Tax Reform: Serious And Not

The editors at the WSJ and Kevin Williamson at NRO show the two sides of conservative discussion of tax reform.  The latter is serious while the former is not.

The editors are all about rates.  It seems, but is not clear, that they are talking about personal rates and they certainly don’t care much about the deficit:

In an ideal world, the Senate deal would create room for tax cuts of $2.5 trillion or more. That’s at least how much more revenue the government would get if the economy returned to its historic growth rate of 3% a year from the Obama era’s 2%.

Kevin, on the other hand, recognizes the challenges that the Congress faces.  We have a significant deficit.  We have escalating entitlement costs.  We need to have dynamic scoring but tax cuts are not self-financing.  He reports (with comments) that:

President Trump’s preferred policy would reduce the top rate to 35 percent, while congressional Republicans have aimed at 33 percent, along with modest reductions in other brackets and, possibly, a large reduction in the corporate tax rate. Our corporate tax rate is one of the world’s highest on paper, but the effective rate — what corporations actually pay — is on average unexceptional, though it varies significantly from industry to industry and firm to firm.

We favor reductions in the corporate tax rate because of the variation that Kevin notes.  Corporations do things because of tax rates.  Those industries that face higher rates take actions like tax inversions to avoid them.  Rather than try to outlaw such inversions we should make the USA a tax haven so corporations and their profits come here.  It is also a reason why we favor lower corporate rates rather than immediate expensing.  We hope that the Congress takes a serious look at tax reform and make it into law.

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The Market Strikes Back

The College Fix reports (h/t: Best Of The Web) that Evergreen State in Washington has a $2.1 budget shortfall.  Evergreen State is notorious for its behavior last year related to its Day of Absence.  If you missed it the Fix article has details.  The financial details are even more interesting:

In an Aug. 28 memo to the campus community titled “Enrollment and Budget Update,” officials report that fall 2017-18 registration is down about 5 percent, from 3,922 students to 3,713. But the problem is nearly all of the students they lost are nonresidents, who traditionally pay a much higher tuition to attend, officials explained in the memo, a copy of which was obtained by The College Fix. [Emphasis added]

At Evergreen State, like almost any four-year state university, out-of-state students support in-state students.  According to Evergreen State:

Evergreen’s tuition is about $6,700 per year for Washington state residents and about $24,000 per year for nonresidents.

Attracting and retaining out-of-state students is a critical budget item for for many if not most state schools.  The reason is that in-state tuition is somewhere near the marginal cost of education but out-of-state tuition is much higher than the marginal cost.  Is is easy to see why as the $17,300 per student difference times approximately 200 students (see bold above) would be almost $3.5 million.  As the budget shortfall is $2.1 million we would suggest that nearly all bolded in the first quote above might be an overstatement.

It is hard to be sure that Evergreen and the University of Missouri are being punished for their behavior.  It does look likely that that is the case for Evergreen because the out-of-state students are in demand and they can go almost anywhere for similar prices. It looks like the market is offering advice to state schools.  Will they take it?

 

Speed Limits And Signals

We are vacationing so posts will be more erratic than usual.  We are currently in Canada.  We first became regular visitors to Ontario when our move to the Midwest coincided with the US moving to a national 55 MPH speed limit.  As Wikipedia notes, many jurisdictions found it to be a major source of revenue.  We found that a less enforced 100 kilometers per hour (KPH) or 62.137 MPH got us home quicker.

Sidebar: In the old days we used 5/8 or 62.5% as an approximation.  Now we just tell the car to use the metric system.  Both the digital readout and the dial speedometer give us kilometers per hour.  It is an impressive bit of technology but another loss for mental math.  End Sidebar.

We thought that this would be a story of democracy.  In the US the scolds have lost and the speed limits have been returned to the states and most states have raised them so that the maximum speeds in most states are 70, 75 or 80 MPH.  Canada has not changed its speed limit in any province we have chanced to enter it is still 100 KPH.  Almost nobody drives 100 KPH but it is still the listed limit.

There is, however, a signal of the real Canadian speed limit.  Every not so often there is a sign that lists the penalties.  Because it happens rarely and we don’t have a photographic memory you will get an approximation of the sign.  It has three lines: 150 KPH means up to a $10,000 fine,
some speed between 120 KPH and 150 KPH means $xxx, and
120 KPH means $100 fine.
All numbers except for 120 and 150 KPH are approximate.  The signal is clear.  The police are not going to give you any trouble up to 120 KPH which is approximately 75 (more precisely 74.56454) MPH.  We passed three police cars at 111 KPH to test the the enforcement of the signal.  We were not willing to test it any more robustly with out of country plates.  You will get some leeway in the US but not as much.  So it turns out the systems are pretty similar.  There is just a different method of communicating the signal of what speed is acceptable.