Some Questions on Tax Reform

Washington has tax cut fever.  Politicians and lobbyists are discussing billions of dollars like it’s pocket change.  Since the plan is changing daily, we thought we’d lay down a few questions we’re using at the Shire to decide whether we would support the final bill:

Is it (much) simpler?

The current tax code is ridiculously complex.  On a routine basis, Congress reacts to the wishes of interest groups and passes new tax credits and deductions.  Of course, the government needs money to fund its operations, so taxes are raised in other places.  Over the years, the back and forth of these two factors have conspired to create a dizzying system.  Our current tax code contains over 4 million words and more than 200 tax credits.  Obamacare added so many new tax provisions that the IRS has published more than 100 pages of guidance on how to comply with it.  It is no wonder that 6 out of 10 Americans hire an accountant to help them file their taxes.

The tax code’s complexity is corrosive to our society.  Average people believe (with some justification) that it is tilted towards the rich and connected.  They feel like chumps if they pay their fair share.  Congress needs to take this opportunity to simplify the code.  We like the spirit of Congressman Brady’s postcard idea — let’s see if they can get anywhere near it in the final product.

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Does it Help Families?

One of the important selling points of the Republican tax plan is that will drop the corporate tax rate from 35% to 20%.  Given that America’s corporate tax rate is among the highest in the world, reducing the rate seems like a good way to increase the competitiveness of America’s companies.  We tend to think that a better business climate will accelerate economic growth which will help moms and dads everywhere.  But, that can’t be the only benefit — the final bill should tangibly help the average American.

Is it Too Radical?

While we are always open for ways to improve policy (especially one as broken as the tax code), it is important for lawmakers to know that real people have built their lives around the current situation.  For example, homeowners have staked their financial future partly around the value provided by the mortgage interest deduction.  Even if you accept the argument that the mortgage interest deduction is inefficient or ultimately raises house prices, completely eliminating it would throw the housing market into chaos.  It appears as though lawmakers have heard this message — their current proposal retains the deduction for most people.

Other provisions of the tax code to take great care before changing include, at a minimum, deductions for dependents (which parents rely on), the deduction for catastrophic medical costs and retirement tax provisions (like the 401(k) and IRA deductions).  While some adjustments may be appropriate, Congress should be acutely aware of the planning that people have done when they consider the final bill.

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One Last Thing — Don’t Focus on the Estate Tax

We’d offer one final piece of advice for Members of Congress — don’t worry so much about repealing the Estate Tax.  While the idea of taxing death may be unappealing, the practical impact of the current system isn’t that great.  Today’s Estate Tax doesn’t take effect until a married couple has an estate of greater than $11 million.  Only 1 in 500 estates are subject to it.  And, a full repeal costs around $200 billion over 10 years — that money could be used to cut other taxes or reduce the deficit.   We’d shift the priority to other tax provisions.

 

Pheasant Hunting in North Dakota

A few weeks ago, I joined some friends of the Shire and hunted pheasant on opening weekend in western North Dakota.  Not only was it a glorious time, but it brought home some timely lessons on how private customs and informal arrangements can work even in complex situations.

One of the interesting things about hunting in North Dakota is that all land is public unless specifically posted as private.   At least where we were, about half the land is open to everyone.  Where the private land is closed, you can still hunt it if you know the owner, know someone who does, or if you ask real nice (which works better if, like some hunters I met from Alaska, agree to throw in some salmon filets).  So, even if you own nothing but a shotgun and an orange hat, you can hunt on some of the world’s best pheasant hunting land.

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North Dakota’s largely informal hunting system shouldn’t work.  People should be too greedy and selfish to allow their land the be hunted for free.  Fights (especially among people with guns) should have broken out long ago and scared everyone into posting their land as private.  A well-meaning legislature should have passed a detailed set of laws and regulations detailing what land can be hunted by whom.  Yet, none of that has happened.  Instead, a largely informal, private system has emerged — and it works.  Thousands of landowners and tens of thousands of hunters have figured out how to protect private property while creating opportunities for people to hunt.  Sure, the state’s there in the background in case things go wrong (which is a helpful thing if it’s needed), but North Dakota has wisely taken a largely hands-off approach and allowed neighbors and friends to work things out.  We might want to consider that model across many other contexts . . .

The other thing you notice on opening weekend are the hunters in blaze orange all over the landscape, all looking for “roosters”  (male pheasants; the females are safe) to hunt.  From the outside, this might seem risky — competing groups of (mostly) men shooting deadly weapons on land of unclear provenance.  I think the average metro area resident would expect a bloodbath.  Yet, the situation is almost completely safe.  The hunters carefully follow both the formal rules of the state (which are sensible) and a series of unwritten customs to ensure safety.  For example, when you travel in your car from spot to spot, hunters empty their guns of all shells (that’s the state law) but also point their guns towards the roof to be doubly safe (that’s the custom).  Another example is found when a family allows hunting on a farm adjacent to their house.  In that situation, hunters plan their route to ensure that no shot gets even near the family dwelling.  And, of course, groups of hunters stay well clear of each other as they hunt.  These and many other laws and customs work together to nearly guarantee a safe hunt.

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After sunset, we headed back to a very rustic lodge well outside of any cell service.  Five or six groups with hunters from their teens to their seventies used a common table and cooking equipment.  Food and supplies were liberally shared between the various group as we swapped stories about the day and previous hunts.   There was laughter and bit of needling as the daily haul was compared.  After a long day of walking more than 10 miles through tough brush while carrying a gun and ammunition, people mostly just sat back and relaxed with a cold beer.  By 9:30, lights were out in every cabin as we slept the sleep of the physically tired — which is the best kind.  After all, the next day’s hunt began at dawn, and we needed our rest.

In the end, due to some lifelong hunting experts and great dogs, and despite fewer birds than normal due to a dry spring, we got our limit.  It was a very satisfying weekend.

Next . . . some unwelcome political questions intrude.

 

On the Attack in New York

America is sad and angry again this morning as the details from another terror attack on our soil become clearer.  The details, while new, paint a depressingly familiar picture of evil.  On a bright and clear Halloween afternoon, Sayfullo Saipov drove a rented truck onto a bike path in New York City with the apparent intent of killing as many people as possible.  As of this writing, 8 are dead and 11 injured.  Mr. Saipov was shot and captured.   He yelled “Allahu Akbar” (God is Great in Arabic) before he was shot, left a note at the scene praising ISIS and appears to have followed a process and route suggested by ISIS’s social media pages.

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The attacker is an Uzbek national who validly entered the U.S. as part of a process known as the Diversity Visa program.  Under this program, the U.S. runs a lottery that favors immigrants from countries that have had relatively low previous immigration to the U.S.  50,000 immigrants per year are granted entry into the U.S. under the program.

There a few points that jump out immediately.  First, the heart of man is full of evil.  Mr. Saipov was admitted into this country in good faith and was free to worship, marry and live in the manner of his choosing.  America asked very little of Mr. Saipov, and provided him with unlimited opportunity.   In return, Mr. Saipov chose to kill without personal provocation and indiscriminately.  One is left with a feeling of despair and dread.

Second, it appears that we’ll need to reconsider the Diversity Visa program.  Intuitively, it makes sense that “under-represented” countries are likely to house more people with intrinsic hostility to America than countries with whom we have more in common.  That is obviously a massive generalization, and potentially unfair, but the risks associated with the Jihadi threat are real enough to justify a significant level of caution.  We here at the Shire are generally pro-immigrant, but strong and sensible security procedures are obviously necessary in our dangerous world.  It seems to us that a program that seeks to favor immigrants with relatively few ties to America is a luxury that we can no longer afford.

We should also pause to recognize the actions of NYPD Police Officer Ryan Nash.  Officer Nash, a 28 year-old five year veteran of the force, was the first police officer on the

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scene, ran towards Mr. Saipov (who was brandishing two weapons) and shot him before he could cause more harm.  Officer Nash’s bravery is a reminder to all of us of the tremendous work that police do in the face of great danger.  While certain officers undoubtedly make mistakes or intentionally do terrible things, the overwhelming majority are like Officer Nash — courageously working every day for our safety.  They deserve our thanks, support and prayers.

Finally, our thoughts and prayers are with families mourning their loved ones and for the injured as they recover.  We cannot imagine their pain, but pray that a loving God will comfort them in their time of need.  We also encourage their families and friends to reach out and offer all possible support to them.  We are hopeful enough to believe that this will happen.

 

 

A Not So Happy Birthday to the EU

Twenty four years ago today the European Union came into being.  To its supporters, the EU represented a triumph of rational, orderly government over the provincial and archaic concept of the nation state.  Jean Monnet, the President of one EU’s early iterations, made this clear as early as 1943:  “there will be no peace in Europe, if the states are reconstituted on the basis of national sovereignty . . . the countries of Europe are too small to guarantee their peoples the necessary prosperity and social development.”

In accepting the 2012 Nobel Peace Prize on behalf of the EU, President Jose Barrasso amplified the point, stating that “the genius of the founding fathers was precisely in understanding that to guarantee peace in the 20th century nations needed to think beyond the nation-state.”  President Barrasso went on to praise the EU’s “Supranational institutions” and their “quest for a cosmopolitan order.”

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Unfortunately for the EU Supranational bureaucrats, many ordinary people have never really supported the idea that their nation is dead.  The Danes rejected EU membership in 1992 in the first popular vote on ratification.  After concessions to sovereignty by the EU, Denmark narrowly joined the EU.  Later that same year, the French people approved EU membership with only 50.8% of the vote.  The almost victorious “no” vote was based on a fear that the EU would strip the French people of their sovereignty and undermine their distinctive French culture.

The EU went on to live up to its supporters hopes and its opponents fears.  Unelected bureaucrats in Brussels passed rule after rule, burrowing deep into the fabric of European life.  In 2009, for example, the EU enacted a regulation “laying down the quality standards for bananas” in which the Eurocrats sought to protect the people of Europe from misshapen or blemished fruit.  In 2011, the EU addressed another issue of our time — restricting the ability of children under 8 to blow up balloons.  After a public outcry, the EU issued an indignant press release clarifying that they were not banning the blowing up of balloons, but only requiring that adults be present if a 7 year-old wished to inflate one.

Not quite reassured by the EU’s benevolence, 52% of the British people voted to “Brexit” the EU in a 2016 vote.  We at the Shire are wholly sympathetic to their decisive rejection of Brussels Supracrats and their attempt to fully reclaim their sovereignty.   After all, Britian fought bravely in two World Wars and was a staunch ally in the Cold War to ensure that their nation and culture would survive.  As Winston Churchill, perhaps the greatest leader of the 20th Century, said in a 1940 speech during the dark days of Nazism in Europe:

We shall not flag or fail.  We shall go on to the end.  We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air.  We shall defend our island, whatever the cost may be.  We shall fight on the beaches, we shall fight on the landing-grounds, we shall fight in the fields and in the streets, we shall fight in the hills.  We shall never surrender!

The British people determined that their small Island’s unique and special heritage was worth protecting against an EU determined to chip away at their sovereignty one meeting and regulation at a time.

Today, the fate of Brexit and Britain’s membership in the EU remains unknown, and there are many pressing and important issues to be resolved.  The Shire believes that leaders in Britain and in the EU should carefully negotiate an exit that minimizes disruption and preserves the free market system that is the chief virtue of the EU.  Or, perhaps Britain should negotiate a way to stay in the union but use their leverage to create an EU that allows Britain to more fully realize its heritage as a free and sovereign nation.  In the best case scenario, these negotiations would led to a careful re-examination of the entire EU project.

While we wait for that happy eventuality, we acknowledge the EU’s 24th Birthday on this November 1, 2017.   We hope that there won’t be many more to follow, at least as the Union is currently constructed and administered.

 

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