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Bernie-Sanders-Donald-Trump

Vermont Socialist Sen. Bernie Sanders, left, and billionaire real estate mogul Donald Trump, right. (Photos: AP/Getty)

After yesterday’s ponderous and detailed discussion of tax compliance, it’s time for some levity. So let’s have some fun with Bernie Sanders and Donald Trump.

And we’ll start with the crazy Senator from Vermont. I’m surprised that I haven’t seen more Sanders-specific humor. I’m probably missing some examples, but a quick look through my archives reveals only the cartoon at the bottom of this article and the satirical poster included below.

Bernie Sanders Poster

A guy this crazy deserves more attention.

So here’s the Sanders version of the monopoly game, courtesy of Mark Perry, the must-read economist at the American Enterprise Institute.

The best part of the game is the description of how everyone decides the best option is to stop being productive and wait for handouts.

Sort of the same message from this Wizard-of-Id parody.

By the way, I have lots of material mocking socialism (see here and here), so we can count that as being anti-Sanders humor (even if he’s not even a real socialist).

Now let’s shift to “The Donald.” I don’t know how to classify him from a philosophical perspective–probably because he doesn’t have a coherent set of principles–but he is an entertaining figure.

That being said, I think I’ve only had one column that included Trump humor.

So let’s atone for that oversight. This World-according-to-Trump map is quite clever.

Very similar to the very amusing how-the-Greeks-see-Europe map I shared back in 2011.

[mybooktable book=”global-tax-revolution-the-rise-of-tax-competition-and-the-battle-to-defend-it” display=”summary” buybutton_shadowbox=”true”]

CATO economist Dan Mitchell decides to have

california-vote-sign

File photo of a California polling place sign. (Credit: Ho John Lee/flickr via Creative Commons)

There’s a not-insignificant part of the United States known as the West Coast. It includes such prominent states as California, Oregon and Washington.

These states have yet to hold a single presidential primary or caucus. But at 8 p.m. Eastern Daylight Time on Tuesday, this population center of 50 million-plus souls was informed that the Democrats have a “prohibitive front-runner” and the Republicans a guy who seems unstoppable by primaries and caucuses alone.

As of this late date in the process, not a single voter in a state bordering the Pacific Ocean has been asked to choose the “winner” — except for Republicans in Hawaii and Alaska.

Washington will have its Democratic caucuses later this month, its Republican primary in May. Oregon doesn’t hold its primaries until May, and California’s are in early June.

When these states do go through the motions of expressing their preference for the next president, they will have done so without months of public agony over matters of regional concern. Their voters will have heard only sketchy talk on issues related to shipping, fisheries or water shortages plaguing the eastern parts of the three states.

And even if the delegate counts remain close, voting late in the season leaves the electorate with a reduced list of possibilities. On the Republican side, there’s no more Jeb Bush or Marco Rubio. On the Democratic side, Martin O’Malley is gone. Bernie Sanders will probably still be running, but his West Coast supporters can no longer affect the perception of his being in a close race with Hillary Clinton.

Noting this unfairness, Washington state officials, backed by The Seattle Times, are calling for a new system that would give every part of the country an even shot at choosing the parties’ nominees. A “rotating regional primary system” would group states into four regions. Every four years, a different region would kick off the voting.

Both parties already encourage regional primaries, notes Kay Stimson, spokesperson for the National Association of Secretaries of State. But they have hesitated to endorse a system of rotating regional primaries, which the association first proposed in 1999.

Because some regions tend to be highly liberal or highly conservative, some worry that clustering primaries by region would skew the results toward one political bias or another. Another concern is that holding large regional votes at the same time would put poorly funded candidates at a disadvantage.

Interestingly, the rotating primary plan would retain first-in-the-nation privileges for Iowa and New Hampshire. The association members saw value in the retail politics of both states, Stimson told me. It lets average people vet the wannabes — and gives poorly funded candidates a chance to grab a foothold.

A competing proposal is to set a national primary date for everyone to vote. The problem here, Stimson explains, is it vastly favors the most heavily endorsed front-runner candidates. In this year’s race, she said, the choices would have been Jeb Bush and Hillary Clinton “and that’s that.”

A rotating regional primary system still seems the fairest and simplest way to avoid the rush to the front of the line we see today. And it remains utterly crazy that giant California can become an afterthought in the selection of party nominees.

If this is any consolation, other big-population states — New York, Pennsylvania, Arizona, Indiana — have yet to hold primaries or caucuses. And the very last group of Americans to choose delegates will be Democrats in Washington, D.C. Their primary will be held June 14.

There's a not-insignificant part of the United

Donald-Trump-Rick-Scott

Gov. Rick Scott at Bright Future Electric in Ocoee on June 11, 2015. PHOTO RIGHT: Trump greets supporters during a campaign rally at the American Airlines Center on September 14, 2015 in Dallas, Texas. (Photos: Carolyn Allen/Tom Pennington/Getty)

Florida Gov. Rick Scott called on the Republican Party Wednesday to come together, respect the will of the voters and support frontrunner Donald Trump. In a Facebook post just one day after his home state voted and Florida Sen. Marco Rubio dropped out, Gov. Scott said aid that Trump’s victories Tuesday show it is time to unify.

“I’m asking all Republicans today to come together and begin preparing to win the general election in November,” Scott wrote. “With his victories yesterday, I believe it is now time for Republicans to accept and respect the will of the voters and coalesce behind Donald Trump.”

The two-term Sunshine State governor also offered his compliments to the entire Republican field, but said the voters had spoken and the in-fighting now needs to come to an end if they hope to defeat Hillary Clinton in November.

“The voters are speaking clearly — they want a businessman outsider who will dramatically shake up the status quo in Washington,” he wrote. “If we spend another four months tearing each other apart, we will damage our ability to win in November. It’s time for an end to the Republican on Republican violence. It’s time for us to begin coming together, we’ve had a vigorous primary, now let’s get serious about winning in November.”

Gov. Rich Scott, who wanted to remain officially neutral leading up to the March 15 contest, praised Trump in January with a USA Today op-ed titled, “Donald Trump has America’s pulse.” While he didn’t offer an endorsement, Scott said that Trump had the courage to speak his mind and was the one candidate who had his finger on the pulse of the American people.

Florida Gov. Rick Scott called on the

Trump Rally Chicago

Demonstrators celebrate after Donald Trump postponed his rally at the University of Illinois in Chicago.

On Feb. 7, 1946, Arthur Terminiello, a Roman Catholic priest who was a fierce opponent of communism and believed that President Harry Truman was too comfortable with it, gave an incendiary speech in a Chicago hall that his sponsors had rented.

The hall held about 800 people, but nearly 2,400 showed up. Father Terminiello’s opponents outnumbered his supporters by a 2-1 ratio. The atmosphere in the hall was electric, with almost everyone present taking sides for or against this priest — all under the watchful eyes of Chicago police.

The speech delighted the priest’s supporters and enraged his detractors. When it became apparent that violence might break out, the Chicago police approached Terminiello while he was speaking and asked him to stop and leave the building.

He refused to leave and resumed his speech. The police prediction soon came to pass. The fiery priest ignited the hatred of his adversaries, many of whom seemed to have come to that venue to silence him. The shouters hurled chairs, rushed the stage and attempted to attack him.

The police safely escorted Terminiello out of the hall and then, in the presence of the many rioters who by now had spilled out onto a public street, arrested him for inciting a riot. The charge was defined in Illinois in the mid-1940s so as to criminalize any behavior that intentionally arouses the public to anger or brings about public unrest.

The police did not arrest any of the rioters who smashed windows, destroyed the stage and assaulted the priest. They saw him arrested for his words that they hated.
Terminiello was tried and convicted. After his conviction had been upheld by the Illinois Supreme Court, he appealed to the U.S. Supreme Court, which reversed his conviction. In so doing, the high court saved the First Amendment from authoritarian impulses that sought to narrow its scope, and it ushered in the modern judicial understanding that has informed the present-day parameters of the freedom of speech.

The ruling generally barred the punishment of speakers who are expressing political opinions and held that the First Amendment needs breathing room; and breathing room contemplates that some people will hate what they hear and articulate that hatred.

The court warned the police against permitting audiences to silence speakers — what lawyers and judges call “the heckler’s veto.” Thus, the police today cannot throw up their hands and permit a speaker to be silenced as they did to Father Terminiello. They have an affirmative obligation to take all reasonable steps to protect the speaker’s right to speak, the audience’s right to hear and the protesters’ right to protest.

Fast-forward to last Saturday, also in Chicago, when Donald Trump canceled a rally and said he did so because he feared that protesters would disrupt it and some folks might be injured. Was this an example of the heckler’s veto?

The legal issues here are complex and subtle, involving property rights and free speech. As a lessee of a government-owned building for his rally venue, Trump could not prevent any person from entering or remaining because of the person’s political views.

However, he could have asked the police to employ reasonable force to remove those whose behavior made it impossible for him to use the venue for the principal purpose for which he leased it. Since the First Amendment requires breathing room, the police must be extremely tolerant of protesters and may remove only those whose behavior physically prevents the use for which the venue was leased.

Stated differently, protest of political speech is itself protected speech, but protest cannot be so forceful or dominant that it vetoes the speaker.

What about the allegations that Trump himself is responsible for the violence at some of his rallies? If Trump publicly demands violence and there is no time or ability for any speech to neutralize his demands and the demanded violence takes place, his speech is unprotected — and he can be prosecuted for incitement to riot. This is the modern rule that holds that all innocuous speech is absolutely protected, and all speech is innocuous when there is time for more speech to rebut or neutralize it.

When there is no time between the demand for violence and the responsive reactive violence, the speaker is liable for the violence he demanded. But if there is time for more speech to counsel against the violence, even if no neutralizing speech is actually uttered, the speaker cannot be prosecuted. And before any prosecution for speech may commence, the court must eliminate every possible lawful interpretation of the speaker’s words.

All these rules further the whole purpose of the First Amendment. It is to recognize, codify and protect the natural human right to form thought and to express the thoughts, and to encourage open, wide, robust, challenging speech about the government, uttered without a permission slip, free from government interference and without personal hesitation.

In the case of the canceled Trump rally last weekend, many fingers have been pointed. The Chicago police claim they never advised Trump to cancel. The Secret Service claims the same. Trump says he was the victim of ideologically driven fanatics who wanted to silence him, just as their predecessors did to Father Terminiello. If there is ever litigation over this, a jury will decide the facts.

But the law is clear. The First Amendment tolerates the maximum possible public discourse, disagreement and confrontations; and it commands the government to protect the values it embodies.

Protestors shutting down Trump rallies don't understand

fair-tax-rally-dc

Supporters of the fair tax and flat tax model hold a Tax Day rally in Washington D.C. (Photo: AP)

Why do many people engage in civil disobedience and decide not to comply with tax laws? Our leftist friends–the ones who think that they’re compassionate because they want to spend other people’s money–assert that those who don’t obey the revenue demands of government are greedy tax evaders who don’t care about society.

And these leftists support more power and more money for the Internal Revenue Service in hopes of forcing higher levels of compliance.

Will this approach work? Are they right that governments should be more aggressive to obtain more obedience?

To answer questions of how to best deal with tax evasion, we should keep in mind three broad issues about the enforcement of any type of law:

1. Presumably there should be some sort of cost-benefit analysis. We don’t assign every person a cop, after all, even though that presumably would reduce crime. Simply stated, it wouldn’t be worth the cost.

2. We also understand that crime reduction isn’t the only thing that matters. We grant people basic constitutional rights, for instance, even though that frequently makes is more difficult to get convictions.

3. And what if laws are unjust, even to the point of leading citizens to engage in jury nullification? Does our legal system lose moral legitimacy when it ismore lenient to those convicted of child pornography than it is to folks guilty of forgetting to file paperwork?

Now let’s consider specific tax-related issues.

I’ve written before that “tough on crime” is the right approach, but only if laws are legitimate. And that leads to a very interesting set of questions.

4. Is it appropriate to track down every penny, even if it results in absurdities such as the German government spending 800,000 euros to track down 25,000 euros of unpaid taxes on coffee beans ordered online?

5. Or what about the draconian FATCA law imposed by the United States government, which is only projected to raise $870 million per year, but will impose several times as much cost on taxpayers, drive investment out of American, and also causing significant anti-US resentment around the world?

6. And is there perhaps a good way of encouraging compliance?

The purpose of today’s (lengthy) column is to answer the final question.

More specifically, the right way to reduce tax evasion is to have a reasonable and non-punitive tax code that finances a modest-sized, non-corrupt government. This make tax compliance more likely and more just.

Here’s some of what I wrote back in 2012.

I don’t blame people from France for evading confiscatory taxation. I don’t blame people in corrupt nations such as Mexico for evading taxation. I don’t blame people in dictatorial nations such as Venezuelafor evading taxation. But I would criticize people in Singapore,Switzerland, Hong Kong, or Estonia for dodging their tax liabilities. They are fortunate to live in nations with reasonable tax rates, low levels of corruption, and good rule of law.

Let’s elaborate on this issue.

And we’ll start by citing the world’s leading expert, Friedrich Schneider, who madethese important points about low tax rates in an article for the International Monetary Fund.

…the major driving forces behind the size and growth of the shadow economy are an increasing burden of tax and social security payments… Several studies have found strong evidence that the tax regime influences the shadow economy. …In the United States, analysis shows that as the marginal federal personal income tax rate increases by one percentage point, other things being equal, the shadow economy grows by 1.4 percentage points.

With this bit of background, let’s look at the magnitude of non-compliance.

The Wall Street Journal reports on the history of dodging greedy governments.

Tax evasion has been around since ancient Mesopotamia, when the Sumerians were cheerfully working the black market. …The Romans were the most efficient tax collectors of all. Unfortunately Emperor Nero (ruling from A.D. 54 to 68) abandoned the high growth, low-tax policies of his predecessors. In their place he created a downward spiral of inflationary measures coupled with excessive taxation. By the third century, widespread tax evasion forced economically stressed Rome to practice expropriation. …Six hundred years later, during the Heian period (794-1185), Japan’s aristocracy acted in a similar manner and with similar consequences. …China’s Qing Dynasty (1644-1912) waged a harsh war against the tax-dodging gentry.

These same fights between governments and taxpayers exist today.

In a column published by the New York Times, we got some first-hand knowledge of the extraordinary steps people take to protect themselves from taxation in China.

In China, businesses have to give out invoices called fapiao to ensure that taxes are being paid. But the fapiao — the very mechanism intended to keep businesses honest — is sometimes the key to cheating on taxes. …My company would disguise my salary as a series of expenses, which would also save me from paying personal income tax. But to show proof of expenses, the accountant needed fapiao. It was my responsibility to collect the invoices. …But evading taxes in China was harder than I expected because everyone else was trying to evade taxes, too. …Though businesses are obligated to give out fapiao, many do not unless customers pester them. They are trying to minimize the paper trail so they too can avoid paying taxes on their true income. …some people are driven to buy fake invoices. It’s not hard; scalpers will sell them on the street, and companies that specialize in printing fake fapiao proliferate.

The author had mixed feelings about the experience.

I couldn’t figure out whether what I was doing was right or wrong. By demanding a fapiao, I was forcing some businesses to pay taxes they would otherwise evade. But all of this was in the service of helping my own company evade taxes. In this strange tale, I was both hero and villain. To me, tax evasion seemed intractable. Like a blown-up balloon, if you push in one part, another swells.

Meanwhile, Leonid Bershidsky, writing for Bloomberg, reviews what people do to escape the grasping hand of government in Greece.

In gross domestic product terms, Greece has the second biggest shadow economy among European Union countries without a Communist past…unreported revenue accounts for 23.3 percent of GDP, or $55.3 billion. …Had it been subject to taxes — at the prevailing 40 percent rate — the shadow economy would have contributed $22 billion to the government’s coffers.

Bershidsky cites some new academic research.

…researchers used loan application data from a big Greek bank. …The bank…regards the reported income figure as a fiction, as do many other banks in eastern and southern Europe. As a result, it uses estimates of “soft” — untaxed — income for its risk-scoring model. Artavanis, Tsoutsoura and Morse recreated these estimates and concluded that the true income of self-employed workers in Greece is 75 percent to 84 percent higher than the reported one.

Greek politician have tried to get more money from the shadow economy but haven’t been very successful.

Even the leftist government of former Prime Minister Alexis Tsipras, which came up with unworkable schemes to crack down on tax evasion — from using housewives and tourists to inform on small businesses to a levy on cash withdrawals — failed.

Bershidsky notes that some have called for indirect forms of taxation that are harder to evade.

The researchers suggest the government should sell occupation licenses through the powerful professional associations: a harsh but effective way to collect more money.

Though his conclusion rubs me the wrong way.

The shadow economy — and particularly the contributions of professionals — is an enormous potential resource for governments.

At the risk of editorializing, I would say that the untaxed money is “money politicians would like to use to buy votes” rather than calling it “an enormous potential resource.” Which is a point Bershidsky should understand since he wrote back in 2014 that European governments have spent themselves into a fiscal ditch.

Now let’s shift to the academic world. What do scholars have to say about tax compliance?

Two economists from the University of Rome have authored a study examining the role of fiscal policy on the underground economy and economic performance. They start by observing that ever-higher taxes are crippling economic performance in Europe.

…most European economies have been experiencing feeble growth and increasing levels of public debt. Compliance with the Stability and Growth Pact, and in particular with the primary deficit clause, has required many governments to raise taxes to exceptional high levels, thus hindering business venture and economic recovery.

And those high tax burdens don’t collect nearly as much money as politicians want because taxpayers have greater incentives to dodge the tax collectors.

…between a country’s tax system and the size of its shadow economy is a two-way relationship. …there exists a positive relationship between the dimension of the tax burden on economic activity and the size of the informal economy. …various tax reform scenarios, recently advocated in economic and policy circles as a means to promote growth, such as…ex-ante budget-neutral tax shifts involving reductions of distortionary taxes on labor and business compensated by an increase in the consumption tax or counterbalanced by decreases of government spending. We will see that all these fiscal reforms give rise to a resource reallocation effect from underground to official production or vice versa and have rather different implications in terms of output, fiscal solvency and welfare.

The authors look at the Italian evidence and find that lower tax rates would create a win-win situation.

Our main results can be summarized as follows. …the dimension of the underground sector is substantially decreased by fiscal interventions envisaging sizeable labor tax wedge reductions. Finally, all the considered tax reforms have positive effects on the fiscal consolidation process due to a combination of larger tax revenues and positive output growth. …consider the case in which the decrease of the business tax is met by a public spending cut…an expansionary effect on output, consumption and investments, and, despite the overall reduction of tax revenues, the public-debt-to-output ratio falls. However, we notice that the expansionary effects are…magnified on consumption and investments. In this model, in fact, public spending is a pure waste that crowds out the private component of aggregate demand, therefore it comes as no surprise that a tax cut on business, counterbalanced by a public spending reduction, is highly beneficial for both consumption and investments. …the underground sector shrinks.

The benefits of lower tax rates are especially significant if paired with reductions in the burden of government spending.

When the reduction of the business tax, personal income tax, and employers’ SSC tax rates are financed through a cut in public spending…we observe positive welfare effects… The main difference…is that consumption is significantly higher…due to the fact that this reform leaves the consumption tax unchanged, while public spending is a pure waste that crowds out private consumption. …all the policy changes that lower the labor tax wedge permanently reduce the dimension of the underground sector. Finally, all the considered tax reforms positively contribute to the fiscal consolidation process.

Let’s now look at some fascinating research produced by some other Italian economists.

They look at factors that lead to higher or lower levels of compliance.

…a high quality of the services provided by the State, and a fair treatment of taxpayers increase tax morale. More generally, a high level of trust in legal and political institutions has a positive effect on tax morale. …two further institutional characteristics that are likely to negatively affect an individual’s tax morale: corruption and complexity of the tax system.

By the way, “tax morale” is a rough measure of whether taxpayers willingly obey based on their perceptions of factors such as tax fairness and waste and corruption in government.

And that measure of morale naturally varies across countries.

…we examine how people from different countries react to varying tax rates and levels of efficiency. …We focus our analysis on three countries: Italy, Sweden and UK. …these three countries show differences concerning the two institutional characteristics we are focused on. Italy and Sweden show a high tax burden while UK shows a low one. Whereas, Sweden and UK can be considered efficient states, Italy is not.

By the way, I don’t particularly consider the United Kingdom to be a low-tax jurisdiction. And I don’t think it’s very efficient, especially if you examine the government-run healthcare system.

But everything is relative, I guess, and the U.K. is probably efficient compared to Italy.

Anyhow, here are the results of the study.

Experimental subjects react to institution incentives, no matter the country. More specifically, tax compliance increases as efficiency increases and decreases as the tax rate increases. However, although people’s reaction to changes in efficiency is homogeneous across countries, subjects from different countries react with a different degree to an increase in the tax rate. In particular, participants who live in Italy or Sweden – countries where the tax burden is usually high – react more strongly to an increase in the tax rate than our British subjects. At the same time, subjects in Sweden – where the efficiency of the public service is high – react less to tax rate increases than Italian subjects.

So low tax rates matter, but competent and frugal government also is part of the story.

In all 3 countries, higher tax rates imply lower compliance. This is in line with experimental evidence: as Alm (2012, p. 66) affirms: “most (but not all) experimental studies have found that a higher tax rate leads to less compliance” and “The presence of a public good financed by voluntary tax payments has been found to increase subject tax compliance”. …The stronger negative reaction of Italian subjects to an increase in the tax rate may be due to the fact that in everyday life they suffer from high tax rates combined with inefficiency and corruption. …In fact, in the final questionnaire, 67.5% of Italian participants state that people would be more likely to pay taxes if the government were more efficient (vs 34.4% and 30.3% in UK and Sweden respectively) and 54.6% would comply with their fiscal obligations if they had some control over how tax money were spent (vs 30.8% and 25.8% in UK and Sweden respectively)… No way to impose a high tax burden on citizens if the tax revenue is wasted through inefficiency and corruption.

Here’s one additional academic study from Columbia University. The author recognizes the role of tax rates in discouraging compliance, but focuses on the impact of tax complexity.

Here’s what he wrote about the underlying theory of tax compliance.

The basic theoretical framework for tax evasion was derived…from the Becker model of crime. This approach views tax evasion as a gamble. …when tax evasion is successful, the taxpayer gains by not paying taxes. In other cases, tax evasion is uncovered by tax authorities, and the taxpayer has to pay taxes due and fines. The taxpayer compares the expected gain to the expected loss. …This approach highlights a number of factors that determine whether and to what extent taxes are evaded. These are: the magnitude of potential savings (which, on the margin, is simply equal to the tax rate)… This model therefore highlights…natural policy parameters that can affect evasion. …the marginal gains from tax evasion could be reduced by imposing lower marginal tax rates.

Interestingly, he doesn’t see much difference between (illegal) evasion and (legal) avoidance.

The ideal compliance policy should target both tax avoidance and tax evasion. While there is a legal distinction between the two, from the economic point of view the difference is less explicit. Both types of activity involve a loss of revenue and both involve a loss of economic welfare.

He then brings tax complexity into the equation.

…the appropriate extent of tax enforcement critically depends on the underlying tax structure. In particular, the role of complexity in the tax system as a factor influencing the size of the tax gap, as well as legal but undesirable tax avoidance, are highlighted. Two principal implications of tax complexity are stressed here. First, complexity permits additional ways to shield income from tax and, consequently, complexity increases the overall cost of taxation. … Reasonable simplification can more adequately combat tax evasion and avoidance than traditional enforcement measures.

Here are some of his findings.

Tax avoidance is a function of ambiguity in the tax system. …Administrative investment in enforcement becomes more important when the tax system is more distortionary. One way to reduce the need for costly tax enforcement is to reduce distortions. … Higher complexity induces tax avoidance and other types of substitution responses. A tax system that allows for many different types of avoidance responses is likely to cause stronger behavioral effects and therefore higher excess burden. …Shutting down extra margins of response can be loosely summarized as expanding the tax base by eliminating preferential treatment of some types of income, deductions, and exemptions. …One of the consequences of complexity is that it makes it difficult for honest taxpayers to fulfill their obligations. …The bottom line is that complexity makes relying on penalties a much less appealing approach to enforcement. …From the complexity point of view, itemized deductions add a multitude of tax avoidance and evasion opportunities. …They stimulate avoidance by introducing extra margins with differential tax treatment.

Sounds to me like an argument for a flat tax.

Incidentally (and importantly), he acknowledges that greater enforcement may not be a wise option if the underlying tax law (such as the code’s harsh bias against income that is saved and invested) is overly destructive.

…tax avoidance—letting well enough alone—may be a simple and practical way of addressing shortcomings of an inefficient tax structure. For example, suppose that, as much of the optimal taxation literature suggests, capital incomes should not be taxed, or should only be taxed lightly. In that case, the best policy response would be cutting tax rates imposed on capital income. If it is not politically feasible to pursue such policies explicitly, a similar outcome can be accomplished by reducing enforcement or increasing avoidance opportunities in this area. …The preferred way of dealing with compliance problems is fixing the tax code.

Amen. Many types of tax evasion only exist because the politicians in Washington have saddled us with bad tax policy.

And when tax policy moves in the right direction, compliance improves. Consider what happened in the 1980s when Reagan’s reforms lowered the top tax rate from 70 percent to 28 percent. Rich people paid five times as much to the IRS, in large part because they declared 10 times as much income.

But it’s very unlikely that they actually earned 10 times as much income. Some non-trivial portion of that gain was because of less evasion and less avoidance.

Simply stated, it makes sense to comply with the tax system when rates are low.

Let’s close by addressing one of the ways that leftists want to improve compliance. They want to destroy financial privacy and give governments near-unlimited ability to collect and share financial information about taxpayers, all for the purpose of supposedly bolstering tax compliance.

This agenda, if ultimately successful, will cripple tax competition as a liberalizing force in the global economy.

This would be very unfortunate. Tax rates have fallen in recent decades, for instance, largely because governments have felt pressure to compete for jobs and investment.

That has led to tax systems that are less punitive. And politicians really can’t complain about being pressured to lower tax rates since these reforms generally led to more growth, which generated significant revenue feedback. In other words, the Laffer Curve works.

There’s even some evidence that tax competition leads to less government spending.

But these are bad things from a statist perspective.

This helps to explain why politicians from high-tax governments want to eviscerate tax competition and create some sort of global tax cartel. An “OPEC for politicians” would give them more leeway to impose class-warfare tax policy and buy votes.

The rhetoric they’ll use will be about reducing tax evasion. The real goal will be bigger government.

I’m not joking. Left-wing international bureaucracies such as the Organization for Economic Cooperation and Development have justified their anti-tax competition efforts by asserting that jurisdictional rivalry “may hamper the application of progressive tax rates and the achievement of redistributive goals.”

I suppose we should give them credit for being honest about their ideological agenda. But for those who want good tax policy (and who also understand why that’s the right way to boost tax compliance), it’s particularly galling that the OECD is being financed with American tax dollars to push in the other direction.

P.S. I don’t know if you’ll want to laugh or cry, but here are some very odd examples of tax enforcement.

P.P.S. Here’s more evidence that high tax rates and tax complexity facilitate corruption.

To answer questions of how to best

Barack-Obama-Oval-Office-Meeting

President Barack Obama meets with Vice President Joe Biden and other advisors in the Oval Office, Feb. 2, 2016. Meeting with the President and Vice President are, from left, Katie Beirne Fallon, Director of Legislative Affairs; Amy Rosenbaum, Deputy Assistant to the President for Legislative Affairs (partially hidden); Chief of Staff Denis McDonough; Martin Paone, Deputy Assistant to the President for Legislative Affairs; and Alejandro Perez, Deputy Assistant to the President for Legislative Affairs and House Liaison. (Official White House Photo by Pete Souza)

President Barack Obama will nominate federal Court of Appeals Judge Merrick Garland to the U.S. Supreme Court to replace the late Justice Antonin Scalia, PPD has confirmed.

“Today, I will announce the person I believe is eminently qualified to sit on the Supreme Court,” Obama said in the statement, which claimed that the president had “consulted with legal experts and people across the political spectrum, both inside and outside government.”

President Obama narrowed the list of possible nominees to three appeals court judges: Merrick Garland, the chief judge of the appeals courts in Washington, D.C.; Sri Srinivasan, a judge on that court; and Paul Watford of the appeals courts based in San Francisco.

Senate Republicans have vowed not to hold hearings or votes on a potential U.S. Supreme Court nominee until after November’s presidential election, arguing that it is their constitutional right not to consent. The court has been divided between four conservative and four liberal justices since Scalia’s death Feb. 13, a leading conservative voice on the high court.

Justice Scalia had already made several rulings that had not been announced, but those votes have been dismissed as is precedent.

Meanwhile, President Obama, who has already had the opportunity to appoint two justices to the court, said it is his “constitutional duty” to make the nomination “and one of the most important decisions that I — or any president — will make.”

Both nominees–Justice Elena Kagan and Sonia Sotomayor–are on the rather far left of the political spectrum and were confirmed in the U.S. Senate with the help of a majority of Republicans. Judge Garland, 63, served on the D.C. appellate court since 1997, when he was nominated by former President Bill Clinton and confirmed by a 76-23 Senate vote. He has been the appeals court’s chief judge since 2013. Reuters reported that Garland was already considered for the high court by President Obama in 2009 before the president eventually nominated Justice Sotomayor.

Judge Garland is allegedly a political moderate, though still undoubtedly to the Left on several hot button issues, to include individual gun rights and the Second Amendment. Ironically, there are some on the Left who will not be happy with the president, though they will be far more quite than those seeking to rally opposition to the nomination.

“No. Look, all of the Republicans have been clear,” Sen. Mike Utah, R-Utah, said in response to whether Republicans would give him a hearing. “This is a lifetime appointment and the American people will have an opportunity to weigh in.”

President Barack Obama will nominate federal Court

Hillary-Clinton-Bernie-Sanders-Iowa-Caucus

Vermont Sen. Bernie Sanders, left, at the at the Holiday Inn on Feb. 1, 2016 in Des Moines, Iowa, while Hillary Clinton, right, speaks on the evening of the Iowa Democratic caucus, Feb. 1, 2016. (Photo: Joshua Lott/Getty Images/AP)

Democrats trash businesses. But if businesses promised things the way politicians do, the owners would be jailed for fraud. It’s not legal to promise more than you can deliver.

I don’t suggest that prosecutors should go after politicians who lie. Voters can do that. Political speech should be free.

But politicians’ promises are routinely repulsive. I’m thankful that most of their promises will be broken.

For my TV show, I listed this presidential season’s worst promises. Here are a few.

–Donald Trump says he’ll impose a 45 percent tariff on goods from China and 35 percent on any Ford car imports from Mexico.

This wins Trump votes because so many Americans believe that trade “takes away” American jobs. Trade does actually take away some. Some autoworkers lose work when plants move overseas. That’s the “seen” loss. But the unseen benefit is that when trade is allowed, more Americans gain jobs. We get better and cheaper products, too.

The historical evidence is clear. When countries close borders, stagnation and poverty follow. When trade is allowed, there are winners and losers, but most people prosper. The gains are harder to see because they are spread throughout the economy, but they are very real nevertheless. The chance that President Donald Trump would start a trade war scares me a lot.

–Bernie Sanders promises free college and Hillary Clinton offers “high-quality preschool.”

But government has no money of its own. “Free” isn’t free. Taxpayers and, later, other students pay tuition bloated by college loans. Taxpayers also pay for preschool that won’t be “high quality” — or at least won’t stay high quality. Oklahoma and Georgia already tried universal preschool. By third grade, student gains disappeared. Of course, the extra spending — that continued.

–Sanders and Clinton also want the national minimum wage raised — Clinton to $12 and Sanders to $15.

Do people think that means Sanders is more generous than Clinton? If we could just pass a law and increase people’s pay without harming businesses and making them less likely to hire in the first place, why not raise the minimum to $22? Or $83? Businesses pay according to value they get in return, like everyone else. No law can make you worth more to an employer. It just makes you more likely to get laid off. Or never hired.

–All current Republican candidates promise to increase military spending. They always do.

Republicans say our military has been “gutted.” But in inflation-adjusted dollars, we spend as much as we did during the Cold War. It’s true that America has fewer planes and fewer ships than we once did. But we have better and deadlier planes and ships. America is going broke but still spends $600 billion on defense, more than the next seven nations combined. That’s not “gutting” the military.

If we didn’t intervene in so many foreign countries, we could focus on actual defense, rather than nation building. Since conservatives are the ones who say they want to spend less, here’s a great place to start.

–Donald Trump promises “a mandatory death sentence” to anyone who kills a police officer.

But the president cannot issue any criminal penalties. Does Trump care about the Constitution? Despite media hype about a “war on cops,” the last few years have been the safest for cops — ever. It’s terrible when anyone gets killed, but we do not have a violent crime crisis on our hands. And what about the poor guy whose house is raided by mistake — who thinks it’s a home invasion and shoots in self-defense? Will he be executed, too?

Not every political promise was bad this year. Donald Trump was smart to change his mind and say America should admit more skilled immigrants. Bernie Sanders wants to “rethink” the war on drugs. Ted Cruz promises to eliminate the departments of Education, Energy, Commerce, Housing and Urban Development and more.

If only there were more good promises to praise.

John Stossel: Democrats trash businesses. But if

Donald-Trump-CNN-Republican-Debate-FL

“So far I cannot believe how civil it’s been up here,” Donald J. Trump said at the Republican debate hosted by CNN in Florida. The comment came a mild exchange with Sen. Ted Cruz over the senator’s flip-flops on ethanol and immigration. (Photo: AP)

Donald Trump has defeated Texas Sen. Ted Cruz in the Illinois Republican Primary, notching his third win behind Florida (99 delegates), and North Carolina. Illinois awards a portion (12) of its delegates based on the winner of the statewide vote, with another 54 delegates awarded on the basis of the vote in congressional districts.

As the vote appears now, Mr. Trump could potentially make up for his loss in Ohio to Gov. John Kasich by winner the total vote in each of the congressional districts. With 41.8% of the vote reporting, the trend makes it very possible.

The Republican frontrunner sought to unify the party in his speech in Palm Beach, Florida, telling the party they should embrace the enormous voter-turnout and excitement generated by his candidacy.

“We have to bring this together,” Mr. Trump said. “We have to unify. Something is happening in this country and we have to embrace it.”

Candidate Popular
Vote
Delegate Votes
Soft
Pledged
Soft
Unpledged
Soft
Total
Hard Total
Trump, Donald John, Sr. 548,529  38.84% 52  75.36%   52  75.36% 52  75.36%
Cruz, Rafael Edward “Ted” 428,361  30.33% 9  13.04%   9  13.04% 9  13.04%
Kasich, John Richard 278,239  19.70% 8  11.59%   8  11.59% 8  11.59%
Rubio, Marco A. 122,209   8.65%        
Carson, Benjamin Solomon “Ben”, Sr. 11,141   0.79%        
Bush, John Ellis “Jeb” 10,766   0.76%        
Paul, Randal H. “Rand” 4,591   0.33%        
Christie, Christopher James “Chris” 3,263   0.23%        
Huckabee, Michael Dale “Mike” 2,658   0.19%        
Fiorina, Carleton Sneed “Carly” 1,495   0.11%        
Santorum, Richard John “Rick” 1,123   0.08%        
Uncommitted          
Total 1,412,375 100.00% 69 100.00% 0 69 100.00% 69 100.00%

Donald Trump has defeated Texas Sen. Ted

Donald-Trump-Ted-Cruz

Donald Trump, left, and Texas Sen. Ted Cruz, right. (Photos: AP)

Donald Trump has defeated Texas Sen. Ted Cruz in the North Carolina Republican Primary, adding another delegate-rich swing state to The Donald’s category. Mr. Trump will notch somewhere around 29 delegates in the Tar Heel State, while Sen. Cruz will haul in around around 26 delegates.

The big delegate haul of the night came from Florida, where Mr. Trump netted 99 delegates. But he came up short in Ohio, where hometown Gov. John Kasich took the 66 delegates in the Buckeye State. However, Gov. Kasich has little path forward, needing to win 110% of the remaining delegates.

Candidate Popular
Vote
Delegate Votes
Soft
Pledged
Soft
Unpledged
Soft
Total
Hard Total
Trump, Donald John, Sr. 458,140  40.24% 30  41.67%   30  41.67% 30  41.67%
Cruz, Rafael Edward “Ted” 418,638  36.77% 27  37.50%   27  37.50% 27  37.50%
Kasich, John Richard 144,289  12.67% 9  12.50%   9  12.50% 9  12.50%
Rubio, Marco A. 87,856   7.72% 6   8.33%   6   8.33% 6   8.33%
Carson, Benjamin Solomon “Ben”, Sr. 10,910   0.96%        
No Preference 6,015   0.53%        
Bush, John Ellis “Jeb” 3,849   0.34%        
Huckabee, Michael Dale “Mike” 3,079   0.27%        
Paul, Randal H. “Rand” 2,713   0.24%        
Christie, Christopher James “Chris” 1,242   0.11%        
Fiorina, Carleton Sneed “Carly” 949   0.08%        
Santorum, Richard John “Rick” 657   0.06%        
Gilmore, James Stuart “Jim”, III 274   0.02%        
Uncommitted          
Total 1,138,611 100.00% 72 100.00%   72 100.00% 72 100.00%

Donald Trump has defeated Texas Sen. Ted

Donald-Trump-John-Kasich

Donald Trump, left, holds a rally in Columbus, Ohio, while Ohio Gov. John Kasich speaks in Manchester, N.H. (Photos: AP)

Ohio Gov. John Kasich has won the Ohio Republican Primary, fending off frontrunner Donald Trump in his own home state where he had more than the people on his side. The Ohio Republican Party broke a 64-year tradition of neutrality to stop Mr. Trump from winning the Ohio Republican Primary on Tuesday, it’s 66 winner-take-all delegates.

The idea is to play spoiler, as there is zero chance Gov. Kasich can win an outright majority of delegates. In order to do so, he’s need to win 110% of the remaining delegates, which is statistically impossible.

“I want you to know the campaign goes on,” Gov. Kasich said. “I’m not going to take the lowest road to the highest office.”

Worth noting, that line was originally used by the governor in New Hampshire in reference to former Florida Gov. Jeb Bush, who called into question his record in the Buckeye State. Gov. Bush criticized his expansion of Medicaid under ObamaCare, which overshot the budget projections by more than 30%, according to The Club for Growth. However, the imbalance wasn’t designed to impact the Buckeye State until the first year after Kasich’s successor takes over, whether it be Democrat or Republican.

Ohio Gov. John Kasich has won the

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