Random Absurdities– Pt I.

By Mike Cronin


Businesses can come under suspicion of discrimination if they don’t hire minorities and the “differently oriented” in proportion to the surrounding population…but they dare not ask what an applicant’s orientation, religion, race, ethnicity, etc. might be, because that could indicate an intent to discriminate.

If you want to keep what you earn, you’re greedy, but if you want to take what isn’t yours so you can buy votes you don’t deserve, you can get elected to high office.

Common Core in math is akin to asking a baby on the verge of walking to learn all of the anatomy and physiology of his little legs and having him explain to you what processes are going on with his muscles, bones, and balance while he is taking his first steps.

The tariffs and taxes on sugar make it twice as expensive here as in other countries.  The tariffs are meant to protect jobs in the sugar-raising industry. Instead, they cause loss of jobs in the industries that use the refined sugar, or force them to switch to high fructose corn syrup.

Ignorance of the law is no excuse…but no one can know of all the laws, because there are more than a person can read.  Worse yet:  even if you are aware of and follow a given law, you may be violating a different, contradicting law.  There is no law that obligates Congress to check whether proposed legislation might contradict current statutes.

Many people have to prove they do not take illegal drugs in order to get hired for a job. Once employed, they will have income taxes confiscated from their paychecks.  Money from those taxes will then be transferred to people relying on “government” assistance to make ends meet – people who don’t have to prove they are drug-free.  In fact, for some, the very reason they are receiving government assistance is because they have destroyed their employment eligibility through illegal drug use!

We send people to prison, comforting ourselves that the guilty are being punished for their crimes.  They will certainly not enjoy their stay, but while they are in, all too often they will learn to be even more ruthless, violent, and/or skilled at criminal activity.  Then they will get out and go right back to their predatory ways – but with a far greater degree of criminal impact.

Government-backed student loans, financial aid, and Pell grants are meant to help students cope with the high costs of post-secondary education.  Instead, by making it easier for more people to pay for school, the demand for higher education goes up…which drives the prices up. Put another way: even as Johnny gets his college loan and pays for school this year, the school raises its rates for next year.  Now Sally gets a bigger loan and pays for the higher tuition. The school raises its rates for next year. Now Jenny gets a bigger loan…lather, rinse, repeat.

We are supposed to equate “rich” with “high income,” resent high income earners, and demand that they pay higher taxes. People with high salaries have to pay high income taxes, but people with high net worth can live quite well off of the gains their investments make, and pay capital gains taxes instead of income taxes. (Capital gains taxes are much lower than the highest income tax bracket.) For example, the highest income tax rate is 35%, but the long term capital gain tax rate is 20%.  This can lead to a situation where a person who works his buns off and makes $500,000 in income (a cardiologist, perhaps) pays $175,000 in federal income tax, leaving $325,000. (This scenario is only about federal income tax vs capital gains tax – we’ll leave social security, states taxes, deductions, etc., out of the equation for simplicity’s sake). Now consider a person with $5 million in net worth invested wisely. Perhaps this person inherited the money.  Suppose this person makes capital gains of 10% per year – pretty good in this economy.  10% of $5 million is $500,000 – the same as our doctor’s income.  But capital gains taxes are only 20% ($100,000), not 35%.  That means the wealthy guy living a life of leisure off his investments pays $75,000 per year less taxes than the “rich” guy who worked his rear end off…on the same amount of taxable income!


A Hard Truth About Pay

By Mike Cronin

Some fields of human endeavor are inherently hard to learn. Medicine, for example. Becoming a doctor requires a person to study for eight or more years beyond the baccalaureate level and become an expert on the composition, functioning, and behavior of the human body. The sum of human knowledge on the subject increases greatly each year due to the efforts of scientists.  People who have acquired skill as a physician are relatively scarce, but because we all want to have our diseases cured and our injuries repaired, they are in high demand and they command high salaries.

On the other hand…some fields are made hard to enter by the members comprising them.  Consider: The Constitution of the United States is the ultimate law of the land.  It was written by well-educated men – in elegant prose that any reasonably literate reader can understand, even after two centuries of language drift.  It is about 17 pages long, and one need not become a lawyer to understand and apply it. Yet somehow that document can describe the limits and give operating instructions for three branches of government.   Now consider that the field of law grows every year. The vast majority of that growth is due to politicians making new laws, not by legal “scientists” discovering new truths.  And most of these new laws are written in “legalese,” which is often designed to be vague or confusing to the lay person.  Understanding modern law requires years of schooling not because it is inherently difficult, but because it is purposely made and kept so by legal practitioners. In other words, most of the difficulty in understanding law and becoming a lawyer is self-imposed by the field of law, not by the need to learn nature’s secrets.  Even so, the end result is a person who, like a doctor, has acquired a relatively rare ability set, so he or she can also command a high salary.

Some star athletes at the pinnacle of professional sports (specifically the NFL, MLB, and NBA in the US, and Soccer/”Futbol” throughout the world) get paid even more than doctors and lawyers – sometimes fantastically more.  Yet any able-bodied person can go out and play football, basketball, baseball, and soccer.  The difference is that the professional “star” athlete has a skill even more rare than medicine or law – the ability to entertain us and win championships.  Most professionals have to spend years at college to acquire the knowledge and skill to practice their trade; the star athlete had to be born with a greater degree of natural athleticism than the rest of us, and he had to learn his sport and hone his skills from elementary school through college. His career will likely be over by the time he gets to 40; the professionals in more intellectual and academic settings will just be hitting his or her stride by that point.

As difficult, or even deadly, as it is to be a teacher, or a first-responder, or a military member, or a tradesman, it is far easier to acquire the skills and knowledge to enter such professions  than it is to become a doctor, lawyer, or pro sports star.  And because they are easier fields to enter, there are lots more people qualified to enter them, and lots more people in them.  The skills, knowledge, and abilities just aren’t as rare, so the salary just isn’t as high.

We might like to think our priorities are all wrong because we pay people who put their lives at risk to protect us far less than pro athletes or entertainment stars. After all, isn’t protecting our lives more important than entertainment? Don’t teachers deserve more because they are preparing our children to be productive members of society? I think most of us would agree that our military and first-responders and teachers certainly deserve more. As a veteran, I certainly would have liked to earn more than I did, and I might have even deserved more than I got…but I didn’t get paid based on what I felt I deserved. But there is a hard, inescapable truth: No one really gets paid on the basis of what they “deserve” or on how difficult their job is. The real basis for pay is how rare and how in demand your knowledge skills, and abilities are. Those with the rarest, most in demand attributes will always be offered bigger salaries than the rest of us with more mundane skill sets.

Issues, Symptoms, and Oreos

By Mike Cronin

Most of the issues in the presidential debates are not issues at all but symptoms. How so? Let’s take an example: illegal immigration.

The real problem isn’t that the United States is racist and doesn’t want so many people coming into our country. It’s that the flood of people coming into this country illegally is a signal that other things are broken.  The mass of immigrants perceive the United States to be a better place to live and work than wherever they are from. In other words, their incentives to come here are greater than their incentives to stay home. That has always been the case with immigration to the United States. What has changed is the nature of the incentives.

Through much of the 19th and 20th centuries, the incentive to immigrate to United States was the opportunity to be free to work hard, own property, and succeed.  From the latter part of the 20th century to the present, that incentive has been morphing. There is still an incentive to come here to be free and succeed, but another incentive has been steadily taking the place of that original one.

The new incentive is to come to the United States and take part in the bounty of government benefits and handouts that we bestow on a significant portion of our population. Free K-12 education. Subsidized housing.  Free or subsidized medical care. Relatively high paying jobs (even jobs that pay immigrants less than minimum wage under the table may be paying them more than they could get in their own country.) Low risk of being deported.   Even the possibility of voting. Why stay at home and live in absolute poverty, when you can come to America and upgrade to relative poverty and dependence on Uncle Sam?

A related symptom is corporate off-shoring and outsourcing. Even as immigrants are poring in to find a better life here, companies that send jobs or work outside the United States are vilified as unpatriotic. But why do they send these jobs outside the United States? Does it have anything to do with patriotism?

Could it instead be because government interference and manipulation have incentivized them to outsource, just as it has incentivized illegal immigration?

Image result for oreo to Mexico

Consider the Oreo case.  Donald Trump vowed last year not to eat Oreos ever again because of reports that Nabisco’s parent company moved 600 jobs from Chicago to Mexico in order to lower labor costs.  What the reports left out of the equation is that the marginal tax rate and a key product ingredient (sugar) are also cheaper in Mexico than in the US.  Think about that.  A company moved 600 jobs to Mexico because operating conditions are more conducive to profitability there than they are here, the original business-friendly nation!

So what is the disease?  Government interference in the market, namely via ham-handed manipulation of incentives.

Government tells companies who to hire (Affirmative Action), how much to pay them (minimum wage), charges payroll taxes, Social Security taxes, and corporate income taxes. Government requires businesses, and many professionals, to have licenses, and it regulates everything. It makes raw materials, parts, and other materials more expensive by applying the same kinds of interference to suppliers and other business partners.  The costs of all of this are either absorbed out of company profits, or passed on to the consumer, and it drives companies to go elsewhere to do business, which kills jobs here.

In effect, our own politicians  drive unskilled and low-skilled jobs out even as they lure unskilled  and low-skilled laborers in! This drives companies to move entire production lines out, or to hire illegal immigrants and pay them under the table.  It puts drag on the entire economy with excessive regulation, excessive taxes, and excessive interference – then the politicians call the companies unpatriotic for wanting to escape.

Might the politicians be a few cookies short of an Oreo?

Taxation without Confiscation


By Mike Cronin

With income taxes dues in a little over a month and presidential hopefuls in the news every day, now might be a good time to consider some changes to our tax code.  I’ve opined in previous posts that it is not greedy to want to keep what you earn, but it is the essence of greed to want what others have earned.  Our current tax and fiscal policy system is fueled by the greed of politicians who promise things they have no right to give, and by the people who want what those politicians are promising. The primary weapon used for the plunder is income tax withholding, i.e. the taking of your money before you ever see it. This is called confiscatory taxation – your taxes are confiscated from you.

There is a movement afoot to take the government’s power to relieve you of your hard-earned money and put it back in to your hands.  The general idea is to replace the confiscatory income tax with a consumption-based tax – which means taxing you on what you buy and consume instead of on what you make. The most notable proposal for a consumption-based tax system is called the Fair Tax.

The philosophical difference between the confiscatory system we have now and a consumption based system is stark.

The confiscatory system requires the government take money from you by force (i.e. the threat of arrest and punishment for not filing/paying).  It encourages politicians to use taxes to fund elements of the government that have no Constitutional right to exist, and worse, to use taxes to change behavior. It places a huge compliance burden on you and businesses. Lastly, and perhaps most egregiously, it fuels envy politics by allowing demagogues to cry for the rich to pay an ever-increasing portion of the tax bill, while allowing nearly half the population to consume an enormous amount of government benefits and entitlements w/o consequence or motivation to change. Worst of all, the harder you work and the more you produce, the more you are taxed. Americans have accepted this for a while, but we are beginning to wake up and see that punishing productivity is insane – if you want more productivity, jobs, and economic growth.  On the other hand, if you want power over millions, a good way to obtain it is to divide and conquer by pitting the masses with low incomes against the few with extraordinary incomes.

A consumption-based taxation system more closely aligns government revenue collection with the morality most of us follow every day.   First, it allows the taxpayer much more control over how much tax he or she will pay, and it puts the government in the role of beneficiary instead of bully.  Second, it more logically aligns with how we pay for almost everything else in life. (E.g. if we don’t buy much jewelry, then we aren’t forced to pay for jewelry).  A person (or business) with large consumption habits is presumably using more government than someone with low consumption habits. Under a consumption-based taxation system, big consumers will pay more for government than the small consumer, and income will no longer be a factor.  In short, people will pay their taxes in direct proportion to how much they consume instead of how much they make.   This will return some of the power Washington stole from us and put back in our hands. Oh, and it will mean no more 1040s and no more IRS!

Sounds eminently fair to me.