Art Laffer has a guaranteed spot in the liberty hall of fame because he popularized the common-sense notion that you can’t make any assumptions about tax rates and tax revenue without also figuring out what happens to taxable income.

Lot’s of people on the left try to denigrate the “Laffer Curve,” but it’s worth noting that even left-wing economists now admit that you don’t maximize revenue with a 100 percent tax rate.*

Indeed, I think the only people who now cling to that absurd view are the bureaucrats at the Joint Committee on Taxation.

But this post isn’t about the Laffer Curve. It’s about a disappointing column that Art Laffer wrote last week in the Wall Street Journal.

The issue is whether states should have the power to impose taxes on sales that take place outside their borders. Art starts the column with a very good point about the link between growth and living standards.

After enjoying an average growth rate above 3.5% per year between 1960 and 1999, Americans have had to make do with less than one-half that pace since 2000. The consequences are already dramatic and will become even more so over time. Overall we are 20% poorer today than we would be had the pre-2000 growth rate persisted.

That’s a great point. I’ve also tried to get people to focus on the importance of long-run growth.

Heck, just look at what’s happened in Hong Kong and Singapore and you’ll agree.

In his column, Art also correctly defines good tax policy.

The principle of levying the lowest possible tax rate on the broadest possible tax base is the way to improve the incentives to work, save and produce—which are necessary to reinvigorate the American economy and cope with the nation’s fiscal problems.

But he then asserts that an Internet sales tax cartel somehow will result in better policy.

…there are reforms that can alleviate the problems associated with declining sales-tax bases and, at the same time, allow the states to move closer to a pro-growth tax system. One such reform would be to have Internet sellers collect the sales taxes that are owed by in-state consumers when they purchase goods over the Web. So-called e‑fairness legislation addresses the inequitable treatment of retailers based on whether they are located in-state (either a traditional brick-and-mortar store or an Internet retailer with a physical presence in the state) or out of state (again as a brick-and-mortar establishment or on the Internet). …The exemption of Internet and out-of-state retailers from collecting state sales taxes reduced state revenues by $23.3 billion in 2012 alone, according to an estimate by the National Conference of State Legislatures. The absence of these revenues has not served to put a lid on state-government spending. Instead, it has led to higher marginal rates in the 43 states that levy income taxes.

This is a very disappointing collection of sentences. Let’s review.

1. States have declining sales-tax bases because state lawmakers treat that levy the same way that politicians in Washington treat the income tax – they put in loopholes in exchange for campaign cash and political support. For them to complain about declining sales-tax bases is sort of like the old joke about the guy who murders his parents and then asks the court for mercy because he’s an orphan.
2. Art offers zero evidence that state governments would use the additional revenue from a state sales tax cartel to reduce income tax rates. What’s next, a column saying we should have a value-added tax because the politicians may use the revenue to get rid of the income tax? Yeah, good luck with that approach.
3. Why is it “inequitable” for there to be different tax policies in different states? That’s another way of describing federalism, and it’s something we should be celebrating and promoting. Particularly since it promotes tax competition, which is one of the most effective ways of restraining the greed of the political class.
4. The Internet sales tax cartel being promoted by Art and various politicians requires that governments have the ability to tax sales that tax place outside their borders. That’s an assault of sovereignty, particularly since out-of-state merchants will be coerced into being tax collectors for a distant government. This is the same dangerous ideology that is used by high-tax governments to promote global anti-tax competition policies.
5. Art offers zero evidence that the absences of a state sales tax cartel has led to higher income tax rates. Yes, some states have raised tax rates in recent years, but others have lowered tax rates.

For more information on why a sales tax cartel among the states would be a bad idea, here’s my short speech to an audience on Capitol Hill.

*This should be an obvious point, but I can’t resist emphasizing that maximizing revenue should not be the goal of fiscal policy.

The makers of a Canadian take-out coffee cup have a bit of fun at the expense of a certain country immediately to their south: 

If this was another country, we’d have to tell you that this coffee may be hot. Good thing this is Canada!

For more on hot coffee spills and warnings, see Overlawyered’s hot coffee tag. For more on the famous McDonald’s case and its long afterlife as a chestnut of online comments sections, see Ted Frank’s mythbusting post and “Law of McDonald’s” lecture; product liability site Abnormal Use’s FAQ on the case; and Glenn Garvin (quoted) on one propagandistic film.

The American Sugar Alliance, the main lobby group for American sugar growers, released a report last week alleging that the subsidies given to Brazilian sugar growers are depressing the world price of sugar perhaps by 25 to 30 percent. But instead of thanking the Brazilian taxpayers for their gift of cheap sugar, apparently the ASA are suggesting that U.S. trade negotiators “add it to their agenda”, implying that they should challenge the subsidies using the World Trade Organization’s dispute settlement mechanism. From Inside U.S. Trade [$]: 

The American Sugar Alliance (ASA) this week released a report estimating that Brazil subsidizes its sugar industry so grossly that it may be depressing the world price for the commodity by as much as 25 to 30 percent. ASA is hoping the report will give further ammunition to its claim that eliminating the U.S. sugar program would be devastating to U.S. producers, even as sweetener users continue a fight to unravel the program through a variety of avenues. The report, authored by sugar and ethanol industry analyst Patrick Chatenay, estimates that Brazilian sugar producers benefit from as much as $2.5 billion in direct and indirect subsidies annually. Factored into that number are benefits accruing to the industry from the “economies-of-scale” for sugar production, which are driven by the heavily subsidized ethanol sector, the report argues. Jack Roney, ASA’s director of economics and policy analysis, said in a conference call with reporters that the $2.5 billion annual estimate may even be conservative. “This report underscores the importance of maintaining the current U.S. sugar policy, which was designed to fleece consumers and deny them access to cheap sugar shield consumers from foreign market manipulation and ensure an continuous flow of rents to sugar producers affordable, homegrown supply of a food staple,” he said. [Emphasis and snarky commentary added.]

I mean, really. This is getting awfully tiresome. The sugar lobby for years have been complaining that we need the sugar program, which keeps prices high for producers by keeping imports strictly controlled, in order to enable “reliable” (i.e., managed) access to sugar. Now they think sugar is too available (i.e., cheap)? For sure, if I was a Brazilian taxpayer, I would baulk at the thought of subsidising (if that in fact is the situation) the sugar addictions of my richer neighbours to my north, but as a consumer? Muito obrigado! The sugar lobby’s talking points are getting ever more creative. But none of them are valid. 

Over at the Guardian, Glenn Greenwald reacts to Senator Lindsay Graham’s call to keep Tsarnaev out of the criminal justice system and treat him as an “enemy combatant”:

It is bizarre indeed to watch Democrats act as though Graham’s theories are exotic or repellent. This is, after all, the same faction that insists that Obama has the power to target even US citizens for execution without charges, lawyers, or any due process, on the ground that anyone the president accuses of Terrorism forfeits those rights. The only way one can believe this is by embracing the same theory that Lindsey Graham is espousing: namely, that accused Terrorists are enemy combatants, not criminals, and thus entitled to no due process and other guarantees in the Bill of Rights. Once you adopt this “entire-globe-is-a-battlefield” war paradigm — as supporters of Obama’s assassination powers must do and have explicitly done — then it’s impossible to scorn Graham’s views about what should be done with Tsarnaev. Indeed, one is necessarily endorsing the theory in which Graham’s beliefs are grounded.

It’s certainly possible to object to Graham’s arguments on pragmatic grounds, by advocating that Tsarnaev should be eventually Mirandized and tried in a federal court because it will be more beneficial to the government if that is done. But for anyone who supports the general Obama “war on terror” approach or specifically his claimed power to target even US citizens for execution without charges, it’s impossible to object to Graham’s arguments on principled or theoretical grounds. Once you endorse the “whole-globe-is-a-battlefield” theory, then there’s no principled way to exclude US soil. If (as supporters of Obama’s terrorism policies must argue), the “battlefield” is anywhere an accused terrorist is found and they can be detained or killed without charges, then that necessarily includes terrorists on US soil (or, as Graham put it, using one of the creepiest slogans imaginable: “the homeland is the battlefield”).…

[I]t is worth noting that the US government previously did exactly what [Graham] advocated. In 2002, US citizen Jose Padilla was arrested on terrorism charges on US soil (at Chicago’s O’Hare International Airport), and shortly before he was to be tried, the Bush administration declared him to be an “enemy combatant”, transferred him to a military brig, and then imprisoned him (and tortured him) for the next 3 1/2 years without charges, a lawyer, or any contact with the outside world. That was the incident that most propelled me to start political writing, but it barely registered as a political controversy.

So as extremist as Graham’s tweets may have seemed to some, it was already done in the US with little backlash. That demonstrates how easily and insidiously extremist rights assaults become normalized if they are not vehemently resisted in the first instance, regardless of one’s views of the individual target.

Let’s recall that the police did not bypass the Bill of Rights with Oklahoma City bomber, Timothy McVeigh. Before his execution, McVeigh got a lawyer, trial, and an appeal. That’s our law–and there’s no fiddling with it. And experience tells us there are very good reasons for placing limits on police questioning. For related Cato work, go here and here.

As part of my “Question of the Week” series, I said that Australia probably would be the best option if the United States suffered some sort of Greek-style fiscal meltdown that led to a societal collapse.*

One reason I’m so bullish on Australia is that the nation has a privatized Social Security system called “Superannuation,” with workers setting aside 9 percent of their income in personal retirement accounts (rising to 12 percent by 2020).

Established almost 30 years ago, and made virtually universal about 20 years ago, this system is far superior to the actuarially bankrupt Social Security system in the United States.

Probably the most sobering comparison is to look at a chart of how much private wealth has been created in Superannuation accounts and then look at a chart of the debt that we face for Social Security.

To be blunt, the Aussies are kicking our butts. Their system gets stronger every day and our system generates more red ink every day.

And their system is earning praise from unexpected places. The Center for Retirement Research at Boston College, led by a former Clinton Administration official, is not a bastion of laissez-faire thinking. So it’s noteworthy when it publishes a study praising Superannuation.

Australia’s retirement income system is regarded by some as among the best in the world. It has achieved high individual saving rates and broad coverage at reasonably low cost to the government.

Since I wrote my dissertation on Australia’s system, I can say with confidence that the author is not exaggerating. It’s a very good role model, for reasons I’ve previously discussed.

Here’s more from the Boston College study.

The program requires employers to contribute 9 percent of earnings, rising to 12 percent by 2020, to a tax-advantaged retirement plan for each employee age 18 to 70 who earns more than a specified minimum amount. …Over 90 percent of employed Australians have savings in a Superannuation account, and the total assets in these accounts now exceed Australia’s Gross Domestic Product. …Australia has been extremely effective in achieving key goals of any retirement income system. …Its Superannuation Guarantee program has generated high and rising levels of saving by essentially the entire active workforce.

The study does include some criticisms, some of which are warranted. The system can be gamed by those who want to take advantage of the safety net retirement system maintained by the government.

Australia’s means-tested Age Pension creates incentives to reduce one’s “means” in order to collect a higher means-tested benefit. This can be done by spending down one’s savings and/​or investing these savings in assets excluded from the Age Pension means test. What makes this situation especially problematic is that workers can currently access their Superannuation savings at age 55, ten years before becoming eligible for Age Pension benefits at 65. This ability creates an incentive to retire early, live on these savings until eligible for an Age Pension, and collect a higher benefit, sometimes referred to as “double dipping.”

Though I admit dealing with this issue may require a bit of paternalism. Should individuals be forced to turn their retirement accounts into an income stream (called annuitization) once they reach retirement age?

I’m torn on this issue. Paternalists sometimes do have good ideas, but shouldn’t people have the freedom to make their own decisions, even if they make mistakes? But does the answer to that question change when mistakes mean that those people will be taking money from taxpayers?

Fortunately, I don’t need to be wishy-washy on the other criticism in the study.

Australia’s system does have shortcomings. It is heavily dependent on defined contribution plans and is vulnerable to weaknesses in such programs.

I strongly disagree. A “defined contribution” account is something to applaud, not a shortcoming.

The author presumably is worried that a “DC” account leaves a worker vulnerable to the ups and downs of the market, whereas a “defined benefit” account promises a specific payment and removes that uncertainty. Sounds great, but the problem with “DB” accounts is that they almost inevitably seem to promise more than they can deliver. And that seems to be the case whether they’re supposedly based on real savings (like company retirement plans or pension funds for state and local bureaucrats) or based on pay-as-you-go taxation (like Social Security).

*Since I’m somewhat optimistic that America can be saved, I’m not recommending you head Down Under just yet.

P.S. I’m also a huge fan of Chile’s system of private accounts. At the risk of oversimplifying, Chile’s system is sort of like universal IRAs and Australia’s system is sort of like universal 401(k)s.

P.P.S. There’s much to admire about Australia, but its government is plenty capable of boneheaded policy. Heck, the government even provides workers’ compensation payments to people who get injured while having sex after work hours, simply because they were on a business-related trip. Talk about double dipping!

P.P.P.S. Here’s my video explaining why we should implement personal retirement accounts in the United States.

P.P.P.S. The death tax has been abolished in Australia, so there’s more to admire than just personal retirement accounts.

Here’s how Ezra Klein spins Sen. Max Baucus’ (D‑MT) preditions of an ObamaCare “train wreck”:

The GOP can try and keep the implementation from being done effectively, in part by refusing to authorize the needed funds. Then they can capitalize on the problems they create to weaken the law, or at least weaken Democrats up for reelection in 2014.

In other words, step one: Create problems for Obamacare. Step two: Blame Obamacare for the problems. Step 3: Political profit!

It never ceases to amaze me how people who want government to plan our lives are horrified when government then interferes with their plans. Here’s one way to summarize Klein’s attempt to blame ObamaCare’s opponents for ObamaCare’s failures:

Step one: Pass a law the public opposes.

Step two: Act surprised when the public continues to oppose it.

Step three: Blame the public for the law’s failures. 

Or:

Step one: Enact an immense law requiring lots of implementation funding.

Step two: Don’t include any implementation funding.

Step three: Blame opponents for not funding the implementation. 

Ooh, this is fun:

Step one: Give government new powers.

Step two: Express frustration when those powers fall into the hands of your political opponents.

Step three: Put your political opponents in camps.

I wonder if Mike Pompeo will pen a letter to Klein, too.

From the Wall Street Journal:

WASHINGTON, April 16, 2013 /PRNewswire-USNewswire/ — United Union of Roofers, Waterproofers and Allied Workers International President Kinsey M. Robinson issued the following statement today calling for a repeal or complete reform of President Obama’s Affordable Care Act (ACA):

“Our Union and its members have supported President Obama and his Administration for both of his terms in office.

But regrettably, our concerns over certain provisions in the ACA have not been addressed, or in some instances, totally ignored. In the rush to achieve its passage, many of the Act’s provisions were not fully conceived, resulting in unintended consequences that are inconsistent with the promise that those who were satisfied with their employer sponsored coverage could keep it.

These provisions jeopardize our multi-employer health plans, have the potential to cause a loss of work for our members, create an unfair bidding advantage for those contractors who do not provide health coverage to their workers, and in the worst case, may cause our members and their families to lose the benefits they currently enjoy as participants in multi-employer health plans.

For decades, our multi-employer health and welfare plans have provided the necessary medical coverage for our members and their families to protect them in times of illness and medical needs. This collaboration between labor and management has been a model of success that should be emulated rather than ignored. I refuse to remain silent, or idly watch as the ACA destroys those protections.

I am therefore calling for repeal or complete reform of the Affordable Care Act to protect our employers, our industry, and our most important asset: our members and their families.”

The United Union of Roofers, Waterproofers and Allied Workers, based in Washington, D.C., has 22,000 members participating in 9 regional district councils across the United States

www.unionroofers.com