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  • Trump Just Imposed a New Tax on Lumber

    Trump Just Imposed a New Tax on Lumber

    There are a lot of news reports today about Trump’s decision to impose stiff tariffs on American companies (home builders) who buy Canadian lumber, here is a sample: “Trump slaps first tariffs on Canadian lumber,” “Tariff on Canadian lumber sends a stern message,” “Trump Administration To Impose 20 Percent Tariff On Canadian Lumber,” and “Trump slaps duty on lumber from Canada.” In each case, those news reports miss a few very critical points: a) Canadian lumber doesn’t pay the tariff, b) Canadian lumber companies won’t pay the tariff, and c) American lumber-buying companies (mostly home builders) will pay the tariff, which will be passed along to home buyers in the form of higher new home prices. Therefore, it’s more accurate to report that Trump has just slapped stiff 20% tariffs (lumber taxes) on the American people, not Canada.

    I’ve taken the liberty of making some edits to the New York Times article “In New Trade Front, Trump Slaps Tariffs on Canadian Lumber” to reflect more accurately the viewpoint of the American consumer and American lumber-buying companies (home builders), and expose tariffs for what they really are: price-raising, job-killing, prosperity-destroying trade policies that involve the government-sanctioned “legal plunder” of Americans (home buyers and home builders in this case) by domestic producers (domestic lumber producers):

    New Title: “In New Trade Front, Trump Slaps Stiff Import Taxes on American Home Builders Buying Canadian Lumber”

    WASHINGTON — The Trump administration announced on Monday that it would impose new tariffs taxes on Americans who purchase Canadian softwood lumber imports, escalating a longstanding conflict with America’s second-largest trading partner.

    The Commerce Department determined that Canada had been improperly generously subsidizing the sale of American companies who buy softwood lumber products to the United States from Canada, and after failed negotiations to keep lumber prices internationally competitive, Washington decided unfairly to retaliate against American lumber buyers with tariffs of 3 percent to 24 percent. The penalties (taxes) imposed on Americans will be collected retroactively on imports dating back 90 days.

    The decision came days after President Trump complained bitterly on behalf of U.S. dairy farmers about Canada’s dairy trade practice of slashing their milk prices (to the great benefit of Americans, especially the poor), and the tariffs on Americans signaled a harsher turn in his relationship with Canada the American people even as he seeks to renegotiate the North American Free Trade Agreement. While he has often assailed China, Mexico and others for their trade practices, he seemed to have forged a strong relationship with Canada’s prime minister, Justin Trudeau.

    The United States lumber companies and Canada have been rivals and at odds over softwood lumber in one form or another since the 19th century, with the current dispute tracing back to 1982. The United States imported $5.7 billion in softwood lumber last year alone, mainly for residential home building. Raising prices on imported Canadian lumber by 20 percent will likely lead to higher prices for new homes, and could slow home building and lead to layoffs for U.S. construction workers.

    Therefore, the tariffs taxes on American home builders buying Canadian lumber are likely to be opposed by American homebuilders, who say they raise the cost of new houses for American home buyers. A study last year by the National Association of Home Builders found that a 15 percent tariff tax on American home builders buying imported lumber would increase new home prices by 4.2 percent and cost 4,666 full-time construction jobs.

    When will the public finally come to understand these basic economic facts about trade protectionism and tariffs?

    1. Tariffs are simply taxes on imports, and those taxes are paid for by Americans, not foreigners. In this case, Canadian lumber producers aren’t paying the 20% tariff/tax, American lumber buyers (home builders) pay the tax on imported lumber from Canada, and those taxes on lumber are eventually paid for by American home buyers.

    2. Tariffs on imported lumber might help protect, save or create jobs in one US industry (lumber producers), but will destroy more jobs in other US industries (construction in this case).

    3. US producers only engage in rent-seeking to use government force to be protected against foreign rivals when foreign competitors (Canadian lumber producers in this case) offer lower prices to Americans than domestic producers. That’s why it’s called “protectionism” — it’s protection for high-cost domestic companies against low-cost foreign competition.

    4. It shouldn’t really matter why foreign producers are better able to serve American consumers with lower prices than domestic producers. If China “manipulates” its currency to offer Americans lower prices that otherwise would be the case, that policy provides net benefits for Americans. If Canada “unfairly” subsidizes its lumber producers, that’s a form of foreign aid, and a gift from the citizens of Canada to the citizens of the United States. If we wouldn’t complain about free lumber from Canada, we shouldn’t complain about low lumber prices that might be subsidized by Canadian citizens.

    5. Protectionism should be seen for what it really is: Trade policies that favor domestic producers over consumers, raise taxes and prices for Americans, and in the process destroy jobs and prosperity. In other words, it’s a sure formula to make a country poor, not great.

    Bottom Line: To paraphrase a comment Milton Friedman once made about minimum wage laws, trade protectionism is a monument to the power of superficial thinking. Superficial and short-sighted because it ignores the complexities and dynamics of world markets, and ignores all of the unseen, delayed and hidden costs of trade protectionism that will make the American economy weak again, not great again.

    Republished from AEI.


    Mark J. Perry

    Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

    This article was originally published on FEE.org. Read the original article.



  • States Introduce Dubious Anti-Pornography Legislation to Ransom the Internet

    More than a dozen state legislatures are considering a bill called the “Human Trafficking Prevention Act,” which has nothing to do with human trafficking and all to do with one man’s crusade against pornography at the expense of free speech.

    At its heart, the model bill would require device manufacturers to pre-install “obscenity” filters on devices like cell phones, tablets, and computers. Consumers would be forced to pony up $20 per device in order to surf the Internet without state censorship.  The legislation is not only technologically unworkable, it violates the First Amendment and significantly burdens consumers and businesses.

    Perhaps more shocking is the bill’s provenance. The driving force behind the legislation is a man named Mark Sevier, who has been using the alias “Chris Severe” to contact legislators. According to the Daily Beast, Sevier is a disbarred attorney who has sued major tech companies, blaming them for his pornography addiction, and sued states for the right to marry his laptop.  Reporters Ben Collins and Brandy Zadrozny uncovered a lengthy legal history for Sevier, including an open arrest warrant and stalking convictions, as well as evidence that Sevier misrepresented his own experience working with anti-trafficking non-profits.

    The bill has been introduced in some form Alabama, Florida, Georgia, Indiana, Louisiana, New Jersey, North Dakota, Oklahoma, South Carolina, Texas, West Virginia, and Wyoming (list here). We recommend that any legislator who has to consider this bill read the Daily Beast’s investigation.

    But that’s not why they should vote against the Human Trafficking Prevention Act. They should kill this legislation because it’s just plain, awful policy.  Obviously, each version of the legislation varies, but here is the general gist.



    Read EFF’s opposition letter against H.3003, South Carolina’s iteration of the Human Trafficking Prevention Act. 

    Pre-installed Filters

    Manufacturers of Internet-connected devices would have to pre-install filters to block pornography, including “revenge porn.” Companies would also have to ensure that all child pornography, “revenge pornography,” and “any hub that facilitates prostitution” are rendered inaccessible. Most iterations of the bill require this filtering technology to be turned on and locked in the on position, by default.

    This is terrible for consumer choice because it forces people to purchase a software product they don’t necessarily want. It’s also terrible for free speech because it restrains what you can see. Because of the risk of legal liability, companies are more likely to over-censor, blocking content by default rather than giving websites the benefit of the doubt.  The proscriptions are also technologically unworkable: for example, an algorithm can hardly determine whether an item of pornography is “revenge” or consensual or whether a site is a hub for prostitution.

    To be clear, unlocking such filters would not just be about accessing pornography.  A user could be seeking to improve the performance of their computer by deleting unnecessary software.  A parent may want to install premium child safety software, which may not play well with the default software. And, of course, many users will simply want to freely surf the Internet without repeatedly being denied access to sites mistakenly swept up in the censorship net.

    A Censorship Tax

    The model bills would require consumers to pay a $20 fee to unlock each of their devices to exercise their First Amendment rights to look at legal content. Consumers could end up paying a small fortune to unlock their routers, smartphones, tablets, and desktop computers.

    Data Collection

    Anyone who wants to unlock the filters on their devices would have to put their request in writing. Then they’d be required to show ID, be subjected to a “written warning regarding the potential dangers” of removing the obscenity filter, and then would have to sign a form acknowledging they were shown that warning. That means stores would be maintaining private records on everyone who wanted their “Human Trafficking” filters removed.

    The Censorship Machine

    The bill would force the companies we rely upon to ensure open access to the Internet to create a massive censorship apparatus that is easily abused.

    Under the bill, tech companies would be required to operate call centers or online reporting centers to monitor complaints that a particular site isn’t included in the filter or complaints that a site isn’t being properly filtered. Not only that, but the bill specifically says they must “ensure that all child pornography and revenge pornography is inaccessible on the product” putting immense pressure on companies to aggressively and preemptively block websites to avoid legal liability out of fear of just one illegal or forbidden image making it past their filters. Social media sites would only be immune if they also create a reporting center and “remain reasonably proactive in removing reported obscene content.”

    It’s unfortunate that the Human Trafficking Prevention Act has gained traction in so many states, but we’re pleased to see that some, such as Wyoming and North Dakota, have already rejected it. Legislators should do the right thing: uphold the Constitution, protect consumers, and not use the problem of human trafficking as an excuse to promote this individual’s agenda against pornography.

    Source: States Introduce Dubious Anti-Pornography Legislation to Ransom the Internet | Electronic Frontier Foundation


  • Taxes Are Worse than You Thought

    Taxes Are Worse than You Thought

    We are quickly approaching the deadline for filing (and paying) our federal and state income taxes (extended to April 18 this year because of Emancipation Day), and that means it’s time for my annual post at tax time to help put things in perspective.

    1. Some Historical Perspective. “In the beginning” when the US federal income tax was first introduced in 1913, it used to be a lot, lot simpler and a lot easier to file taxes; so easy in fact that it was basically like filling out your federal tax return on a postcard.



    For example, page 1 of the original IRS 1040 income tax form from 1913 appears above. There were only four pages in the original 1040 form, including two pages of worksheets, the actual one-page 1040 form above, and only one page of instructions (view all four pages here). In contrast, just the current 1040 instructions for 2016, without any forms, runs 106 pages.

    Individual federal income tax rates started at 1% in 1913, and the maximum marginal income tax rate was only 7% on incomes above $500,000 (more than $12 million in today’s dollars). The personal exemption in 1913 was $3,000 for individuals ($72,850 in today’s dollars) and $4,000 for married couples ($97,000 in today’s dollars), meaning that very few Americans had to pay federal income tax since the average income in 1913 was only about $750. The Tax Foundation has historical federal income tax rates for every year between 1913 and 2013 here for tax brackets expressed in both nominal dollars and inflation-adjusted dollars.

    2. Tax Graphic of the Day (above). Some more historical perspective…

    3. Opportunity Cost. In a 2012 report to Congress (most recent data available), the National Taxpayer Advocate estimated that American taxpayers and businesses spend 6.1 billion hours every year complying with the income tax code, based on IRS estimates of how much time taxpayers (both individual and businesses) spend collecting data for, and filling out their tax forms. In addition, Americans will spend an estimated $10 billion for the services of tax preparation firms and $2 billion on tax-preparation software programs like TurboTax that still require many hours of time.

    The amount of time spent on income tax compliance – 6.1 billion hours – would be the equivalent of more than 3 million Americans working full-time, year-round (or 2.1% of total US payrolls of 145.9 million). By way of comparison, the federal government currently employs 2.8 million full-time workers, and Wal-Mart, the world’s largest private employer, currently employs 2.2 million workers worldwide and 1.3 million workers in the US (both full-time and part-time). At the current average hourly wage of $21.90 an hour, the dollar value of the opportunity cost associated with tax filing would be more than $131 billion, slightly more than the 2016 GDP of Washington, D.C. ($127 billion).

    As T.R. Reid pointed out recently in a New York Times op-ed, it really doesn’t have to be that way. For example:

    In Japan, you get a postcard in early spring from Kokuzeicho (Japan’s IRS) that says how much you earned last year, how much tax you owed, and how much was withheld. If you disagree, you go into the tax office to work it out. For nearly everybody, though, the numbers are correct, so you never have to file a return.

    4. Tax Progressivity. And just how progressive is the US federal income tax system? Very, very progressive, see the chart above showing average effective tax rates by various income groups in 2014 (most recent year available). That pattern of income tax progressivity explains why almost all federal income taxes are paid by the top income groups (see next few items).

    5. Tax Progressivity and Tax Burden. According to the most recent IRS data, the federal income tax shares by six different income groups are displayed in the chart above. Almost all federal income taxes (97.3%) are paid by the top 50%, more than 2/3 of income taxes are paid for by the top 10% and nearly 40% of taxes are paid by the top 1% of taxpayers. For all of the criticism and negative publicity the “Top 1%” get, I’d like to personally thank that group this year at tax time for shouldering such a disproportionate share of our collective tax burden. It’s a form of “disparate impact” on the 1% that we all benefit from! So, I say “Thank You Top 1%” from all of us in the bottom 99% for your valuable and significant contribution to our nation’s tax burden.

     

    6. Tax Burden of the Top 1% vs. the Bottom 95%. The chart above gives us another perspective on the tax burden of the top 1% over time, and compares the tax share of that group to the tax burden of the bottom 95% in every year between 1980 and 2014 (most recent year available). In 2014, the top 1% earned 20.6% of the total income reported to the IRS and paid 39.4% of all federal income taxes collected ($543 billion). The bottom 95% of US taxpayers earned 64% of total income (almost three times as much as the top 1%) and paid only 40.5% of the total income taxes collected ($550 billion). So once again, to the 1.395 million taxpayers in the top 1%, I say “Thank You” for paying almost as much in federal income taxes in 2013 as the 132.6 million taxpayers in the bottom 95% by income.

    7. Bowling vs. Taxes. Speaking of the progressivity of income taxes, here’s a thought about the way we tax income vs. the way we score bowling. Under the scoring rules of bowling, you get rewarded, not penalized, for being successful. If you get a spare, the scoring system rewards you by adding the pins from the next ball into the current frame, and if you get a strike you get rewarded by adding your next 2 balls into the current frame.

    Under our progressive income tax system with seven tax rates in 2015 increasing from 10% to 39.6%, you get penalized, not rewarded, for being successful, productive and entrepreneurial, because the more you earn, the higher the tax rate you pay. The top marginal income tax rate has been as high as 91% in the 1950s and 1960s, and 70% in the 1970s. If we scored bowling the way we tax income, we would subtract, not add pins for a spare or strike, i.e., penalize successful bowling. If we taxed income the way we score bowling, we would have lower, not higher, tax rates on our most successful income-earners.

    8. Coincidence? Why are Tax Day (April 15) and Voting Day (first Tuesday in November) so far apart? Couldn’t we move Tax Day to the first Monday in November, or Voting Day to the first Tuesday following April 15?

    9. What’s in a Name? Why do we call the IRS a “service?” Couldn’t it have been named a department like Labor, a bureau like the BLS or the FBI, a commission like the FTC, an administration like FDA, an agency like EPA, etc.?

    10. 20 Inspirational Quotes about Taxes from Forbes, here are a few good ones:

    “The taxpayer: that’s someone who works for the federal government, but doesn’t have to take a civil service examination.” – Ronald Reagan

    “We have what it takes to take what you have.” – Suggested IRS Motto 

    “It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates.” – John F. Kennedy

    I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money.” – Arthur Godfrey

    “A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money.” – G. Gordon Liddy

    Happy Tax Day!

    Republished from AEI.


    Mark J. Perry

    Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

    This article was originally published on FEE.org. Read the original article.