty. “We’re all in this together.” Does the “this” refer to a free republic or to the Greek-style socialist hellhole the “progressives” wish to create?
Notice CoercionNow’s biggest lie: they claim to be “proud” to pay their own taxes, but what they’re really after is to force others to pay more taxes. After all, nothing is stopping members of CoercionNow from paying as much of their own money as they want to the government. Nor is anything stopping them from financing any private charity.
Let us return to fundamentals. The source of all significant human progress has been the growing recognition of the rights of the individual, however sporadic that has been. Unfortunately, no government anywhere on earth has ever fully protected individual rights—though the United States, grounded on the individual’s “unalienable rights” of “life, liberty, and the pursuit of happiness,” has come the closest. It is time for us to complete the task our Founders started.
The protection of individual rights and the banishment of coercion are flip sides of the same coin. In order to protect individual rights, we must keep the individual safe from the initiatory force of others. In a proper society, no one may murder another, rob from another, claim the property of another through fraud or broken contract, bind or restrict anyone except to lawfully protect others’ rights, or damage another’s property.
When government protects individual rights, prosperous civil society can thrive. Individuals can live their own lives by their own judgment. They can remain alone when they want and join others when they want. They can work and produce as they deem best, using their own resources and those others grant them through voluntary contract. They can keep the fruits of their labor to spend, save, invest, or give away as they deem best. The only legal restriction is that no individual may initiate force against another.
We’ll know we’ve made real progress when no one dares express “pride” in calling for the initiation of force against others. True champions of progress, prosperity, and peaceful human relations proudly advocate the abolition of coercion and the consistent protection of individual rights.
I was furious when Colorado’s idiot legislators imposed the so-called “Amazon tax” in 2010, forcing the company to drop the Associates program for all Colorado residents. The basic problem is that the Associates program, which incentivizes people to link to Amazon products by paying out a percentage of the resulting sales, arguably created a “nexus” that expanded the state’s power to impose tax-collection obligations on out-of-state companies.
Now that a district court has tossed Colorado’s “Amazon Tax,” what does that mean for the Associates program? I just received the following correspondence from Amazon: “Thank you for contacting us regarding rejoining the Associates program. At this point, we’re evaluating the decision from the United States District Court for the District of Colorado. We’d welcome the opportunity to re-open our Associates Program to Colorado residents. We’ll contact you if we are able to re-open the program in the future.”
Hopefully, the Associates program will again become available. Now will the legislature kindly leave us the hell alone to earn money?
The following article by Linn and Ari Armstrong originally was published March 2 by Grand Junction Free Press.
Do “we the people” have a say in how politicians spend our money, or not? That is the basic issue at stake in a legal case currently winding its way through the courts.
Lobato vs. State of Colorado seeks to overturn Constitutional restraints on government spending so that judges can compel legislators to spend tax dollars on government schools to the teachers unions’ satisfaction.
First some context: In 1992, the majority of Colorado voters passed the Taxpayer’s Bill of Rights (TABOR) to restrain government spending and better protect people’s rights to keep and use the fruits of their labor. Last fall, an astounding 64 percent of voters rejected Prop. 103, a tax hike loosely tied to education funding.
On December 9 of last year, Denver District Judge Sheila Rappaport spit in the faces of Colorado voters by essentially throwing out the fall vote and reinterpreting the state Constitution—throwing out the parts she doesn’t like—to suit her own political agenda.
Colorado’s Constitution (Article IX, Section 2) states: “The general assembly shall . . . provide for the establishment and maintenance of a thorough and uniform system of free public schools throughout the state. . . . One or more public schools shall be maintained in each school district within the state, at least three months in each year. . . .”
Judge Rappaport fixated on the phrase “thorough and uniform” and ruled she gets to unilaterally decide what that means, the rest of the Constitution be damned. Of course she decided that the legislature must spend more tax dollars on education, regardless of what the people earning that money may think about it, and regardless of the fact that Colorado’s government schools already spent $8.7 billion in 2009-10 for over $10,000 per student (as Ben DeGrow reports for the Independence Institute).
Obviously the context of the phrase grants wide latitude to the legislature to decide what constitutes a “thorough and uniform” education. The language explicitly says three months of school each year would be perfectly fine; obviously the legislature provides far more than that.
But of course the Constitution contains not just that one section, but many others as well, including TABOR and other spending restraints. As is obvious to everyone except, apparently, Judge Rappaport, one must interpret each Constitutional provision in the light of the others.
For example, while the U.S. Constitution grants Congress the power to “regulate commerce . . . among the several states,” the First Amendment explicitly prohibits Congress from doing so in a way that abridges “the freedom of speech, or of the press.” Likewise, Colorado’s Constitutional language regarding education must be interpreted in light of the provisions concerning other legislative responsibilities and spending restraints.
Judge Rappaport’s biases showed through clearly in her viciously dishonest attack on John Andrews, the former state senator and now the director of the Centennial Institute. Andrews testified as to the meaning of the Constitutional language; Rappaport’s decision summarizes that Andrews believes “a ‘uniform’ education means that any child in Colorado, regardless of his or her family background or geographic location, receives the same learning opportunities and is within reach of the same educational outcomes as any other child in the state.” Fair enough, so far.
But then consider Rappaport’s snarky editorializing: “Some of the State’s witnesses hold extreme views on education. . . . Senator Andrews’ vision for the future is a separation of schools and state similar to the separation of church and state in our nation. . . . He reveres the educational system we had in this country in the 1700s because there were few government operated schools. He fails to mention that our schools did not educate whole segments of the population, including women and people of color, at that time.”
It is true that Andrews advocates the ultimate separation of school and state. So do we (and the comparison to the separation of church and state is apt). But that has no bearing on the meaning of the Constitutional phrase in question. Obviously Andrews recognizes that the Constitution imposes particular requirements that the legislature and the courts must meet. Obviously he wants every child to enjoy a superb education. For Rappaport to essentially call Andrews a sexist and a racist, despite his explicit comments to the contrary, is quite contemptible—and it illustrates the tenor of her politicized ruling.
Thankfully, on January 23, Colorado Attorney General John Suthers announced his office’s intent to appeal the ruling. He correctly said “the constitution, including TABOR, really is under attack in this case” (as DeGrow reports). He further said, “We are going to suggest… the question of what’s thorough and uniform has to be looked at in the context of subsequent constitutional amendments.”
Let us hope that the next judge to hear the case puts Colorado’s voters and Constitution ahead of the judge’s personal political agenda.
Linn Armstrong is a local political activist and firearms instructor with the Grand Valley Training Club. His son, Ari, edits FreeColorado.com from the Denver area.
See also Spending Limits Protect Against Factions, regarding Kerr vs. State of Colorado.
Today the Denver Post lambasted Douglas Bruce, citing his “reckless and brazen” evasion of state taxes. Recently Bruce was convicted on multiple charges.
I have no doubt that Bruce a) organized his finances in ridiculously convoluted ways (as he seems to be able to do nothing simply), b) agitated virtually every politician, bureaucrat, and leftist ideologue in the state, and c) gravely erred by representing himself in court. Whether he’s actually technically guilty of violating the state’s tax laws, I could not say definitively without studying his case more carefully. What is obvious is that, on the moral level, what’s he’s actually “guilty” of is daring to spend his own money in politically unapproved ways.
But there’s a deeper point here that practically everybody else seems to be ignoring: the large majority of Colorado residents are likely in violation of the state’s use-tax laws. I wrote about this matter earlier in the year. My guess is that millions of Coloradans are tax scofflaws. So, in the broader sense, obviously Bruce’s prosecution is selective; the state simply ignores millions (or at least hundreds of thousands) of cases of (generally unwitting) tax evasion every year.
Here’s the comment I sent over to a couple members of the Post‘s editorial board: “Fair enough regarding Doug Bruce, though the prosecution still smells of political retribution. However, my guess is that well over 80 percent of those currently piling on Doug Bruce are in violation of the state’s use-tax requirements. I’d actually be curious to learn what fraction of the Denver Post editorial board is in compliance with the use-tax laws. I personally think it’s a problem that probably the overwhelming majority of Colorado residents are in violation of the tax law, but apparently this is not the sort of story the Post regards as interesting.”
Update: Curtis Hubbard, the editorial page editor of the Denver Post, informs me that he did in fact address the use tax less than two weeks ago! Somehow I missed that article. He correctly points out that most people don’t pay it and that the state doesn’t enforce it. However, his solution to the problem is to force out-of-state online retailers to collect the tax and remit it to the state. I have a rather different idea for how to equalize the treatment between in-state and out-of-state businesses:repeal the sales tax for in-state businesses (even if done in a revenue-neutral way by increasing other tax rates).
Some have questioned whether a national sales tax is Constitutionally permissible (without an amendment). The answer is yes.
Milton Wolf is among those who question this: “Mr. [Herman] Cain’s 9 percent national sales tax [and by extension any other national sales tax] simply isn’t constitutional. Among the enumerated powers in our Constitution, there is no federal jurisdiction over the purchases you make at your local stores, aside from those involving interstate transactions.”
But it turns out I looked this up in the course of researching my article forThe Objective Standard, “‘Fair Tax’ Looks Ugly in the Details.” (See also my more detailed follow-up article on the same topic.)
While I am no expert on the Constitution, thankfully we in Colorado have just such an expert now working in the state: Rob Natelson. (Recently Natelson delivered a seminar on the Constitution with Dave Kopel.)
In his book The Original Constitution (Second Edition), Natelson discusses the types of taxation permitted under the Constitution (see pages 158-161). He mentions the two relevant sections of the Constitution (as originally written):
Article I, Section 2, Clause 3
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons [etc.; this section was modified by the Fourteenth Amendment].
Article I, Section 9, Clause 4
No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken. [This section was modified by the Sixteenth Amendment.]
Of course, the other obviously relevant section is Article I, Section 8: “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises…”
The question is whether a national sales tax constitutes a “direct” or an “indirect” tax. Based on Natelson’s remarks, I counted it as an “indirect” one:
Direct taxes included capitations and levies on real property, business assets, and other capital items, on the ownership of basic household necessities, and on wages, rents, and other income. Probably taxes on wealth (such as inheritance and estate taxes) were direct. Indirect taxes were exactions on imports and on consumable goods and services. This line of division was not flawless, for an import duty probably was indirect even if imposed on an item destined to serve as a capital good. (p. 161)
I wasn’t entirely sure of my interpretation, so I asked Natelson whether a “sales tax [is] an ‘indirect’ tax and therefore constitutionally allowed.”
He replied, “Yes. A national sales tax is clearly constitutional, so long as uniform throughout the country.”
He was quick to point out that his evaluation of the Constitutional matter did not reflect his opinion of a national sales tax.
I will state flatly: even though a national sales tax is Constitutionally allowed, it is still a really, truly, horrendously stupid idea, at least if enacted without repealing the Sixteenth Amendment (which permits the income tax). The worst situation we could possibly end up with (in terms of taxation) would be a national sales tax added to a national income tax. One or the other is bad enough, but both would cripple the economy and severely infringe our liberty.
The Objective Standard has posted a three-part debate on the “Fair Tax,” a national sales tax intended to replace the income tax.
In my opening salvo, “‘Fair Tax’ Looks Ugly In the Details,” I point out that the “Fair Tax” is still relatively complex, and it would require many Americans to submit the tax. I also discuss the tax’s “prebate” and its potential for corruption. I conclude, “Yes, advocates of liberty should look at strategies to make tax collection less burdensome. But fundamental tax reform, which must include serious cuts in net taxes collected, becomes possible only with significant cuts to federal spending.”
John Keel wrote a lengthy reply, “Concerning ‘Fair Tax Looks Ugly in the Details.'” He argues that the tax is simple, it would impose low compliance costs, and it would reduce rather than expand the black market.
In my reply to Keel, “‘Fair Tax’ Offers Neither Fairness Nor Simplicity,” I expand my criticisms of the tax. I point out that, yes, the tax would require extensive paperwork for compliance. The so-called “prebate” not only adds another layer of bureaucracy, but it poses the risk of expanding into another welfare program. The “Fair Tax” would become easily corrupted, and it would in fact promote an extensive black market. The tax could also lead to a dual system of federal taxation, complimenting rather than replacing the income tax, and it could morph into a Value Added Tax.
However, I point out, if a sales tax actually followed the repeal of the Sixteenth Amendment, that would be a lot better. But still the major goal of the liberty activist should be to reduce federal spending and restore individual rights.
A couple days ago “Brian” wrote about Proposition 103, “The legislature is under no obligation to spend the money on education. Prop 103 is a law, and it is only valid until it is superseded by another law.” I heard a similar claim yesterday from Justin Everett and the hosts of Grassroots Radio on 560 am.
While I think it’s possible that the legislature could try to overwrite Prop. 103 and redirect the funds to other ends, I think that’s very unlikely.
A couple weeks ago I reviewed Prop. 103 and pointed out its language adding the tax hike to the education budget of 2011-12. So, as written, Prop. 103 definitely increases the budget for education. (The budget might have increased anyway, but probably not nearly as much.)
If the legislature tried to spend the Prop. 103 money on other ends, that would undoubtedly draw a legal challenge, though I doubt Colorado’s absurdly biased courts would welcome it. But the political heat for failing to budget in accordance with Prop. 103 would be overwhelming.
I can’t recall who suggested a more plausible alternative: the money could go to shore up the pensions of those working in government “education” (broadly defined). Prop. 103 says nothing about spending the money on actually teaching children.
It’s not like critics of Prop. 103 need to reach for strained arguments about the legislature “spending the money however it wants”; as it is written the measure is terrible.
As my dad and I wrote recently, “Prop. 103. Would Hurt Working Families, Kill Jobs.”
A new paper from the Independence Institute amplifies these concerns:
The higher tax will reduce job opportunities in Colorado. The total loss in jobs from the Prop 103 tax increase is estimated between 7,400 and 11,600. The higher tax will also reduce the tax base, partially offsetting the revenue generated by the tax. Prop. 103 will exacerbate a $1 billion structural deficit in the state budget.
This is an important argument. By further weakening the Colorado economy, Prop. 103 would reduce the amount of taxes flowing into the rest of the budget. So, while education spending would skyrocket, spending elsewhere would fall relative to where it otherwise would have been.
That Prop. 103 would harm the economy is the first major reason to oppose it; the second is that the tax hike would probably have little to no effect on the actual quality of education. (My dad and I review this point as well.) Yes, the money would go to enrich administrators and the teachers’ unions, but would it actually improve kids’ education? We seriously doubt it.
Further enriching the teachers’ unions and entrenching their power is hardly the way to improve education. Instead, we need to move toward free markets to give educators and families the freedom they need to best educate the children in their care.
I always appreciate your insight, and read most of your posts. Somehow missed this one.
Sorry about the “after-the-fact” response, but just Googled my name and…To reinforce my statement on the radio, Sen. Rollie Heath admitted in a few debates, there is no guarantee of how the money would be spent. Terry Scanlon of the Colorado Fiscal Policy Institute admitted the same at a debate, and added “If the legislature can get around Amendment 23, a Constitutional Amendment, then they could probably get around this.” Reps. Swalm and Balmer also reinforced this notion at a debate as well after I made this statement. Anything statutory can be changed by both chambers of the legislature with a 50%+1 vote and signed by the governor. With that said, I was relieved and excited when voters killed this tax increase by almost a 2-1 margin.
December 16, 2011
The Objective Standard published my latest article, “‘Fair Tax’ Looks Ugly in the Details.”
I point out that, not only would the “Fair Tax” (a type of national sales tax) increase the cost of items by (at least) 30 percent, but it would also tax consumable services. While usually sellers must remit the tax, sometimes consumers must do so. The worst possible outcome is a sales tax added to the income tax.
To a large degree, the debate over the sales tax versus the income tax misses the more fundamental issue of spending levels. How the federal government collects our money matters, but how much the government forcibly confiscates matters far more. So long as the federal government spends massive amounts of the citizens’ wealth on “bailouts,” corporate welfare, and handouts to individuals, any resulting tax necessarily grows onerous.