|Maybe The White Working Class Will Not Hit Bottom||After Paris I Understand Winston Churchill's Relief|
by Christopher Chantrill
November 17, 2015 at 12:00 am
TED CRUZ HAS unveiled his Simple Flat Tax plan, that includes a single low, low personal income tax with a single rate of 10%. He also wants to eliminate the federal corporate income tax and the employee payroll tax, and replace them with a 16% Business Flat Tax. But according to Larry Kudlow and the Tax Foundation, he is really talking about a value added tax, a VAT. Here is what the Tax Foundation says about the Cruz plan.
It’s actually pretty simple: there’s profits that go to shareholders, and there’s wages, salaries, and other compensation to workers. Both get taxed at the same rate: in this case, sixteen percent.
In that sense, a subtraction-method value-added tax is actually just a simple combination of a sort of corporate income tax and an ordinary payroll tax. (Fittingly, Senator Cruz’s plan uses this VAT to eliminate the corporate income tax and the payroll tax.)
In a way, you could say that nothing changes. Corporations still get taxed on their profits and workers will still get taxed on their labor; that’s because under Cruz’s plan a business gets taxed on its gross revenue less costs like stuff bought from other businesses and equipment to expand the business. And under his plan labor costs wouldn’t be deductible.
But there are three big differences between today’s world and Cruz world, and they might transform the labor market.
First, if a business is taxed on its labor costs then the advantage for hiring labor “off-the-books” goes away. Think of the possibilities with respect to illegal immigrants.
Second, there is health insurance and other “benefits.” As I see it, in Cruz world these would be taxed like any other labor expense. Same thing for corporate pensions. All of a sudden it would pay businesses to offload all the benefits and just pay their employees in cash.
Third, the removal of the payroll tax will reduce the marginal tax rate on nearly all workers and particularly low-wage workers struggling to get off welfare. Right now, the marginal tax on welfare recipients that work is about 50 percent, because every dollar they earn is taxed with payroll taxes and also results in reduction in their welfare benefits.
On top of that, I worry about the end of the link between the payroll tax and Social Security; it might make it more difficult to reform Social Security into a real savings program. Democrats will start agitating for more taxes of business to pay for higher Social Security benefits. I don’t like that at all.
These are pretty dramatic changes in the world of work for wages, but Cruz isn’t talking up the drama. He is just saying that there is nothing to see here but his Simple Flat Tax plan. Not exactly, Ted. Not when you are talking about the most significant change in taxes on work in my lifetime.
This sort of politics flying under the radar bothers me, although I understand why it is necessary. In today’s high-tax high-benefit state almost any policy change is going to have big winners and losers, so you want to put the losers to sleep, as in “you can keep your doctor.”
I would like a world in which we walk into the future with our eyes open. That would mean the ability for culture leaders to talk to the American people before the politicians got to issue their tax plans. We know why this is impossible: liberals. Jonah Goldberg:
Hollywood is liberal. The music industry is liberal. The fashion industry is liberal. Publishing is liberal. The mainstream media are liberal. Silicon Valley is liberal. Believe it or not, most corporations and the overwhelming majority of charitable foundations are liberal.
Since the first thing that liberal babies learn in their cradles is how to trash conservative ideas as racist, sexist wars on women, conservative ideas don’t get much of an airing in America. And that means that politician Ted Cruz has to fly his ideas under the radar.
Larry Kudlow doesn’t like the Cruz’s VAT tax, whether it is flying under the radar or not. When taxes are paid by businesses, he warns, “the true costs for workers and consumers are hidden” and thus are easy for politicians to raise.
But if you ask me, the main problem with the Cruz Business Flat Tax is that it will dramatically change the rules for business. Austrian economics tells us what happens next: a period of adjustment for the liquidation of the malinvestments revealed by the new tax regime. After all, some businesses will benefit enormously from the change. Others will go to the wall.
That’s why I predict that the first result of the Cruz tax reforms will be a short, sharp recession. Only then will the boom resulting from lower marginal taxes rates begin.
Buy his Road to the Middle Class.
[The Axial Age] highlights the conception of a responsible self... [that] promise[s] man for the first time that he can understand the fundamental structure of reality and through salvation participate actively in it.
Robert N Bellah, "Religious Evolution", American Sociological Review, Vol. 29, No. 3.
[To make] of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier. — Gen. Hans von Seeckt
MacGregor Knox, Williamson Murray, ed., The dynamics of military revolution, 1300-2050
Civil Societya complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churchesbuilds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust
[W]hen I asked a liberal longtime editor I know with a mainstream [publishing] house for a candid, shorthand version of the assumptions she and her colleagues make about conservatives, she didn't hesitate. Racist, sexist, homophobic, anti-choice fascists, she offered, smiling but meaning it.
Harry Stein, I Can't Believe I'm Sitting Next to a Republican
[T]he Liberal, and still more the subspecies Radical... more than any other in these latter days seems under the impression that so long as he has a good end in view he is warranted in exercising over men all the coercion he is able[.]
Herbert Spencer, The Man Versus the State
These emerge out of long-standing moral notions of freedom, benevolence, and the affirmation of ordinary life... I have been sketching a schematic map... [of] the moral sources [of these notions]... the original theistic grounding for these standards... a naturalism of disengaged reason, which in our day takes scientistic forms, and a third family of views which finds its sources in Romantic expressivism, or in one of the modernist successor visions.
Charles Taylor, Sources of the Self
Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism
For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008
As far as the Catholic Church is concerned, the principal focus of her interventions in the public arena is the protection and promotion of the dignity of the person, and she is thereby consciously drawing particular attention to principles which are not negotiable...
[1.] protection of life in all its stages, from the first moment of conception until natural death; [2.] recognition and promotion of the natural structure of the family... [3.] the protection of the right of parents to educate their children.
Pope Benedict XVI, Speech to European Peoples Party, 2006
No lesson seems to be so deeply inculcated by the experience of life as that you should never trust experts. If you believe doctors, nothing is wholesome: if you believe the theologians, nothing is innocent: if you believe the soldiers, nothing is safe. They all require their strong wine diluted by a very large admixture of insipid common sense.
Lord Salisbury, Letter to Lord Lytton
What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph
In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, The Scientist as Rebel