Archive for November, 2010

Lowering Taxes Is Not Increasing Government Spending

November 25, 2010

New York Times carries an article titled “The Blur Between Spending and Taxes”. The author is Harvard Professor N. Gregory Mankiw. The essential theme of the article is that the government is spending when it decides to forgo tax revenue that it otherwise could have collected. Indeed, tax revenues forgone in the enactment of tax deductions, such as for interest payments on home mortgages or charitable contributions, and tax credits, such as for first-time homebuyers or adoptions, are now commonly described as “Tax Expenditures.” The thought is that the government is spending money in deciding not to take it in taxes and to allow the taxpayers to keep it.

In terms of balancing a budget, foregoing some incomes is in fact equivalent to having additional spending.
But the size of the budget obviously differs. Also, when it comes to government budget, this accounting view obfuscates a critical notion: ownership.

Do individuals own the fruit of their labor, and give some of it up in form of taxes, or is the government generous in letting them keep some of it? Is taxation “taking”, or is anything that’s left untaxed “given”?

Blurring that line and ignoring property rights allows disguising increased taxation as reduced government spending (which is needed, given its debts). Furthermore, by shifting what’s considered the default, the burden of proof is shifted: individuals now need to defend why they should keep some income, rather than government having to justify why it should take some of it.

More fundamentally, if the food and housing that you obtained through your work were in reality “granted to you by government”, doesn’t that mean that government is granting you your life and your body? How can property in one’s body be reconciled with the absence of property rights in your labor?


Box obsessed cat

November 13, 2010


In Defense of Payday Lending

November 11, 2010

It is easy to misjudge payday lending.

One assumes that those business are making tons of profits, run by disreputable business people, and harm their consumers.

In reality, a valuable service is provided. Without it, its consumers would be left worse off. Competitive pressure and consumer choice ensure that the terms and conditions are acceptable, and result in returns comparable with other financial services.