Trump’s Tax Reform: On the Right Track

The tax reform proposal offered last week by President Trump and Republicans in Congress would be an improvement over the current system, but more so for corporate income taxes than for individual income taxes. It appears that the biggest advantage the proposal offers individual taxpayers is a simplified tax structure, whereas significant cuts are in the works for corporate taxes.

Individual Income Taxes The proposal reduces tax brackets from seven to three: 12%, 25%, and 35%. The degree to which this might represent a tax cut remains to be seen, because the proposal does not say at what income levels those brackets would be effective. The standard deduction would almost double, meaning that those at the bottom end of the income distribution would surely enjoy a reduction in income taxes.

The proposal would broaden the tax base by eliminating many deductions and credits. The home mortgage interest deduction and deduction for charitable contributions would be retained, but deductions for payments of state and local taxes are eliminated. This deduction favored taxpayers in high-tax states, and effectively provides a subsidy to high-tax states financed by taxpayers in low-tax states.

Lincoln Smiles on Madrid’s Effort to Prevent Independence Vote

In Spain, the central government resorted to violence to stop the people of Catalonia from participating in a vote on independence. The violence from agents of the national government is distressing. According to The Telegraph:

Video footage showed officers from Spain’s national police—4,000 of whom had been brought in by the government to help quash the ballot—fighting with elderly voters, some of whom were left bleeding, and dragging young women away from polling stations by their hair.

Spanish officials shrugged off the violence and candidly stated that a few cracked heads were necessary to maintain the full authority of the central government. According to Spanish Prime Minister Mariano Rajoy: “We did what we had to do” to thwart the “premeditated attack on the legality of the Spanish state.” Mr. Rajoy has described the referendum as a “coup” and refused to accept the right of the people of Catalonia to chart their own destiny and choose whether to be an independent nation or remain under the thumb of Madrid. Mr. Rajoy’s actions and sentiments are similar to those of General Francisco Franco who attempted to destroy Catalan separatism and killed 3,500 people when he took control of the region in 1938.

Catalonia has its own language, laws, and customs. It is a fairly wealthy region that Madrid plunders to keep itself afloat.

According to The Guardian:

90% of the 2.26 million Catalans who voted on Sunday voted in favour of independence, according to preliminary results released by the region’s government. The region has 5.3 million voters. Officials said 770,000 votes were lost due to disruption which resulted in polling stations being raided by Spanish police.

Overwhelmingly, the people want independence. It is disappointing that Madrid will not listen to their voices and allow the region to go its own way. This reminds me of Abraham Lincoln’s use of federal troops to stop the Maryland legislature from deliberating on the issue of secession.

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William J. Watkins, Jr. is a research fellow at the Independent Institute and the author of the book, Crossroads for Liberty: Recovering the Anti-Federalist Values of America’s First Constitution.

Transcending Government — A Future of Competitive Governance Driven by “Governance Entrepreneurs”

In a little-known 2006 World Bank report Where Is the Wealth of Nations? a team of economists provide a snapshot of wealth in 120 countries, and they find that governance is key. A full 46 percent of total wealth in high-income countries derives from the rule of law, the most important factor. This is an extraordinary finding with sweeping implications.

The economists divide each country’s capital stock into three categories: (1) natural capital (patureland, subsoil assets, timber, non-timber forest resources, protected areas, and cropland); (2) produced capital (buildings, machinery, equipment, and infrastructure); and (3) intangible capital (raw labor, human capital, social capital, and quality of institutions). These are the range of assets upon which development depends and from which income and saving flows.

How the UK Can Benefit from a Free Trade Future After Brexit—Even Outside the Single Market

[This article was co-authored with David Paton and David Blake, and first appeared on]

The benefits of free trade have been familiar to economists since Adam Smith. Trade encourages specialisation and leads to lower costs, higher productivity and higher living standards.

Yet for some economists, things are different when it comes to the UK leaving the EU’s customs union and single market. The customs union was built on the German Zollverein model of protecting domestic industries from foreign competition around the time of German unification 150 years ago. Today, free trade is promoted within the EU, which is good. But the customs union imposes barriers to trade with the rest of the world, which is not.

The single market also imposes a hugely burdensome regulatory edifice on economic activity within the EU. Brexit will give the UK the opportunity to pursue its own free trade policy with the rest of the world and to escape the needless regulatory burdens of the single market.

Too many economists have refused to take seriously the idea that Brexit has the potential to provide economic benefits to the UK. Before the referendum, Treasury economists assured the public that a vote to leave would cause “an immediate and profound shock to our economy” leading to recession and a large increase in unemployment.

These are predictions that have since proved to be very wide of the mark. Modelling by the LSE’s Centre for Economic Performance (CEP) predicted that leaving the EU could only have negative consequences for the UK economy.

The consensus is misleading

The EU’s Thousands of Senseless Tariffs Simply Serve to Punish the Poor

My report A Trade Policy for a Brexited Britain, published by the Institute of Economic Affairs last month, had a short section on EU tariffs. I gave the example of how in October last year EU tariffs on orange imports were quintupled from 3.2 percent to 16 percent. This example has been challenged by some on the Remain side, who have suggested that I got my facts wrong.

In fact, the source was Dan Lewis, a leading authority on EU tariffs, who wrote on precisely that subject on BrexitCentral last November: “New 16% import tariffs on oranges show why we must leave the Customs Union”. This example illustrates classic EU tariff policy in action. A bunch of producers elsewhere in the EU—in this case Spain—complained about competition from South African orange exporters and lobbied to increase tariffs. They got their way and the net result as it affected the UK was to increase the cost of orange imports to the UK. Lewis also provided some links (here and here) to the Spanish producers’ lobbying efforts and to one of the tariff schedules on his database.

You Can’t Go Home Again, but . . .

A melancholy saying reminds us that you can’t go home again. I know I can’t. My parents have been dead for decades, and my brother Bill, my only sibling, died three years ago. Moreover, the house in which we lived when I was growing up in the late 1950s and early 1960s has been wiped from the face of the earth. Only a few old timers might recall that on a certain spot of now-bare ground once stood the house in which Jess Higgs and his family flourished some sixty years ago.

Yet, if you cannot go home again, it may happen that home can come to you, as it has come to me in a heart-warming way since my emigration to Mexico two years ago. Here in Mexico I live in a remote place with very limited local availability of groceries and other ordinary consumer goods. Fortunately, however, three times each week Lucio, an enterprising fellow from Bacalar, a town a hundred miles away, comes to my gate with his pickup loaded with fresh produce, eggs, pastries, tortillas, and other goods. (If we ask him to bring something he would not ordinarily bring, he brings it on a later trip.) Among the goods I routinely buy from him are cantaloupes, and often the label on the melons indicates that they were produced by Pappas Family Farms of Mendota, California.

National Idolatry and Constitution Day

By federal statute, September 17 is designated as a holy day in the American civic religion. On that day in 1787, the delegates to the Philadelphia Convention affixed their signatures to the document that they had created and that governs us today. The website encourages public demonstrations of love for the Constitution and features a picture of smiling and diverse citizens waving American flags and looking up as if a god is about to descend.

Exactly what we are supposed to celebrate is not clear. A national debt above $20 trillion? A president and Congress with few, if any, limits on their power? A Supreme Court that dares to hold that the antediluvian definition of marriage is unconstitutional?

Is Trump Destroying the GOP?

Of all the concerns raised about President Donald Trump and his behavior in the Oval Office, perhaps one of the more sobering one is the way he and his allies have elevated a minority position within the GOP to a dominant policy agenda at the national level.

Throughout his primary campaign, Trump spoke to his base by consistently harping on populist policy proposals such slowing or stopping immigration by building a wall along the Mexican border, repealing Obamacare, renegotiating or pulling out of NAFTA, and lowering corporate taxes. He also leveraged his business background to legitimize a bold, no holds barred approach to governing the country without any critical thought to how top-down business management approaches might undermine democratic institutions.

While these agenda items consume public debate today, however, they represented a minority position within the Republican Party when he began his candidacy in 2016. In fact, Trump remained a minority candidate within the GOP up until the last month of the primaries.

Compounding California’s Student Preparation Problem

California State University officials want more undergraduates to earn their degrees and do so more quickly. Yet their “solution” could compound the more fundamental problem that too many students are graduating without being prepared.

CSU Chancellor Timothy P. White issued an executive order last month that changes policies affecting entering freshmen’s knowledge assessments and course placements. One change is allowing remedial English and math classes to count as credit-bearing courses toward a degree. To help avoid remedial courses altogether CSU plans to use multiple measures to determine course placements not just scores on tests taken during students’ junior or senior years of high school. These measures will include high school course grades and GPAs.

Yet these changes are risky, as Thomas D. Elias explains in The Orange County Register.

The 23-campus California State University system knows it must somehow speed up graduation beyond today’s pace, which sees just 19 percent of entering freshmen graduate within four years. The low rate is at least partly because more than a third of frosh need some remedial work. ...

The problem with giving academic credit for remedial classes that essentially provide students with knowledge or skills they should have picked up in high school is that it threatens to dumb down degrees from Cal State campuses from the North Coast to San Diego.

Review: The Hitman’s Bodyguard and the Ethics of Assassination

The Hitman’s Bodyguard is an action/drama that would normally be considered standard fare for the summer season. Yet this movie does more than careen through dead bodies and extended vehicle chases. The story is driven by the relationship between the core characters and turns on a serious question of ethics and forgiveness. At the same time, the film verges on a parody of its genre. This combination seems to have befuddled many movie critics but not audiences.

Ryan Reynolds (Deadpool, X-Men Origins: Wolverine, Life) plays Michael Bryce, a AAA-rated executive bodyguard. This moniker alone is the first clue that much of this movie is tongue in cheek—part spoof, more drama, and mostly action. Bryce falls from grace when one of his high-profile clients, a billionaire Asian arms dealer, is assassinated on one of his very lucrative assignments. As a consequence, Bryce is relegated to the dregs of bodyguard gigs–protecting drug-addicted CEOs so they can testify against their suppliers.

Samuel L. Jackson (Pulp Fiction, Django Unchained, Hateful Eight) plays Darius Kincaid, a notorious assassin with over one hundred kills to his credit, and an arch nemesis of Bryce. When Kincaid agrees to testify against Vladislav Dukhovich (Gary Oldman of the Harry Potter series, The Dark Knight Trilogy, The Darkest Hour), the blood-thirsty tyrant ruling Belarus, Bryce ends up being the only one Interpol agent Amelia Roussel (Elodie Yung from Gods of Egypt, The Girl With a Dragon Tattoo, District 13: Ultimatum) trusts to deliver Kincaid to the International Criminal Court in The Hague, Netherlands.