The Washington Post‘s Editorial Board is not impressed with Rep. Ro Khanna’s scheme to tax wealth. A slice:
Rep. Ro Khanna (D-California) supports his state’s billionaire tax proposal on the ballot in November. Texas businessman Mark Cuban had a question: What about founders of promising start-ups who are billionaires only on paper?
Khanna’s solution was revealing. Hint: It would create another tool for government control.
On Saturday, Cuban noted on X that California has more and more “deca unicorns” — start-ups with valuations of $10 billion. If a founder owns even 10 percent of such a company, he or she could be considered a billionaire despite not having much wealth aside from the paper value of a yet-unproven firm. It’s not clear how such a person would pay the supposedly one-time 5 percent tax Khanna wants to impose.
Khanna replied to Cuban that the paper-billionaire founders could, essentially, get loans from the government using their companies as collateral. “Allow illiquid founders to pledge shares with a loan from the government to pay tax,” Khanna posted. “At the end of the period, the loan is either paid back in cash, or the government assumes the shares.”
So, Khanna’s plan is for government to … front people money to cover their taxes. That’s a variation of current policy for people of modest means; a significant portion of welfare spending amounts to returning money that households already paid in taxes that same year.
But Khanna wants a revenue treadmill for people he considers rich. The state would lend taxpayers’ money to other taxpayers so they can pay a novel wealth tax back to the state.
The congressman’s proposed security for the wealth-tax loan is meaningless. If a deca unicorn start-up succeeds, its founders will likely have enough cash to pay back the loan. But if the business sputters and the high valuation disappears, the government would then own shares of a failed company.
That means many loans would never be paid back and the government would accumulate stakes in failed companies. It’s socialism without the purported benefit: California would own the means of non-production.
National Review‘s John Puri asks if Trump’s tariffs are fulfilling the promises under which they were peddled. Two slices:
Paradoxically, by incentivizing Chinese manufacturers to reroute shipments through third-party nations, the United States was helping to amplify Beijing’s economic influence around the globe. All for little to no reduced dependence on our end.
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Reducing our reliance on China through strategic tariffs and friendshoring may be a noble aim, but good intentions are not the measure of sound public policy. We must ask at a certain point, “Does this actually work?” Unfortunately for the confident planners atop U.S. trade policy, it is very hard to disentangle a globalized economy bound together by price signals, and nearly impossible to cut the world’s premier industrial power out of complex supply chains.
John Puri has yet another insightful piece at National Review about trade. Three slices:
One year, four months, and 15 days after Liberation Day, it is difficult to judge Trump’s expansive tariffs because the administration never settled on a standard for success or failure. Instead, it vacillated wildly between competing explanations. On every metric one can remember, however, tariffs are not accomplishing what the president claimed they would.
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More sophisticated protectionists maintain that the purpose of tariffs is — or at least, should be — to grow the U.S. industrial base by ensuring demand for what it produces. Set aside the issue of whether America’s industrial output is really lower than it used to be (it’s not), and whether the sector’s declining employment is primarily due to foreign competition (also untrue). Empirically, Trump’s tariffs have shown no sign of boosting American industry.
Domestic industrial production is flat. Manufacturing employment has continued falling since tariffs were imposed. These may not be fair indicators, as it would take time for new tariff-induced factories to come online. But investment in manufacturing facilities is also down, and most industrialists are complaining about tariffs rather than celebrating them.
There are a couple of reasons why Trump’s tariffs may not be incentivizing companies to build more in America. The president has imposed tariffs that are nearly universal, making little distinction between import categories. Yet half of U.S. imports are inputs for domestic production — 30 percent capital goods (excepting automotive), 20 percent industrial supplies and materials. When the prices of these goods rise because of tariffs, domestic manufacturing becomes costlier and less competitive. Not exactly an attractive opportunity.
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Other protectionist programs have much longer track records. The U.S. sugar industry, for example, has been shielded by a tariff-rate quota system for almost a century. A few thousand growers survive in Florida, but in return, Americans pay twice as much for the sweet stuff. Higher prices destroy approximately three times as many jobs in the downstream confectionery industry as they save in the sugar business. (They also induce food companies to put corn syrup in everything.)
Long-standing tariffs on Canadian lumber have driven up wood prices, which home builders and buyers don’t much appreciate. Protectionism helps insulate a flabby domestic car market from cheaper models. It raises the prices of essential foods like beef and peanuts. It makes clothing and shoes more expensive to protect domestic industries that hardly exist anymore.
We’ve been frustrated because the way that you get that result is if you define the middle class in terms of what the median household makes, the household that’s right in the middle. In the Pew analyses, the middle class makes between two thirds of the median and twice the median. And the problem with that is that if everybody’s income uniformly doubles over time and everybody is much better off in absolute terms, that measure would show the middle class hasn’t grown at all and you’re no better off than when you started. Steven [Rose] and I think there’s some merit to that measure, but it sort of hides changes in absolute living standards because it’s mixed in with changes in inequality. And we think you should focus on each of those things separately.
Here are further thoughts from Bob Graboyes on AI.
