“Where’s The Outrage?”

Sen. Ted Stevens (R-AK) rightly worries that current universal service mechanisms are unsustainable as consumers migrate to Internet phone services that are lightly taxed and regulated (these services clearly should contribute their fair share). Stevens and others also believe that rural America won’t get broadband services without subsidies (we can’t know this for sure, because we have never tried the alternative approach of removing all of the barriers to competition and investment). Anyway, while Internet content and conduit providers obsess over net neutrality, something equally harmful is lurking in the shadows. A little noticed provision in the Senate’s “staff working draft” designed to expand the universal service funding base could have profound consequences. Currently, consumers of “telecommunications” services contribute billions Read More ›

Rubinomics, RIP (maybe…we hope…please?)

Don Luskin has the goods on the terrific 2003 capital gains tax cut and the increased government revenues it yielded. Bottom line: The Congressional Budget Office predicted the 2003 capital gains tax rate cut from 20% to 15% would reduce capital gains revenues by $26 billion when in fact those revenues have increased by $27 billion over the baseline projection, for a total CBO botch of $53 billion. Wasn’t it just earlier this week that former Treasury Secretary and current Citigroup director Robert Rubin was giving us another lecture how in order to become more competitive and prepare for a future of intense globalization the U.S. needs to raise tax rates? Sorry, Bob, the new numbers, as have all the Read More ›

Deng Redux — cutting taxes on Chinese farmers

China will completely eliminate agricultural taxes on its famers over the next 5 years, even though 28 of 31 provinces have already done so. Deng Xiaoping first cut taxes on peasants in 1979, instituting a small quota that went to the government but allowing peasants to keep all additional output. Under this “household responsibility system,” the marginal tax rate on farming was thus zero, and after decades of chronic “famine,” Chinese agriculture boomed. Over the last decade, however, many local officials across the country had begun charging fees and taxes on farmers, leading to widespread rural unrest or at least frustration. Now Beijing will continue Deng’s tradition of low tax rates that has been fundamental to the nation’s 27-year boom. Read More ›

The Tax Reform Swamp

“The President’s Advisory Panel on Middle Class Tax Hikes” That’s what the Free Enterprise Fund is calling the Tax Reform Commission that met for the 11th time this year on Tuesday. The meeting focused on ways to limit the home mortgage deduction, thus raising revenue to “pay for” the elimination of the Alternative Minimum Tax (AMT). Although we don’t yet know what the Panel’s final report will say when it is released on November 1, it looks like its recommendations will be much less ambitious than many of us would like — and less ambitious than the U.S. economy needs. News accounts today suggest that the major “reform” will be elimination of the AMT in return for limits on the Read More ›

Repeal the Telephone Excise Tax

Senator Rick Santorum (R-Pa.) and Congressman Gary G. Miller (R-Calif.) have introduced the Federal Telephone Excise Tax Repeal Act of 2005 (S.321; H.R. 1898). Taxes which target communications services are one of the reasons that 15 other countries enjoyed faster broadband deployment than the U.S. on a per capita basis in 2004 (Click here to see the rankings). Eliminating this tax ought to be a high priority. Currently, the tax applies to telephone and teletypewriter services that existed in 1965 when the statute’s current definitions were enacted. Since that time, “numerous questions have arisen,” according to the IRS, concerning the applicability of the tax to newer services. The IRS issued a notice of proposed rulemaking last year in an effort Read More ›