taxes

The EU's Fury at Trump's Tariffs Is Hypocritical Insanity

Joel Kotkin — Wed, 02 Apr 2025 18:48:18 -0400

Donald Trump’s tariff blitz is not exactly making friends with long-time allies, economists, or the libertarian, free trade Right. His approach has made him persona non grata at publications such as National Review and the Wall Street Journal. Yet although the president wields the tariff stick like a madman swatting flies, there is more logic to his approach than one might glean from much of the press.

Fundamentally, Trump’s tariff policy is an attempt, albeit crude, to reverse decades of unfair trade relations, most notably with Europe. His focus is to force the EU, whose trade policies he has labelled an “atrocity”, to reform its protectionist system, under which tariffs on US-made cars are by some counts four times higher than the equivalent American tariffs on European cars. The situation is similar in such sectors as food, beverages and other agricultural products. In some areas, American products sold in Europe are frequently taxed at 30 per cent or more.

As the historian Michael Lind has pointed out, tariffs have long been a tool in the arsenal of both advanced and developing countries. And they still are. Today, the EU imposes high tariffs on electric vehicles made in China. Other countries, including rising power India, have levied tariffs of 70 to 100 per cent on electric vehicles from China and elsewhere. Few Canadians recognise that Canada, beneficiary of a $100 billion merchandise trade surplus with the US last year, has been highly protectionist and for a long time. Canada recently levied a 100 per cent tariff on imported Chinese EVs and a 25 per cent surtax on Chinese steel and aluminium.

To deal with Trump’s policies, America’s traditional allies need to recognise that the greatest threat to the West is not American tariffs but China’s massive drive to dominate the market in manufactured goods in virtually every industry. In the US, notes an EPI study, the growth of China’s trade deficit cost roughly 3.7 million jobs between 2001 and 2018.

Until recently, multinational corporations and financial markets have been remarkably untroubled by Beijing’s stated aim by 2050 of becoming the leading global superpower. But those in the public realm have to take a longer range view that recognises that the West’s greatest long-term challenge lies in relentless Chinese mercantilism.

This West’s trade disadvantage with Beijing extends from the most prosaic to the cutting-edge. During the pandemic, the US found itself dependent on China, the source of the affliction, even for the most basic medical supplies. “Why can’t the greatest economy in the history of the world produce swabs, face masks and ventilators in adequate supply?” asked Lawrence Summers, the former head of President Obama’s National Economic Council, on social media on March 21 2020.

America’s inability to produce even basic goods has not fundamentally altered since. The generally anti-Trump media complains how companies cannot even source screws in the United States. Although chief executives and libertarian economists may see this as a reason to keep the floodgates open, a rational person might suspect that an America that cannot produce even such simple goods will not long lead the world.

But Chinese dominance is also spreading to the most critical sectors. In 2023, it consumed roughly half of the world’s steel and emerged as one of the world’s largest automobile producers – electric cars largely powered by coal play a key role. It has also invested heavily to take over the aerospace industry from both Boeing and Europe’s Airbus. It has grown rapidly in sectors like semiconductors, batteries, airplanes, and automotive parts, and now accounts for more than half of all world shipbuilding. Unlike Japan in the 1980s, whose growth threatened American industries, China’s rise also threatens America’s basic ability to produce advanced military goods.

Once this is understood, it seems fairly insane for Europeans and the UK to be criticising the United States while continuing to turn a blind eye to China. Britain’s Keir Starmer’s attempt to cosy up to China in order to “Trump proof” his realm seems the road to ever great irrelevancy, although perhaps his Labour Party can benefit in its drive to curb free speech from the censorship masters in Beijing.

European leaders need to realise that Trump’s desires are not revolutionary, but similar to their own: if you want to do business in our country, create jobs and production here. This is not only reliant on getting key trade partners to reduce their protective barriers but to force companies, like Honda, to scrap plans for shifting production of new models to Mexico and instead make them in Indiana. Both Eli Lilly and chipmaker Taiwan Semiconductor have already been persuaded to invest billions in the United States, when their products in the past could easily be shipped in from abroad.

Of course many businesses – notably those with strong Chinese supply links – will be reluctant to accept that the current economic regime is over. But others are now seeking out more domestic suppliers. McKinsey surveyed supply chain executives and found consistent concern that supply chains are too vulnerable to international disruption.

Rather than rant, European, UK and Canadian political leaders need to push for negotiations aimed at equalising tariff barriers and look for ways to build a reinvigorated economic and security alliance. Trump, after all, is a committed dealmaker, and perhaps can be persuaded to ratchet down his demands and give countries, including his own, time to adjust.

Trump will, and rightfully so, work to unravel existing trade barriers, and recalibrate relations by ending nearly 80 years of now unsustainable American economic and security protection. America’s president may be half-mad, but our friends abroad also need to realise that, without a strong tie to America, they would likely be reduced to little more than Chinese vassal states.

This piece first appeared at: Telegraph.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and and directs the Center for Demographics and Policy there. He is Senior Research Fellow at the Civitas Institute at the University of Texas in Austin. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

California’s Budget Deficit Spells Trouble

Joel Kotkin — Thu, 23 Feb 2023 11:38:13 -0500

Just a year ago California Governor Gavin Newsom could, and did, brag about the state’s estimated $100 billion surplus. Flush with cash, the preening presidential hopeful was able to hand out thousands of dollars of goodies to households while financing an elaborate multi-billion dollar climate change agenda.

Now the state faces a budget deficit of at least $25 billion, which could grow to $35 to $50 billion if there’s a deep recession. Part of the problem lies with the end of federal Covid spending, but more to blame is the utter dependence of the state on tech billionaire taxpayers and high property prices. These are the top 1% of earners, who pay roughly half of the state’s income taxes.

Read the rest of this piece at UnHerd.

Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.

Canada to Tax Home Equity?

Wendell Cox — Mon, 13 Sep 2021 12:33:16 -0400

In Canada, where income adjusted house prices vary more than five times between metropolitan areas, the threat of a federal initiative to tax house equity could be looming. That’s the conclusion columnist Lorne Gunter, writing in The Edmonton Sun, The Winnipeg Sun and other Sun Media outlets. The headline read: “Liberals laying groundwork to tax homeowners’ equity: Officials are softening up the ground for such a tax by insisting it is unfair that today’s homeowners have so much value in their homes while so many others cannot afford homes.

According to Gunter the evidence is in a report by the federal government’s Canada Mortgage and Housing Corporation, parts of which have been obtained by Blacklock’s Reporter (described as an “Ottawa insider newsletter”, which is the equivalent of a “Washington insider newsletter” in the United States). The report, “Wealth and Generational Equity in Canadian Housing,” according to Gunter, will be released at some point after the September 20 national election.

According to Gunter: “The current draft of the report recommends the Liberals “examine tax and other public finance policy opportunities to level the intergenerational playing field.” The Liberals currently form the federal government, under Prime Minister Justin Trudeau, but are in a tight election race with the opposition Conservatives and New Democrats.

House prices, adjusted for incomes, are far higher in the Vancouver and Toronto metropolitan areas than in much of the rest of the nation. According to the Demographia International Housing Affordability (2021), published by the Frontier Centre for Public Policy, the median multiple (median house price divided by the median household income) is 13.0 in Vancouver, 9.9 in Toronto. By contrast, Demographia reports that median housing prices were 6.1 years less of median household income in Edmonton (median multiple of 3.8). Today, there remain a number of metropolitan areas with median multiples even lower than Edmonton’s.

Just 15 years ago, Toronto housing prices were only 1.6 years of income more costly, with Toronto’s median multiple being 4.4 and Edmonton’s 2.8. This was just after the Ontario government had implemented its greenbelt policy, which like elsewhere around the world, has been associated with huge increases in house prices relative to incomes. The problem with such policies (referred to as urban containment or compact city policies) is that they ban or severely limit development on the urban periphery, where land is affordable. This creates a scarcity of housing drives up house prices throughout the housing market (metropolitan area), while extinguishing opportunity for young households and others of more limited means (including many immigrants).

Vancouver’s similar policy was adopted decades ago, when there was only modest difference between its housing affordability and that of the rest of the nation (see Figure below).

Canada could face a very contentious debate on housing policy.

Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He has served as a visiting professor at the Conservatoire National des Arts et Metiers in Paris. His principal interests are economics, poverty alleviation, demographics, urban policy and transport. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.

Mayor Tom Bradley appointed him to three terms on the Los Angeles County Transportation Commission (1977-1985) and Speaker of the House Newt Gingrich appointed him to the Amtrak Reform Council, to complete the unexpired term of New Jersey Governor Christine Todd Whitman (1999-2002). He is author of War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life and Toward More Prosperous Cities: A Framing Essay on Urban Areas, Transport, Planning and the Dimensions of Sustainability.

Feudal Future Podcast: America Under Biden's New Tax Plan

Joel Kotkin and Marshall Toplansky — Mon, 10 May 2021 11:35:55 -0400

On this episode of Feudal Future, hosts Joel Kotkin and Marshall Toplansky are joined by Hank Adler, Associate Professor of Accounting for Chapman University, and Steven Malanga, City Journal’s senior editor, to discuss Biden's new tax plan.

Hank Adler was in public accounting for thirty-four years, the last twenty as a tax partner at Deloitte & Touche. He joined the faculty of Chapman University in 2003. Mr. Adler has served on several corporate and community boards of directors. His research has been published by The Wall Street Journal, Tax Notes, Prentice Hall and Tax Magazine. His interests include theories of taxation and board governance.

Steven Malanga is the George M. Yeager Fellow at the Manhattan Institute and City Journal’s senior editor. He writes about the intersection of urban economies, business communities, and public policy. Malanga is the author of The New New Left: How American Politics Works Today (2005); The Immigration Solution: A Better Plan than Today’s (2007), coauthored with Heather Mac Donald and Victor Davis Hanson; and Shakedown: The Continuing Conspiracy Against the American Taxpayer (2010).

[ 3:17] High Taxes and California

[ 6:45] The concentration of wealth in California

[16:30] Biden's porposal on capital gains

[29:08] Entrepreneurial growth in America

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Leran about Joel's book, The Coming of Neo-Feudalism.

Silicon Valley Exits California for Texas

Tory Gattis — Mon, 14 Dec 2020 12:11:03 -0500

The big news this week is all the different tech companies announcing their moves to Texas.

The big one for Houston is the announcement that HP Enterprise is moving its HQ from Silicon Valley to Spring just north of Houston - a long-term legacy benefit of Compaq Computer (which was acquired by HP and kept substantial operations here).

WSJ story: Hewlett Packard Enterprise to Leave Silicon Valley for Texas - Tech giant, which traces its roots to the origins of Silicon Valley, is latest company to move away from area long considered hub of innovation

“Houston is also an attractive market for us to recruit and retain talent, and a great place to do business,” Mr. Neri said, adding that as one of the largest and most diverse cities in the country, “Houston provides the opportunity over time to draw more diverse talent into our ranks.”

And some more detail from their press release: (hat tip George)

"Why Houston?

Houston has long been our largest U.S. employment hub, and construction has been underway since the beginning of the year on a new, state-of-the-art campus in the area. Houston is also an attractive market for us to recruit and retain talent, and a great place to do business. The most diverse city in America and the fourth largest, Houston provides the opportunity over time to draw more diverse talent into our ranks – a key priority for HPE as we work to be unconditionally inclusive.

We also anticipate long term cost savings associated with this move that we can reinvest in key areas of our business and innovation."

And finally a repost from Facebook that digs into what that increased affordability really means for employees:

"Hewlett-Packard announced its leaving Palo Alto for Houston.
$1,100 is the average rent in Houston.
$3,350 is the average rent in Palo Alto.

Just to give a concept of how much the extra $2,250 a month that saves is.
$530 is the average monthly payment on a car.
$460 is the monthly individual cost of health insurance.
$400 is the average monthly cost of food.
$145 is the average monthly spending on gas for a car.
$130 is the average monthly cost of car insurance.
$1,665 a month total.

Those 5 things which are just as essential for people in Palo Alto as Houston and cost about as much in both places cost that much.

If an HP employee moved to Houston and cut rent cost down, but chose to save $585 more a month and put it in a 401k paying 5% for 10 years, they’d have $92,700 or 7 years average rent in Houston.

Those 5 things are also essential, so let’s just say an HP employee moved to Houston and saved the entire $2,250 a month for 10 years.
$27,000 saved a year.
$357,000 saved over 10 years.
27 years worth of rent in Houston.
9 years worth of rent in Palo Alto.

A lot of people have a lot of different reasons for companies leaving, but I think the rent factor and how it’s extremely hard for employees to live is the problem.

Hewlett-Packard was the birth of Silicon Valley and it’s leaving.

I don’t see it as unlikely a future where Facebook, Uber, Google and more could join."

Then there are the other stories on Elon Musk's and Oracle's moves to Austin:

NYT: ‘Welcome to Texas!’: Musk’s California Departure Stokes the States’ Rivalry - Several companies have followed the same path to Texas, which has aggressively advertised lower taxes and fewer regulations.

"California, with its steep housing costs, raging wildfires and strict business regulations, has been losing residents to other states, with Texas as the most popular exodus destination. Of more than 653,000 people who left California last year, about 82,000 went to Texas, more than any other state, according to census figures.

Or, as The Stanford Review wrote in a nod to the native Texan George Strait, “All of California’s Exes Are Moving to Texas.” (????) ...

California and Texas — two economic powerhouses, one led by Democrats and the other by Republicans, with respective populations of 40 million and 29 million — are in many ways natural frenemies. It is a rivalry made up of In-N-Out versus Whataburger, of Disneyland versus the State Fair of Texas, of tacos versus, well, other tacos."

The Verge: Elon Musk says he has moved to Texas, calls California overly ‘complacent’ - ‘California has been winning for a long time, and I think they’re taking it for granted’
Techcrunch: Oracle is headed to Texas now, too

"Taxes, a more affordable cost of living for employees, a lower cost of doing business, and less competition for talent are among the top drivers for the companies’ moves, though there is also a growing sense that culture is a factor, as well."

WSJ: Covid-19, Remote Work Make Austin a Magnet for New Jobs - Texas’ capital is attracting corporate jobs and remote workers, lured by lower costs and lower taxes

All in all a very good week for Houston and Texas! Let's hope this is just the beginning of a much larger tech exodus from California to Texas...

This piece first appeared on Houston Strategies Blogspot.

Tory Gattis is a Founding Senior Fellow with the Urban Reform Institute and co-authored the original study with noted urbanist Joel Kotkin and others, creating a city philosophy around upward social mobility for all citizens as an alternative to the popular smart growth, new urbanism, and creative class movements. He is also an editor of the Houston Strategies blog.

Maine Governor Moving to Florida for Lower Taxes

Wendell Cox — Thu, 15 Nov 2018 13:34:17 -0500

Maine governor Paul LePage has announced that he will move to Florida after his term expires in 2019. According to The Hill, taxes are driving the Governor away. He said: “I will pay no income tax and the house in Florida’s property taxes are $2,000 less than we were paying in Boothbay,” LePage said. “At my age, why wouldn’t you conserve your resources and spend it on family [rather] than spend it on taxes?”

What’s the Matter With Kansas – and Connecticut?

Aaron M. Renn — Thu, 22 Jun 2017 10:02:46 -0400

In 2012, the state of Kansas under Gov. Sam Brownback passed a large tax cut. Despite this massive fiscal stimulus, the state’s economy actually underperformed the nation during much of the subsequent period and the cuts blew a gigantic $900 million hole in the state’s budget.

Finally the legislature cried uncle. It passed a $1.2 billion tax hike. Brownback vetoed it but the Republican dominated legislature overrode the veto.

Not only did the tax cuts fail to grow the economy, one of the state’s major metro regions, Kansas City, received a gigantic free broadband investment in the form of Google Fiber. Spanning Kansas and Missouri, this investment also failed to produce significant tech growth.

Meanwhile in Connecticut, the state twice raised taxes to address a budget deficit. Unfortunately, these tax hikes did not create long term revenue growth. What’s more, after the most recent rounds of tax hikes, the state experienced a corporate exodus highlighted by GE and Aetna. The state capital of Hartford is also flirting with bankruptcy. Gov. Dannel Malley now admits the state is tapped out on tax increases.

There are a lot of claims one can make out of these situations. I’m only going to point out that both Kansas and Connecticut are out of favor in the marketplace right now. For example, while the suburban office park may not be extinct, it’s certainly facing challenges in high tax settings like New Jersey and Connecticut. Companies like GE are in fact increasingly looking to global city centers for their highest level executives. Connecticut doesn’t have that product on offer and can’t create it. Regarding Kansas, it was likely a low tax state even before the cuts, which did not materially improve its competitive position or instrinsic attractiveness.

It’s simply very difficult to counter these macro forces. When cities were out of favor, even NYC was en route to oblivion. Trying to push on a string often only creates as many problems as solutions.

IRS to Continue Migration Data

Wendell Cox — Tue, 18 Dec 2012 14:22:44 -0500

" The IRS should be applauded" --- it is hard to imagine a public statement to this effect, other than from a government insider. But this was the Tax Foundation, improbably and correctly complimenting the Internal Revenue Service in announcing that its annual income tax migration data would continue to be produced. This apparently reverses a decision to discontinue the data. The Tax Foundation noted that there was:

... outrage when the IRS announced that they were canceling the program. An IRS economist, informed of the decision by higher-ups, told the Daily Caller: "We were just told this morning that the program is indeed going to be discontinued. It is not our decision at all and we are very disappointed." Jim Pettit, of the activist group Change Maryland, penned a National Review piece noting that the decision came soon after the data put Maryland Governor Martin O'Malley on the defensive (O'Malley has routinely asserted that Maryland has a great tax system and business climate, despite strong evidence to the contrary), and the Washington Examiner followed up with an editorial saying that the data is vital for ascertaining which "model" of states (high-tax, high-service vs. low-tax, low-service) Americans were preferring. Members of Congress also started calling, demanding an explanation.

We join in the chorus. This data has been valuable for many uses and many will continue to use it in the years to come.

Infographic: State Property Tax Data

Mark Schill — Fri, 08 Jul 2011 15:44:17 -0400

Credit Sesame has created an interactive map showing property tax rates for all 50 states. Based on data from the Tax Foundation, the graphic also shows property tax rates as a share of home value and as a share of median income of homeowners. It's important to note that property taxes can vary regionally within states, and property taxes are only one part of overall state and local tax burden.

Mortgages – CreditSesame.com

Here's the Tax Foundation's numbers on overall state and local tax burden. For more on overall state business climates, check out our Enterprising States report.

High Cost of Living Drives New York’s Fiscal Deficit with Washington

Eamon Moynihan — Thu, 19 Aug 2010 17:38:15 -0400

Between now and the end of the year, a hot political topic here in New York will be whether to let the Bush tax cuts expire for people in the highest income bracket, as the Obama administration proposes, or whether to extend those cuts for everyone. Advocates taking the latter position will correctly argue that higher rates will be especially harmful to New York, because of the large number of wealthy people, who live here.

What is not likely to be discussed, however, is that because of the exorbitant cost of living in New York and the surrounding suburbs, federal taxes take a supersized bite out of the incomes of all New Yorkers, who in the vast majority are not wealthy at all. The result is that here in New York City, which is arguably the poorest city in America when it comes to what people can actually afford, we end up subsidizing other states and localities, where people pay less to Uncle Sam, even as they enjoy a higher standard of living than we do.

How could this be? The answer is that because New York and the surrounding suburbs are so expensive, businesses have to pay higher salaries to recruit people to work for them. According to the ERI Economic Research Institute, a leading data survey company that helps corporate clients set compensation packages and calculate the cost of doing business throughout the United States and elsewhere, these higher salary costs are substantial.

They calculate, for example, that a typical registered nurse in metropolitan New York earns $82,712 versus a national average of $65,464. In the case of an accountant, they calculate a figure of $74,388 versus a national average of $58,712. In the case of an administrative assistant, as they define those job responsibilities, they calculate a figure of $59,243 versus $47,961 nationally. And finally, they also provide data for someone working as a janitor. Here the figure they calculate is $38,142 versus $31,220.

Sounds great. Who doesn’t want a higher salary? But unfortunately, it’s not that simple. The problem is that the IRS doesn’t care how much you can actually buy with your hard earned dollars. They just want to see the number printed on your W-2. And as we all know, the more you make, the more you pay.

For the average registered nurse in New York, filing as an individual, and assuming no special deductions or one-time credits, the tax bite amounts to $14,381 versus $10,219 for the average registered nurse in the rest of the country. An accountant here pays $12,444 versus $8,531 nationally. For an administrative assistant, the figure is $8,656 versus $5,844. And in the case of a janitor, the figure is $3,899 versus $2,864.

But wait, it gets worse than that. Based on data from the federal Bureau of Economic Analysis, it turns out that the cost of living in the New York metropolitan area is significantly higher than the difference in salaries alone would indicate. According to their data, the cost of living here is 45 percent higher than in the rest of the country or approximately twice the difference in salaries.

Yes, employers have to pay more to recruit people to work here in New York, but they don’t have to make up the whole difference. Economists refer to this as money illusion, which is their way of saying that people find it difficult to distinguish between the nominal value of money and the true purchasing power of that money in the marketplace.

If we recalculate salaries to take into account the cost of living, it turns out that the federal tax premium that New Yorkers have to pay is even greater. Thus, if the tax bite were to reflect the actual standard of living for a registered nurse in New York, the real tax would be $8,106 instead of the actual tax of $14,381 or a difference of $6,275. For an accountant, the difference would be $5,775. For an administrative assistant, it would be $4,352, and for a janitor, $1,778.

The lessons here are clear. In the short term, New York’s Congressional delegation needs to restrain efforts to raise taxes in Washington, D.C., because the impact here will be greater than elsewhere. And in the longer term, we need to determine why the cost of living in New York is so high and then implement the reforms necessary to fix the problem and give New Yorkers a standard of living that is competitive with rest of America.