Category Archives: Mathematics

The Budget “Reform” Act

Now that they’ve started to tackle taxes, it’s time for the Republicans to fix this as well:

As any student of political behavior might have predicted, both parties have learned to game these systems. Obamacare and the tax bill provide many examples.

Democrats got the CBO to count the revenue generated by Obamacare’s Community Living Assistance Services and Supports, or CLASS, Act taxes, fully aware that program’s postponed and unsustainable costs would never be incurred. Republicans likewise took some $300 billion of savings, suddenly available when CBO revised its clearly mistaken estimates of costs of repealing Obamacare’s individual mandate, to pay for tax cuts it couldn’t otherwise get.

This is not a criticism of CBO, which has remained properly nonpartisan and which was designed to estimate revenue flows, not personal choices — such as how many young people would rather pay small individual mandate penalties rather than expensive Obamacare health insurance premiums.

It’s a criticism of the notion that you can create neutral rules that will guide elected politicians to desired results. Politicians and the voters they represent have policy goals they believe important and they have their own ways — fallible, but subject to criticism and debate — to estimate the likely effects of particular policies.

My observation over the years is that systems intended to be failsafe are sure to fail. Forty years of the Budget Control Act regime and 30 years of the opaque Byrd Rule (which allows some Senate measures to pass with 50 votes while others require 60) have shown that both parties have figured out how to game the rules enough to foil those the intended purposes.

The notion that anyone, let alone the CBO, can with any accuracy predict the effects of changes in tax rates and other incentives over a decade is absurd.

Out Of Town

I was driving up to San Francisco yesterday, and today I’m at the Foresight Vision Weekend. There was a session on longevity (including cryonics) this morning, and now there’s a panel on blockchain and it’s potential applications. One of the panelists says that one app he’s woring is with a company that wants gas stations in space. I’ll have to talk to him later.

A Veneer Of Certainty

How dependable is climate science?

Not enough to base energy policy on.

[Update a few minutes later]

A vigorous fisking of what Judith Curry calls “the stupidest [peer-reviewed] paper ever written.” With all respect to Professor Curry, that’s a pretty high bar, even in this field.

[Update a couple minutes later]

OK, I slightly misquoted her.

[Update a while later]

Link is fixed, sorry!

Corporate Taxes

I’ve been saying this for years as well:

corporations don’t pay taxes — they collect them. Any taxes are actually paid by customers (higher prices), employees (lower wages), shareholders (smaller returns), etc. The ideal corporate tax rate is therefore zero, but politically that would never fly. Instead we have a tangled mess of corporate tax law, which benefits large corporations with their armies of lawyers and lobbyists. Small corporations which can’t afford all that are put at a competitive disadvantage, not to mention sole proprietorships which pay through the nose on everything.

But since we can’t get an ideal corporate tax rate, a flat and transparent corporate tax would be the next best thing. Our current system is the worst of all possible worlds: It diverts resources and manpower away from investment and innovation, and stifles entrepreneurs to the benefit of established interests.

On the other hand, our system creates endless possibilities for corruption and graft. So it has that going for it. Which is nice for Washington.

One other point: People are saying that most of the benefits of the tax bill go to the upper percentage. Ignoring the fact that you can’t cut taxes without cutting them on the people who pay the most taxes, cutting corporate taxes in fact effectively reduces indirect tax costs for all the people above, who are in all income brackets (particularly the employees and customers). As I wrote years ago, we can’t cut taxes, we can only cut (or increase) tax rates.