• Tag Archives taxes

  • Here’s How Biden Is Making It Even Harder to Buy a Home

    Posted on by Azrael Comment

    The US housing market is extremely competitive right now; prices are high and houses are selling fast.

    When Molly Rodela — who is a wife as well as a mother to two kids — was finally able to find a suitable house for a reasonable price online, she could not spend any time considering the decision. She contacted her agent, visited the house without her husband, and then put in an offer $20,000 above the asking price all in the same day.

    With her quick action, the Rodelas were able to get the house. But many have not been so lucky.

    Moreover, the factors behind the tight housing market are concerning.

    For homebuilders across the country, it has become harder and harder to create affordably-priced housing. One of the reasons is the increased labor costs associated with a shortage of skilled workers.

    And a huge factor has been the recent spike in the price of lumber. In fact, the National Association of Homebuilders recently reported that the cost of building a new house has gone up by $24,000 due to soaring lumber prices alone.

    For homebuyers, the issue may go from bad to worse.

    The Biden administration recently took the first step to double tariffs on Canadian lumber from roughly nine to 18 percent.

    In doing so, the administration is falling for an age-old economic fallacy.

    In his timeless book, Economics In One Lesson, Henry Hazlitt argued that “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

    In other words, Hazlitt believes that we must not assess policy with blinders on, but rather with a broad understanding of the policy’s consequences.

    In the chapter titled “Who’s ‘Protected’ by Tariffs,” he applied this principle to anti-trade protectionism specifically, pointing out that people who support tariffs fall for the fallacy of “considering merely the immediate effects of a tariff on special groups, and neglecting to consider its long-run effects on the whole community.”

    In this case, Biden is justifying his tariff hike by its immediate effects on the American lumber industry. He argues that when Canada subsidizes their lumber industry, they are able to undercut US producers in an unfair way. So, by implementing a tariff on Canadian lumber, Biden is making Canadian lumber more expensive, thus giving American lumber companies a competitive advantage.

    But a true practitioner of the art of economics would then ask: who else does the tariff impact, and how?

    One important question to ask, for instance, would be how does the tariff impact American industries that purchase lumber? The answer: they have to pay higher prices.

    The burden of these increased production costs inevitably ends up being passed onto consumers. Basic economics tells us that when the price of one resource used to produce a good goes up, the price that the consumer eventually pays for that good rises as well.

    This is exactly why home buyers — and consumers of products that use lumber in general — will be the victims of Biden’s lumber tariff.

    A shortage of lumber as a result of the pandemic led to its price in May being up nearly 400 percent over the past year. But prices have begun to drop again because production has started to ramp up. To increase the tariff — which is just an import tax — would serve to restrict the supply of lumber. This would not allow prices to decrease back to pre-pandemic levels.

    The natural consequence of high lumber prices is the increase in price for all of the goods that use lumber in their production. This does not just stop at houses, but rather includes things such as furniture and storage appliances as well. The average consumer will then have to pay a higher price for all of them.

    Tariffs are not only harmful to individual consumers, but the economy as a whole. As Hazlitt points out, “Higher prices in one area mean that they will not be able to spend that money on something else, thus hurting other industries as well.”

    For example, if, because of Biden’s tariff hike, people have to spend more on houses and other things made with lumber, they will have less money to spend on things such as restaurants, tourism, and consumer technology. Therefore, workers and investors in those industries will be economically disadvantaged by the tariffs, too.

    As Hazlitt says, “In order that one industry might grow or come into existence, a hundred other industries would have to shrink.”

    At the core of the matter, President Biden is making the mistake of only looking at the effect of this tariff on a special group — the US lumber industry. But, in doing so, he is neglecting the millions of Americans who — far from being protected — will be economically harmed by the tariff hike, including consumers (especially homebuyers), workers, and investors.

    Tariffs, much like any number of other well-meaning government programs, seem like a plausible solution to certain problems we face. But, if we think like an economist and widen our lens to encompass the bigger picture, it becomes clear that they will primarily hurt the American people.

    Buy Economics in One Lesson from the FEE Store.


    Jack Elbaum

    Jack Elbaum is a Hazlitt Writing Fellow at FEE and an incoming sophomore at George Washington University. His writing has been featured in The Wall Street Journal, Newsweek, The New York Post, and the Washington Examiner. You can contact him at jackelbaum16@gmail.com and follow him on Twitter @Jack_Elbaum.

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


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  • Jeff Bezos Just Endorsed Corporate Tax Hikes. Here’s Why Amazon’s Support Should Be a Giant Red Flag

    Posted on by Azrael Comment

    The Biden administration and some (but not all) of their Democratic allies in Congress want to raise the corporate tax rate to 28 percent. They say this would help the working class and hurt Big Business, finally making corporations “pay their fair share.” But if that were true, giant corporations like Amazon wouldn’t be endorsing the change. 

    Yet that’s exactly what Jeff Bezos just did. 

    “We support the Biden Administration’s focus on making bold investments in American infrastructure,” the Amazon CEO wrote in a public statement. “We recognize this investment will require concessions from all sides—both on the specifics of what’s included as well as how it gets paid for… we’re supportive of a rise in the corporate tax rate.” (Emphasis mine).

    Amazon has also lobbied aggressively for other big-government policies like a $15 federal minimum wage. At first glance, this might seem like an endorsement of the policies: see, they wouldn’t be so bad for business after all. Yet it’s actually a giant red flag. 

    When Big Business comes together to collude with Big Government, it usually means everyday people are about to get ripped off.

    When CEOs and politicians are able to agree on seemingly anti-business policies, it’s often because they know the government roadblocks instituted will entrench their market dominance and ultimately redound to the C Suite’s benefit. Amazon knows it can weather the storm of higher corporate taxes (right now it pays very little in corporate tax because it exploits tax breaks) but many of its smaller competitors cannot. Meanwhile, Bezos also knows that his company can afford armies of tax experts, accountants, and lawyers to exploit every loophole to minimize the damage; a luxury many less-dominant rivals won’t have.

    And, most importantly, a wealth of economic research shows that workers and consumers really bear the majority of the costs of corporate taxes through lower wages and higher prices. 

    “The elementary fact is that ‘business’ does not and cannot pay taxes,” Nobel Prize-winning economist Milton Friedman once explained. “Only people can pay taxes. Corporate officials may sign the check, but the money that they forward to Internal Revenue comes from the corporation’s employees, customers or stockholders.”

    More specifically, a study by the Tax Foundation found that Biden’s proposed corporate tax hike would shrink the overall size of the economy, reduce wages, and eliminate 159,000 jobs. 

    Of course, Bezos would hardly notice a blip in his bank account. The workers left unemployed would have a different experience.

    Amazon is not truly altruistic or “woke.” The company knows that the costs of proposed corporate tax hikes would mostly fall on workers and hurt smaller retail competitors. Amazon just hopes that you don’t know that—and that Americans mistake its cronyism for altruism.


    Brad Polumbo

    Brad Polumbo (@Brad_Polumbo) is a libertarian-conservative journalist and Policy Correspondent at the Foundation for Economic Education.

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


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  • Top 20% Gets 6x More Benefits from Student Debt Cancellation than Bottom 20%, New Study Finds

    Posted on by Azrael Comment

    From Sen. Elizabeth Warren to Rep. Alexandria Ocasio-Cortez, some of the most prominent progressive politicians in the country are pushing hard for widespread student debt cancelation. So, it’s fascinating to see a new study show that forcing taxpayers to pay down the roughly $1.5 trillion in government-held student debt is not a “progressive” policy by any stretch.

    Note that just one in three American adults over age 25 actually has a bachelor’s degree. This population, naturally, holds almost all student debt. Yet college graduates typically make 85 percent more than those with only a high school diploma and earn roughly $1 million more over a lifetime.

    So any government policy that forces taxpayers to pay off loans held by a relatively well-off slice of society is actually regressive, meaning it disproportionately helps the wealthy. You don’t have to take my word for it—this is the finding of a new University of Chicago study.

    Economists Sylvain Catherine and Constantine Yannelis crunched the numbers to conclude that full student debt cancellation would be a “highly regressive policy” and award $192 billion to the top 20 percent of income earners, yet just $29 billion to the bottom 20 percent.

    The study also examines other proposals to have taxpayers pay off $10,000 or $50,000 in debt per person, rather than all debt. It finds similarly regressive outcomes for these proposals as well.

    “Outstanding student debt is inversely correlated with economic hardship,” study co-author Sylvain Catherine writes. “So it is difficult to design a forgiveness policy that does not accentuate inequality.”

    This finding is not an outlier.

    In fact, other research from left-leaning institutions like the Urban Institute has reached the same conclusion. So, we’re left with the simple fact that one of the Democratic Party’s top agenda items is a taxpayer-financed handout to the wealthy. And, of course, student debt cancellation ignores the real reason college is so expensive in the first place.

    But we nonetheless face an important question: Why are supposedly progressive politicians, elected as champions of the working class, using their power to push for handouts for the wealthy?

    One possible answer is that sweeping big-government policies involve the centralization of so much power that they will inevitably be corrupted by favoritism and clientelism.

    “There is no such thing as a just and fair method of exercising the tremendous power that interventionism puts into the hands of the legislature and the executive,” Austrian economist Ludwig von Mises once wrote. “In many fields of the administration of interventionist measures, favoritism simply cannot be avoided.”

    And as far as favoritism is concerned, guess who votes overwhelmingly for progressive Democratic politicians? That’s right: Young people and the well-educated.

    So, while it’s disheartening to see top Democrats seek to exploit the federal taxpayer to their wealthy constituents’ benefit, it’s not exactly surprising. The only way to prevent these kinds of abuses is to limit the power of government itself.

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


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