Sweden’s Shrinking State

Ah, Sweden, the very mention of it will often bring about the phrase ‘liberal paradise’. The land where healthcare is free, everyone lives long lives, and there’s no crime or violence, despite huge taxes and a massive public government.

All of it sounds wonderful except: it hasn’t been that way since the early 1990′s and its government is shrinking by the day.

Yes, this ‘paradise’, it seems, has been deregulating and lowering both taxes and spending for the past 20 years at a rate that’s absolutely astonishing. This myth of the ‘perfect state’ has come about due to a few things:

  1. Between 1850-1950, Sweden had one of the fastest growing economies in the world, it amassed massive capital, and was largely unregulated.
  2. Between 1950 to 1980, all the state programs began with the huge surpluses they had, and marginal taxation skyrocketed to 70% – this is the liberal paradise that people mention. Times were good, really, but it was unsustainable.
  3. Starting in the 1990s, the ‘banking crisis’ occurred where banks collapsed, the healthcare system utterly failed, killing thousands, and the entire financial system started to collapse on itself. Spending as a percentage of GDP  was at an all time high of 71.1% (for reference, the US now spends 103%). The education system was on the verge of collapse and many, many jobs evaporated overnight.
  4. Sweden went from 4th richest OECD country to the 16th in the span of 20 years.

Strangely, no big government advocate seems to know of the 1990′s Swedish banking crisis. It’s in plain view: http://en.wikipedia.org/wiki/Economy_of_Sweden#Crisis_of_the_1990s and is a well studied piece of history in Sweden itself. The reasons are clear: big government intervention. Sweden, instead of continuing to go down the bad course, actually did something that is rarely done: they reversed course.

In 1994, following the banking crisis, massive market reform came down and entire industries were deregulated. Private schools were started, a voucher system was put in place, and largely, the majority of top performing schools in Sweden are for profit. The banking system was deregulated, many services were cut, taxes lowered, and spending as a percentage of GDP was cut from 71.1% to 53.3% an overall reduction of the state by over 30%.

Even the citizens are wanting less state provided healthcare. A rise of private insurance has been growing in Sweden, In 2011 about 440,000 people had private health care insurance in the country of 9.5 million (source: http://reason.com/blog/2014/01/22/socialist-swedes-take-to-private-health). If this public paradise was so great, why is it radically moving towards privatizing and deregulation faster than the US is moving towards socialization? Now, Sweden is still less ‘free’ than what most libertarians would wish, but it does show that a country can turn itself around and that even the most praised ‘ideal liberal states’ are not immune to the ill effects of big government.

For more reading on the subject, an article that appeared in Forbes does a great job going into more detail: http://www.forbes.com/sites/paulroderickgregory/2012/05/13/look-to-sweden-obamas-high-tax-gurus/

Despite massive spending, underachievement prevails

r-SAN-FRANCISCO-MINIMUM-WAGE-HIKE-large570Did you know that the number of people on food stamps has grown over the past 13 years by nearly 30 million, which accounts for almost 20% of households receiving taxpayer-funded food subsidies?  At the same time, the federal government is spending more per household than ever before – in fact, a 152 percent increase since 1965.

Our middle class is shrinking – the rich are getting richer and the poor are getting poorer, due in large part to insanely complex government rules and regulations that only those with resources can bypass.  In fact, the top 7% of households own 63% of the nation’s wealth.  During the so-called economy recovery, the other 93% of families lost wealth, putting into question the effectiveness of big spending government stimulus packages and who, in reality, the recovery truly helped.

ABC News reports that nearly 50 million people in the United States live in poverty, but yet, most Americans view our nation as the most prosperous in the world, fundamentally superior to our foreign counterparts despite our poor education system, insanely expensive healthcare industry and THE biggest government that we’ve ever had.

In fact, our healthcare system spends twice as much per person than any other developed nation in the world, a cost that accounts for more than 16% of our nation’s Gross Domestic Product (GDP).  Our healthcare spending has increased at twice the rate of inflation, but yet our pharmaceuticals continue to kill and emergency rooms remain clogged with people using it as their primary care service.

A much-maligned segment of the population, the top 1% of income earners in the country have a greater net worth than the bottom 90% put together.  Perhaps this is due to nearly a quarter of all jobs in the United States that pay a wage of less than $10/hour.

Worse, spending in Washington continues to grow, more than it ever has despite record tax revenues.  Federal politicians managed to rack up $755 billion in deficits through the first eleven months of 2013′s fiscal year.  Spending during the same period amounted to a whopping $3.2 trillion.

Now, the government wants to take over healthcare.  Already the most expensive healthcare system in the entire world, the 10,500-page Obamacare monstrosity has authorized the government to spend even more money.  The new healthcare system’s broken Healthcare.gov web site cost the American taxpayer $634 million to build.  Obamacare has caused many insurance companies to cancel policies and create more expensive alternatives.  Premiums have risen and job hours have decreased to sub-30 hours to avoid Obamacare penalties.

The evidence of the big government effect is clear and overwhelming, and it is costing the American taxpayer trillions of dollars in reckless spending.  Both the Democrats and Republicans represent the cause of these problems, and our nation will never truly fix our ailing spending habits until we replace those responsible for it.

Tax the rich? Guess what, we already are, big time!

Although the rich are often criticized for exploiting loopholes in our tax system to reduce their tax burden (which does happen), the top 10% in this country also holds the mark for shouldering a widely disproportionately big percentage of federal income taxes every tax year.  Although the top 10% collect about 45% of our nation’s total income, they are responsible for paying over 70% of the nation’s income tax.

I suppose it is clear to see why states with the highest tax burden, like California, New York and New Jersey, have seen a net loss in domestic migration of its residents, while states with lower tax burdens like Arizona, Florida and Texas have seen a rise in migrations.  Combined with state income taxes, many residents in the more heavily taxed states pay more than half of their income straight to the government.

Empirical evidence is clear that taxes effect inter-country migrations, and the states that confiscate more from residents are always on the losing end.  When the rich leave, who is left footing the tax bill?  The bill does not simply go away.

Even Bill Maher, hardly a source for right-wing or conservative commentary, has lamented on his program just this year that taxes are getting more and more outrageous.  “Liberals, you could actually lose me,” Maher said. “It’s outrageous what we’re paying [in taxes]. Over 50 percent. I’m willing to pay my share, but yeah, it’s ridiculous.”

California is often cited as an example of negative inter-country migration, and why not?  Californians recently passed Proposition 30, which not only raises sales taxes from 7.25% up to 7.5%, but also creates new and higher tax brackets for the state’s more successful residents.  Folks making between $250,000 and $300,000 are now forced to fork over 10.3% of their income to the state, up from 9.3%.  The richest people, those earning more than $1 million a year, will pay 13.3%, up from 10.3% (a whopping 3% increase).  Combine that with federal income tax rates and people’s tax burdens in California easily extend past 50%.

In terms of making the rich “pay their fair share”, I agree.  Let’s lower the income tax rate, encourage further innovation, hiring and spending, and keep our nation’s rich people (and their money) happily settled into the United States and our bank accounts rather than in Cayman Island accounts to avoid our nation’s punitive system of taxation.

Milking the rich hits new high as average tax rate reaches 35%

Article Highlights

  • Rich paying largest share of federal taxes since 1979
  • Top 1% of earners pay over 35% of income to Washington
  • Bottom 20% pay nothing

A new study published by the Tax Policy Center in Washington D.C. finds that the rich are paying the largest share of federal income taxation in decades, which puts into question Obama’s claim that the rich need to pay their “fair share” to fix our government’s debt problem.

Earners in the  top 1% pay an average of 35% of their income to the federal government, the study found.  The bottom 20% pay nothing, and often, receive more in tax rebate checks than they paid into the system.  This amounts to a deficit in tax payments, and essentially, an additional yearly paycheck.  Historically, lower income earners are paying lower taxes than ever.

“My sense is that high-income people feel abused by being targeted always for more taxes,” said Roberton Williams of the Tax Policy Center.  Not only do higher income earners FEEL targeted by our tax system, they ARE targeted with high, punitive taxes – revenues that are then either wasted or lost within the incomprehensible layers of our government bureaucracy.

The Congressional Budget Office recently predicted that government revenues in 2013 will set new records.  Add in the fact that the large majority of those revenues will come from higher income earners, and political rhetoric that demands the rich “pay their fair share”, it does not take much of an imagination to realize just how devastating our tax system is to our nation’s future growth.  No wonder the wealthy maintain overseas bank accounts.  No wonder businesses outsource labor to other nations.  If those resources are kept within the borders of the United States, they are confiscated!

It seems the rich are paying their “fair share” after all.  When nearly 1 in 5 Americans pay nothing in taxes at the end of the year, it casts a serious shadow over the merits of progressive taxation and the class-based society that results from those tax tiers.

No need to apologize, Phil; taxes plague us all

phil-mickelson-298x300Professional PGA golfer Phil Michelson released a statement apologizing to his fans and those who felt insulted after the left-handed golfer said that due to extremely high state taxes in California, some “drastic changes” are looming in the near future, including a possible move out of the state.

“Finances and taxes are a personal matter, and I should not have made my opinions on them public,” Mickelson said in a statement. “I apologize to those I have upset or insulted, and assure you I intend not to let it happen again.”

A couple weeks ago, Mickelson had broached the subject of politics during a Pebble Beach Pro-Am conference call.  After his final round last Sunday, Mickelson was asked to elaborate on what he meant by his comments.  “There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state, and it doesn’t work for me right now,” he said. “So I’m going to have to make some changes.”

Is there anyone out there who would honestly feel insulted by another person expressing discontentment with having to pay more than 60% of his or her income to the state?  Our tax system is a disgraceful mess and  incomprehensible by the majority of Americans.  As a taxpayer, I would be more insulted if nobody found fault with our clearly lopsided progressive system of taxation.

The public was both supportive and critical of Mickelson’s comments.  Some mocked the golfer, who pulled in close to $45 million last  year, for complaining about taxes while making so much money.  But Mickelson has no reason to apologize for “insulting” anybody.  While talk of politics is probably not the best course of action for any public sports figure, milking the rich out of their money has no place in a free society and it is perfectly natural for people to protect their earnings.  If Mickelson does end up moving, it once again proves a point that we’ve made plenty throughout SmallGovTimes.com – that if you milk the rich, you lose the rich.  And what state doesn’t want their tax revenue, or in the case of business owners, their jobs?

Rich Perry has already invited Mickelson to move to Texas, which has no state income taxes.  Many golfers live in Texas or Florida because neither state collects income tax.  Tiger Woods admitted to moving to Florida for precisely that reason back in the middle 90s.  Mickelson, a native of San Diego, lived in Scottsdale, AZ for several years before moving back to California.  California residents are the highest taxed in the nation.

2012 brings big debt and fewer liberties to Americans

rules_1668_1668The year 2012 saw tremendous encroachments into the freedoms and liberties of the American people, and few of our Congressional representatives stood in the way of such abuses of power.  From taxing internet purchases to allowing the government to throw people in jail based on “secret” evidence of terrorism, this year marks another elimination of freedoms and liberties in the United States.

A couple things did increase, though: our national debt and the number of well-paid federal government workers.

The NDAA (National Defense Authorization Act) not only gave the government the authority to continue expensive and never-ending wars overseas, but it also gives Washington far reaching powers to imprison American citizens for the mere suspicion of terrorism.

“This bill takes away [the right to a trial] and says that if someone thinks you’re dangerous, we will hold you without a trial. It’s an abomination,” remarked Kentucky Senator Rand Paul who argued fiercely against the inclusion of the indefinite detention provision within the NDAA.  Paul cited Japanese internment camps as historical evidence that government cannot be trusted with powers that rely on behind-closed-doors “secret” evidence against the American people.

The United States’ punitive system of taxation is forcing companies to funnel millions of dollars to overseas bank accounts.  Facebook, in fact, has funneled nearly a half billion to Cayman Island banks.  The U.S. government’s continued insistence to punish success in the United States has once again prompted companies in 2012 to take their financial business elsewhere.

At the state level, an estimated 225,000 wealthy residents have fled California to escape its tax structure.  This year, Democratic Gov. Jerry Brown successfully pushed through tax increases that make Californians the highest taxed citizens in the country as the state’s deficits skyrocket to nearly $30 billion.  Taxing the rich never works, and as reported on the Small Government Times before, ends up sending your wealthier taxpayers running for the hills.

How about that U.S. Postal Service?  This year marked the first year that the government distribution service defaulted as the organization continues to leak money.  Daily, the Postal Service is losing about $25 million.  The financial hemorrhaging is preventing the service from paying current and future retiree benefits, roughly $5.5 billion in 2011 and 2012.

The number of federal workers, along with their salaries, have seen dramatic increases in the last several years.  According to public record, over 500,000 federal government workers earn more than $100,000 a year (an increase of 10% since 2006) and average nearly twice the private sector in annual salaries.  In fact, 77,000 federal workers make more than state governors.  Despite economic uncertainty for the majority of the American people, more than half of those in Congress are millionaires.  Several calculate their wealth easily in the hundreds of millions.

More than 40,000 state laws took effect this year, ranging from a higher minimum wage for several states, fining bus and truck drivers for talking on their cell phones while driving and a variety of regulations on concussions suffered while playing sports.  Some states made it a requirement that larger businesses use the E-Verify system to confirm the legality of its workers.  California gave illegals brought to the United States as infants access to the same statewide scholarships that legal students enjoy.  Other states are requiring school and city coaches to bench younger players when they are believed to have suffered a concussion.  Seat belts laws, inclusion of gay and lesbian studies in school curriculum and requiring state licensing to perform abortions all helped to increase the number of laws and regulations offered in this country.

The U.S.’s national debt has skyrocketed passed $16 trillion, an increase of a whopping $5 trillion since Barack Obama took office.

Elections have consequences, ladies and gentlemen.  Stay vigilant.

Obama demands tax hikes on rich before any compromises

Days after the re-election of Barack Obama, the president said that any compromise from his office on the issue of taxes and the national debt will hinge on the inclusion of tax increases for wealthier Americans in an fruitless effort to slow our nation’s rising debt and limit the ensuing economic calamity.

“I’m committed to solving our fiscal challenges, but I refuse to accept any approach that isn’t balanced,” the president said.  Apparently to Mr. Obama, “balanced” means nothing more than offsetting any spending cuts with further tax revenue from this country’s job providers.

Obama insists on raising taxes on those who make more than $250,000 a year, although hard numbers on how much of a rise remains unknown.  According to Obama, a majority of Americans also believe this nation’s punitive tax system should be strengthened for those who are considered “wealthy”.

“I just want to point out, this was a central question during the election. It was debated over and over again. And on Tuesday night, we found out that the majority of Americans agree with my approach,” he said.

This news comes at a time when deficits remain at all time highs.  October, the first fiscal year in 2013, has already seen a massive increase in budget deficits — $6 billion above the estimated $114 billion.