Thursday, November 29, 2012

The Parable of the Old Refrigerator

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Let’s say you have a spare refrigerator in your garage. It keeps a few extra beers cold for you, just in case you might need them on short notice. If that old refrigerator starts to cost you so much that you have to borrow money to pay your electricity bill each month, what would you do about it? Would you demand a salary increase from your employer to cover the difference? Or would you simply dispose of the costly relic, maybe even selling it for a little extra cash?

Perhaps you would just keep that old refrigerator and borrow more and more money to keep it running—because, you know, you might need those cold beers someday.

Tuesday, November 27, 2012

Kachalsky Loses at the Second Circuit

The right to carry in 2011.

Predictably, the U.S. Court of Appeals for the Second Circuit has upheld the ruling of the lower court in the matter of Kachalsky v. Cacace. As usual, the court misapplied the McDonald decision, interpreting the Supreme Court’s ruling that the right to bear arms described by the Second Amendment is “most notably for self-defense within the home” to mean that the right exists only within the home. A certiorari petition is expected.

Meanwhile, appeals continue to move forward in other circuits. Oral arguments are scheduled on Dec. 6th for several other right-to-carry cases, including California’s Richards v. Prieto.

Monday, November 26, 2012

Democratic Rule in California

Gov. Jerry Brown thanks supporters for their work on his temporary tax hike initiative, Proposition 30 during an election night party in Sacramento, Calif., Tuesday, Nov. 6, 2012. (AP Photo/Rich Pedroncelli)

While the mainstream media were tripping over themselves to call President Barack Obama’s re-election, a perhaps even more important event went largely unnoticed. On Nov. 6th, the Democratic Party won commanding majorities in both the California Assembly and Senate, effectively completing a takeover of the state’s government. This electoral victory has been a few decades in the making but wasn’t quite unexpected.

Until the late 1980s, California often leaned to the Republican Party. However, the demographic changes that accompanied the state’s rapidly growing population began to deliver more and more state and federal offices to Democratic contenders. Instead of rallying and trying to build new relevance for themselves, the Republicans struck a nefarious political bargain with their rivals. Using self-serving legislative redistricting procedures, both parties carved out safe, unassailable electoral enclaves for themselves. In this manner, the Republicans preserved some political power in the California Legislature and the U.S. House of Representatives, even while they steadily lost representation in statewide offices.

After a series of fierce statewide initiative battles, the voters approved a new commission that would take control of the redistricting process away from the Legislature. These reforms were expected to produce competitive elections, and they certainly have. I suspected that the Republicans would lose seats, but I am slightly surprised that their defeat was this thorough this quickly.

The Democrats will now have a supermajority in the Legislature. Previously, the Republican minority had been able to hold off many proposed tax increases, since the state constitution requires a two-thirds majority to pass such legislation. All the while, though, the Democrats have argued that higher taxes are desperately needed to solve California’s fiscal problems, and the people have seemed to agree, approving taxation initiatives (at least when ostensibly aimed at the rich) on a fairly regular basis.

The people of California have spoken, so who am I to stand in their way any longer? Maybe we really can tax and spend ourselves into prosperity, so let’s get to the business of soaking the rich—whoever they may be. If they don’t like it, they can just move to some benighted flyover state.

Like it or not, the Democratic Party owns California now … and all its problems.

Friday, November 23, 2012

Taxation and Revenue

The Laffer curve describes the relationship between tax rates and revenues.

Though it has become politically irrelevant and I am now committed to soaking the rich until California blooms or burns or at least until I have my share of the spoils,* I have been asked why I previously “voted against my job” and opposed tax increases, so I will answer that question as a final nod toward fiscal wisdom and responsibility.

In the simplest terms, tax rates are not directly proportional to tax revenues. Beyond a certain point, higher tax rates will actually result in reduced revenues as the economy declines in response to the rising costs and as overburdened taxpayers find ways to avoid or evade taxes. Of course, the reverse is also true. To an extent, lower tax rates can allow for economic growth that increases tax revenues in the long term.

Stated another way, if the private sector prospers, then the public sector will prosper in turn. If the public sector demands too much from the private sector, and the private sector suffers as a result, then the public sector will also suffer in the end.

I don’t know where we are on the curve, but I’m fairly certain it is somewhere beyond the point of revenue maximization. That was my pragmatic reason for opposing higher taxes.

*Apparently, it’s greed only if you make more than $250,000 per year.