12/07/2017

How To Help The High Tax States

Editorial Board, The Wall Street Journal

As Republicans try to merge the House and Senate tax bills, one big issue is taxpayer anger in high-tax states over ending the state-and-local deduction. The solution is easier than they think: Cut the top tax rate enough that Republicans won’t raise taxes on so many productive Americans.

If you look at the big picture of both tax bills, they include an historic pro-growth reform of the business tax code. Cutting the corporate rate to 20% from 35%, with a comparable cut for pass-through companies while cleaning up dozens of tax breaks that distort investment, will instantly make American firms and the U.S. more competitive and should spur capital flows that lift wages. 

The bad news is that the reform of the individual code is something of a mess. Taxpayers at lower and middle incomes will benefit from a doubling of the standard deduction and raising the thresholds when certain tax rates hit. The increase in the child tax credit will reduce taxes for some people, though it complicates the code because it’s a form of social policy that favors some Americans over others. 

But the biggest weakness in the bills is that they punish taxpayers in high-tax states who earn relatively high incomes but will lose the state-and-local tax deduction. The original reform idea was to offset the loss of that deduction by lowering top rates. Broaden the tax base in return for lowering the rate. [Subscription required.]

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In Search Of History

4,000 Years Of Price Control

Tablets, said to be 200 years older than the Babylonian Code of Hammurabi ... show that the ancient kingdom of Eshnunna had wage control and price control. The news ought not to have come as a surprise. For the code of Hammurabi itself (unearthed in 1902), which was promulgated earlier than 2000 B.C., fixed prices, wages, interest rates, and fees. This makes price control at least about 4,000 years old. ...

 

Ironically, it is those who now wish to return to this ancient totalitarian device who are fondest of calling themselves “progressives.” They are also fond of saying that those who believe in economic liberty “are living in the nineteenth century.” These controlists have yet to learn that they themselves are still living, as the discoveries in Babylonia attest, in the nineteenth century—B.C.!

-- Henry Hazlitt,

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  • Unemployment:
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    FreeMarket Central June Year-to-Year: 2.80% (CPI-U*)
    FreeMarket Central Shadow Stats: 9.9%

*[cpi-u is the Bureau of Labor Statistics inflation rate for all urban consumers]

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