Each year, the Edmondson Community Organization (ECO)—a nonprofit in Baltimore dedicated to revitalizing the city's Midtown-Edmondson area—reviews an obscure list of properties released by the government. The task is to see how many are situated within the organization's neighborhood boundaries. The fewer, the better.

The owners of the properties that do appear have fallen behind on their property taxes and, as a result, are poised to lose their real estate in an annual tax sale conducted by the government. After poring over the list, the ECO knocks on those doors to deliver the queasy news and alert the occupants to what is about to happen.

The issue is one ECO knows intimately. A few years back, the organization accrued a $2,543 property tax debt on its community center. So in 2018, the city sold that lien for $5,115 to a California-based investor, who then foreclosed on and sold the ECO's building for $139,500. In return, the ECO got a check for the difference between its debt and the lien purchase price: $2,572.

In other words, all told, the organization paid six figures to compensate for the $2,543 it owed the government, in what a new federal lawsuit alleges is a pervasive practice in Baltimore that illegally deprives people of their equity in violation of the Fifth Amendment's Taking Clause as the city attempts to satisfy modest tax debts.

Every spring, Baltimore bureaucrats conduct a mass auction online to sell off liens like the ECO's. Sometimes the unlucky debtors have fallen just hundreds of dollars behind on their taxes.

For that, they may lose their property and the vast majority of equity tied up in it. Following an investor's purchase, an owner has a certain period to satisfy the amount of the lien, along with interest and fees, to keep their property. That's a tall order when considering these parties were struggling to pay the original debt, much less the new total, which has since ballooned. In the case that debtors are unsuccessful, the investor has effectively purchased the property for the amount they paid for the lien.

In the ECO's case, that meant an investor bought their building for about 2,600 percent less than what it ultimately sold for. The ECO, in turn, was left with a fraction of what their property was worth.

That Baltimore's process robs property owners of huge chunks of equity is not just a regrettable side effect, the ECO's lawsuit alleges; it's baked into the nature of the city's approach. "The City understands there that there is a finite pot of investor capital available to purchase all the liens," reads the complaint. "This creates a perverse incentive for the City to minimize the winning bids"—a.k.a. to depress prices—"to spread that finite pot across the highest number of liens." 

Some of the moving parts of Baltimore's approach do seem to imply that the government is not merely unconcerned with owners retaining some of their equity but that they are actively seeking to keep bids low. The more glaring examples included in the ECO's suit show that the city charges a high-bid premium that punishes investors making offers above a certain threshold and opts to fulfill the law's advertising requirement in part by listing properties in The Daily Record, a business and legal newspaper that is not targeted at the general community. (The ECO says this violates state law, which stipulates that such a sale must be advertised twice in general-circulation newspapers.)

"There's a limited amount of investor money out there," says Maryland Legal Aid's chief legal and advocacy director Somil Trivedi, who is representing the ECO, "and the city has structured a system to spread that money across as many liens as possible instead of getting as much equity back for their citizens."

The ECO is not alone, according to the suit, but is one of many victims. You don't have to travel far to find others. "In the same tax sale in which a bidder purchased a lien on ECO's building, 68 properties in Midtown-Edmondson were also subject to the tax sale," states its complaint. "The winning bids on those properties totaled only 22% of the assessed value of the properties—a dramatic loss of generational wealth for the owner of each Midtown-Edmondson property that was lost in the sale."

Home equity theft, as it's sometimes called, was once an obscure issue limited to discussion in magazines like this one. But last year it took the national stage when the Supreme Court ruled unanimously in Tyler v. Hennepin County that a local government had violated the Constitution when it seized an elderly woman's condo over a modest tax debt, sold it, and kept the profit. Geraldine Tyler, the plaintiff in that suit, had fallen $2,300 behind on her taxes, which ultimately reached $15,000 after Hennepin County tacked on penalties, interest, and fees. The government then sold the condo for $40,000 and kept the additional $25,000.

While the ECO's situation isn't entirely analogous to Tyler's—the organization was paid something—Baltimore's scheme could still very well be unconstitutional, says Christina M. Martin, a senior attorney at Pacific Legal Foundation who represented Tyler before the Supreme Court. "If the procedure that you're using to sell the property is designed in a totally unreasonable manner, then obviously people are going to still get robbed of more than what they owe," she tells me. "There's a longstanding history of courts overturning sales that have a shocking result like [the ECO's]."

Tyler, in theory, should have put an end to stories like these. But the lawsuit out of Baltimore comes as some other jurisdictions have devised creative ways to comply with the law on its face but not really in practice. After Michigan's Supreme Court ruled the practice unconstitutional, for example, the state passed a convoluted debt collection statute that requires owners to complete a Herculean legal obstacle course to reclaim their equity. It is a difficult course to win.

"It is the government's choice in the first place to collect property taxes, to decide what regime they want to use to enforce the collection of those property taxes, and so it can't then complain that the regime that it chose to engage in for an amount of money that it chooses to collect is then too difficult to do constitutionally," says Trivedi. "There are lots of jurisdictions around the country that do it differently. Some don't even have tax sales. Some have much longer periods of negotiation and payment plans….Municipalities around the country have figured out ways to collect taxes without doing it unconstitutionally."

The post Baltimore's Tax Sales Are Robbing People of Their Equity appeared first on Reason.com.

A few minutes before 10 a.m. on Wednesday, former President Donald Trump dropped a plan to completely overhaul the relationship between millions of older Americans and the federal government.

"SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY," Trump shouted from his Truth Social account.

If implemented, that would be a hugely expensive policy change. According to one quick estimate by a former White House chief economist, it would reduce federal revenue by $1.5 trillion over 10 years and would add $1.8 trillion to the national debt. (The extra cost is the result of interest on the new debt that would be racked up in the absence of that revenue.) It would also accelerate Social Security's slide into insolvency. And, obviously, it would be a big tax break for Americans who collect Social Security checks—but not a tax break that would be particularly good at fostering economic growth.

Despite all that, the most notable thing about Trump's announcement was what it didn't include. There was no attempt to reckon with those figures, for example. No surrogates were dispatched to explain why this change is necessary or good for the economy or country. No press releases went out. There was, of course, no attempt to explain what government programs would be cut to offset the drop in revenue. For that matter, there had been no discussion of this idea at the Republican National Convention. It was not mentioned in Trump's (long) acceptance speech and was not included in the party's platform.

Like so much else in the Trump era, this looks like an idea that went from the former president's head to his social media account with very few stops in between.

There is something to be said for that degree of—let's say—transparency. If nothing else, it is quintessentially Trumpian: hastily conceived and not deeply considered, more of a marketing slogan than substance. Let's just call this what it is: a nakedly political play to win the votes of Social Security–collecting Americans.

Coming as it did on Wednesday morning, the "no taxes on Social Security" plan stood in stark contrast to the news the Trump campaign had made just one day earlier. On Tuesday, Trump's campaign had officially (and gleefully) sunk the Heritage Foundation's "Project 2025"—a 900-page document in which the conservative think tank had outlined an extensive policy plan for Trump's prospective second term. The project had been headed by Paul Dans, who had served in the Trump administration, and was central to the institutional-wide pivot toward populism that Kevin Roberts, Heritage's president, had executed in recent years.

In a statement, two of Trump's top campaign officials didn't merely bury Project 2025 but also issued a threat.

"Reports of Project 2025's demise would be greatly welcomed and should serve as notice to anyone or any group trying to misrepresent their influence with President Trump and his campaign—it will not end well for you," said Susie Wiles and Chris LaCivita.

Translation: How dare anyone try to substitute actual policy substance for whatever random thought might fall out of the former president's head on a Wednesday morning?

Roberts' mistake "was thinking that Mr. Trump cares about anyone's ideas other than his own. He governs on feral instinct, tactical opportunism, and what seems popular at a given moment," wrote the Wall Street Journal's editorial board in a scathing response to the news of Project 2025 being scuttled and that Dans had resigned from Heritage. "The lesson for Heritage, and other think tanks, is that it's better to stick to your principles rather than court the political flavor of the day."

Amen to that.

Meanwhile, Vice President Kamala Harris has launched her campaign by veering hard into an almost Trump-like policy nihilism of her own. Having already tried to memory-hole her track record as the Biden administration's so-called "border czar"—read Reason's Liz Wolfe if you need to catch up on that controversy—Harris is now seemingly rewriting her positions on a bunch of other things too.

For example, Harris was a co-sponsor of the Green New Deal when she was a member of the U.S. Senate in 2019. She voiced her support for the progressive environmental package while campaigning for president that same year.

Now, she's backing away from it. This week, a spokesperson for the Harris campaign told the Washington Examiner that Harris no longer supports the federal job guarantee—a promise that the federal government would provide jobs with "family-sustaining wages" to anyone who wanted one—that was a key feature of the Green New Deal.

As the Examiner notes, Harris has also "backed away from her endorsement of eliminating private healthcare plans as part of a Medicare for All proposal. Her campaign also told The Hill that she will not seek to ban fracking if she is elected. That was after previously telling CNN while running for president 'There's no question I'm in favor of banning fracking.'"

Maybe this is Harris embracing her philosophy of being "unburdened by what has been." Maybe she's simply taking a page from Trump's book—after all, the former president has never paid much of a price for making it up as he goes along.

For both Trump and Harris, simply telling voters what you think they want to hear is possibly the most direct route to winning an election. But such a cynical approach to campaigning sidelines any discussion of policy—and means the election is likely to be decided on far stupider grounds.

The post Trump and Harris Are Just Making It Up as They Go appeared first on Reason.com.

Republican vice presidential nominee J.D. Vance has been in the news for an old clip of him talking about how the tax code should punish adults without kids. While Vance's proposal probably aims to address demographic concerns, it represents a misguided approach that contradicts fundamental principles of economic freedom and fairness.

And you know what? That's precisely what our tax code already does, in this case and many others.

Using the tax code to "reward" parents and "punish" nonparents is at odds with the idea of a neutral, efficient tax system. In an ideal and fair world, the tax base would be broad but taxed at a low rate. People making the same income should be paying the same level of taxes no matter how they choose to live their lives.

Unfortunately, the tax code is neither fair nor neutral. It punishes and rewards all sorts of behaviors based on what government officials decide is good or bad.

For instance, the tax code does, in fact, treat people with kids more favorably than it treats those who do not have kids.* There's the child tax credit, of course. Then there's the earned income tax credit, which is more generous for families with children than those without. And there is no shortage of other provisions, such as a very significant deduction for heads of households and another for dependent care, which do the same thing.

It's hard to know what Vance's proposal really entails. Does he want another surtax on childless parents? Does he want to expand the child tax credit and make it a universal basic income like many conservatives and progressives want? It's also unclear whether he is simply failing to see that our tax code already delivers on his wishes and punishes childless adults. Either way, I assume he is well intentioned and that he is rightfully concerned about the decline in fertility we are witnessing not just in this country but across the world.

Unfortunately, punishing childless parents with additional taxes wouldn't boost fertility. For one thing, we've had a child tax credit since the 1990s, and the tax break has been regularly extended. That hasn't encouraged people to have more kids.

That's not unique to the child tax credit. Lots of evidence exists showing that government programs of all sorts meant to encourage, reward, or stimulate the supply of babies usually fail. One of the most dramatic examples is South Korea. The country has spent over $200 billion on such policies over the past 16 years, and fertility rates are still falling.

There isn't any doubt that more people, and hence more babies, are a boon for our lives and our economy. But that alone isn't a good reason for government subsidies. And while raising kids is expensive, that's no justification for a government tax break, either.

Besides, careful studies have shown the cost of raising a child in America has been decreasing for six decades. In the end, rather than rewarding families with lesser taxes at the expense of childless adults, I would encourage advocates to focus on removing existing government barriers—like overzealous policies that make child care more expensive without making kids measurably safer—that make life more complicated for families.

Ultimately, these are only secondary aspects of a much bigger debate. Our tax code is incredibly unfair. It's not just childless adults that face a surcharge compared to parents. Tax breaks for homeowners mean that renters pay more money for the same amount of housing. Households which include a college student pay less in taxes. People who can afford an electric vehicle can secure a tax break that others cannot.

These tax breaks for some are not just unfair to the taxpayers who don't get them—they also turn our tax code into a complicated mess that requires many millions of collective hours to comply with. Instead of adding more complexity and bias, we should be moving in the opposite direction—toward a simpler, flatter, and more neutral code that treats all taxpayers equally.

Using the tax code as a tool for social engineering is misguided. It leads to economic inefficiencies and infringes on individual liberty. Rather than doubling down on the problematic aspects of our current system, we should be working toward comprehensive reform. Only then can we hope to see taxes as something that truly serves the interests of all Americans, regardless of their personal choices.

COPYRIGHT 2024 CREATORS.COM

*CORRECTION: The original version of this article misstated in part who benefits more from the current tax code.

The post J.D. Vance Wants To Control You With Taxes appeared first on Reason.com.

The United States notoriously makes tax filing stressful and expensive thanks to greed, the tax lobby and the idea that basically nothing should be free (fun stuff!). However, there's a little glimmer of hope, as the IRS is making Direct File, its free digital tool announced in late 2023, permanent. According to the US Department of the Treasury, a Direct File pilot program saved 140,000 individuals an estimated $5.6 million in filing costs for the 2024 tax session. 

Not only is the program here to stay (with the current government, at least), but its access is expanding. Taxpayers in 12 states could use Direct File this year, but the tool will be available in all 50 states and Washington DC starting with the 2025 filing season. The Treasury reports that Direct File users approved of the tool, with 90 percent of the 11,000 taxpayers surveyed rating the system "excellent" or "above average."  

Right now, the free TurboTax alternative only works for taxpayers with simple filings like a W-2 or standard deduction. However, the Treasury plans to "expand the reach and tax scope" it offers in the coming years. Despite this expansion, it will be up to states whether they want to participate in the program. 

Remember when Republicans were against using the tax cops to go after political opponents? Well, they seem to have changed their minds.

House Oversight Committee Chairman James Comer (R–Ky.) has made no secret of his desire to use finance laws against left-leaning activists. A few months ago, he complained that the IRS was going too easy on progressive nonprofits. Now he's found another angle of attack: insinuating that these organizations are part of an anti-Israel conspiracy.

Comer and House Education Committee Chairwoman Virginia Foxx (R–N.C.) are "investigating the sources of funding and financing for groups who are organizing, leading, and participating in pro-Hamas, antisemitic, anti-Israel, and anti-American protests" on college campuses, they announced in a Tuesday letter.

"This investigation relates both to malign influence on college campuses and to the national security implications of such influence on faculty and student organizations," Comer and Foxx wrote.

Foxx objected when the shoe was on the other foot. In 2013, it was revealed that the IRS had been placing extra scrutiny on nonprofits whose paperwork included terms such as tea party and patriot. Foxx wrote an op-ed criticizing the "outrageous" demands for information that IRS investigators had made.

"The problem at the IRS is with more than the search terms it used. Whether conservative or liberal, targeting Americans is wrong," she stated. "The deeper problem is that government's taxing arm ever came to consider itself the arbiter of what constitutes legitimate free speech in the first place."

Asked about Foxx's earlier statements, her spokesman Alex Ives wrote to Reason that "what you are positing amounts to false equivalencies on many levels." He stated that Foxx was seeking to "ensure groups do not have financial ties to designated Foreign Terrorist Organizations," without citing specific examples.

"Do groups on campuses have a right to free speech? Of course," Ives said. "Do they have a right to have their ties to foreign financiers connected to terror organizations to go unscrutinized? Of course not."

The letter from Foxx and Comer demands that the Department of the Treasury provide all Suspicious Activity Reports, or bulletins on potential tax evasion and money laundering, for 20 different organizations. The list includes Students for Justice in Palestine and its sponsor, the WESPAC Foundation. It also names off-campus Muslim and Palestinian-American groups, Jewish peace movements, and many organizations that are not primarily focused on the Israeli-Palestinian conflict.

"This is part of a broader effort to demonize parts of the tax-exempt sector that a part of the Republican Party views as a key target in the war on woke," says Lara Friedman, president of the nonprofit Foundation for Middle East Peace, which has been tracking Congress' stance on the Israeli-Palestinian conflict. "If you make this about supposedly fighting antisemitism, you bring parts of the Democratic Party with you."

Many of the groups listed are big names in progressive philanthropy: George Soros' Open Society Foundations, the Pritzker family's Libra Foundation, the Rockefeller Brothers Fund, and the Bill & Melinda Gates Foundation.

The Rockefeller organization gave several hundreds of thousands of dollars to Jewish Voice for Peace; another Jewish group for Palestinian rights called IfNotNow; the Adalah Justice Project, a Palestinian-American rights group; and Palestine Legal, a legal aid service for pro-Palestinian advocates in America.

"The RBF has had no direct involvement in the campus protests nor have we earmarked funds for them," Rockefeller Brothers Fund spokeswoman Sarah Edkins said in a statement last week. "Some RBF grantees have provided training, messaging, and/or legal support to student protest leaders. The Fund does not direct the activities of any grantee organizations."

Edkins added that the fund "respects Israel's right to exist and supports the right to self-determination for both the Israeli and Palestinian peoples."

The Open Society Foundations also gave several hundreds of thousands of dollars to Jewish Voice for Peace and IfNotNow, according to Rolling Stone. The grant-making network told Politico that it "has funded a broad spectrum of US groups that have advocated for the rights of Palestinians and Israelis and for peaceful resolution to the conflict in Israel."

It's not clear why the Bill & Melinda Gates Foundation and the Libra Foundation wound up on the list. Last week, Politico named them as supporters of pro-Palestinian protests, because of their donations to the Tides Foundation, a clearinghouse for progressive groups that funds Jewish Voice for Peace, IfNotNow, Adalah, and Palestine Legal. But the Gates and Libra donations were earmarked for other causes.

Jewish Voice for Peace says that the congressional letter is "inaccurate, dangerous and a desperate attempt by right-wing legislators to criminalize public protest. These legislators are falsely and libelously smearing tens of thousands of students as antisemitic, simply because they are protesting the use of their tuition dollars in the massacres of Palestinian families."

Two of the groups listed in the letter, American Muslims for Palestine (AMP) and the Council on American-Islamic Relations, also offered statements to Reason. The Libra Foundation declined to comment, and the Gates Foundation pointed to its comments to Politico. None of the other groups responded to emails asking for comment.

"AMP looks forward to demonstrating in any jurisdiction that it operates wholly within the laws of the United States, compliant with all laws and regulations governing U.S. nonprofit entities," the organization's attorney Christina Jump says. "AMP operates completely within the United States, raises funds completely within the United States, and utilizes those donations completely within the United States to support its mission of educating American Muslims and the American public on the rich history and culture of Palestine."

Edward Ahmed Mitchell, deputy director of the Council on American-Islamic Relations, says that the letter "reads like a bad impersonation of Joseph McCarthy. Instead of advancing the goals of a foreign government by pursuing witch hunts against the American people, Rep. Foxx, Rep. Comer and other genocide-enablers in Congress should focus on washing the blood of over 30,000 slaughtered Palestinian civilians off their hands."

Republicans are not the only ones trying to bring the U.S. tax code into the Israeli-Palestinian conflict. In New York, some Democrats are trying to strip away nonprofit status from organizations that operate in Israeli settlements in the Palestinian territories. New York–based nonprofits have raised money to buy drones for settler militias and to maintain a military academy in a West Bank settlement.

The House Ways and Means Committee held a hearing in November 2023 on the "nexus" between campus protests and "terror financing." Soon after, the House passed a bill allowing the secretary of the treasury to shut down nonprofits based on vague insinuations of terrorist support. Last week, 15 Republican senators called on the IRS to revoke the nonprofit status of any organization that supported Students for Justice in Palestine.

Friedman, the Foundation for Middle East Peace president, believes that the congressional letter is more likely to have a "chilling effect" on nonprofits than to turn up any real evidence of illegal activity.

"It's partly a fishing expedition," she says. "And by lodging an accusation, they hope to paint a picture in the mind of the public."

The post Congressional Republicans Launch 'Fishing Expedition' Against Progressive, Jewish, and Palestinian Nonprofits appeared first on Reason.com.

How much do billionaires really pay in taxes?

"Today, the superrich control a greater share of America's wealth than during the Gilded Age of Carnegies and Rockefellers," said Gabriel Zucman in a recent New York Times opinion piece entitled, "It's Time to Tax the Billionaires."

Zucman is an economist at the Paris School of Economics and the University of California, Berkeley, and a frequent collaborator with superstar economist Thomas Piketty, author of the extremely influential book on wealth inequality, Capital in the Twenty-First Century.

But today's guest, Phil Magness—an economic historian, author, and the David J. Theroux Chair in Political Economy at the Independent Institute—says the work of Piketty and his circle of inequality-obsessed colleagues is deeply flawed and sometimes outright deceptive. He points out that billionaires do pay taxes…a lot of taxes. And the inequality literature is riddled with errors and bad statistics.

Watch the full conversation on Reason's YouTube channel or the Just Asking Questions podcast feed on Apple, Spotify, or your preferred podcatcher.

Sources referenced in this conversation:

1. Magness' viral post debunking Zucman
2. Zucman's article discussed in the introduction
3. CBO: Tax credits awarded by quintile
4. Zucman's explanation for excluding the Earned Income Tax Credit (p. 19)
5. Tax Foundation: Summary of the Latest Federal Income Tax Data, 2024 Update
6. Piketty's inequality U-graph
7. Auten-Splinter adjustment, after-tax income for top 1 percent
8. Piketty: "r > g"
9. Piketty: Capital income has increased as labor income has fallen

Timestamps:

• 00:00 Introduction to Just Asking Questions: Billionaires and Taxes
• 01:38 Unpacking the Misleading Tax Rate Graphs
• 06:38 The Political Motivations Behind Misleading Tax Narratives
• 15:39 Analyzing the Impact of Tax Credits on Lower-Income Earners
• 22:32 The Real Tax Burden: A Closer Look at Wealthy Americans' Contributions
• 27:05 Countering Piketty's Inequality Data With Accurate Accounting
• 34:58 The Practical Problems With a Wealth Tax
• 40:04 Piketty's Inequality Narrative and Its Flaws
• 48:50 Global Financial Transparency and Taxation Proposals
• 54:40 The Moral and Economic Case Against High Taxation
• 57:48 Listener Q&A: Defending the Show's Title

• Producer: John Osterhoudt

The post Phil Magness: Who Really Pays the Most Taxes? appeared first on Reason.com.

Justin Champlin, the former chief deputy tax assessor in Ascension Parish, Louisiana, has been arrested on two counts each of injuring public records and computer tampering, as well as malfeasance in office. Police said that on two different occasions, Champlin illegally reduced the assessment on his property to lower his tax obligation. Champlin was fired from his job in early April following an internal audit.

The post Brickbat: Low Taxes for Me, Not for Thee appeared first on Reason.com.

As California (and possibly Congress) are, again, revisiting instituting link taxes in the US, it’s worth highlighting that our prediction about the Canadian link tax has now been shown to be correct. It didn’t harm Meta one bit to remove news.

The entire premise behind these link taxes/bargaining codes is that social media gets “so much free value” from news orgs, that they must pay up. Indeed, a ridiculously bad study that came out last fall, and was widely passed around, that argued that Google and Meta had stripped $14 billion worth of value from news orgs and should offer to pay up that amount.

$14 billion. With a “b.”

No one, who understands anything, believes that’s true. Again, social media is not taking value away from news orgs. It’s giving them free distribution and free circulation, things that, historically, cost media organizations a ton of money.

But, now a study, in Canada is proving that social media companies get basically zero value from news links. Meta, somewhat famously, blocked links to news in Canada in response to that country’s link tax. This sent many observers into a tizzy, claiming that it was somehow both unfair for Meta to link to news orgs AND to not link to news orgs.

Yes, media organizations are struggling. Yes, the problems facing the news industry are incredibly important to solve to help protect democracy. Yes, we should be thinking and talking about creative solutions for funding.

But, taxing links to force internet companies to pay media companies is simply a terrible solution.

Thanks to Meta , not giving in to Canada and blocking links to news, we now have some data on what happens when a link tax approach is put in place. Some new research from McGill University and the University of Toronto has found that Meta didn’t lose very much engagement from a lack of news links. But media orgs lost out big time.

Laura Hazard Owen has a good summary at Nieman Lab.

“We expected the disappearance of news on Meta platforms to have caused a major shock to the Canadian information ecosystem,” the paper’s authors — Sara Parker, Saewon Park, Zeynep Pehlivan, Alexei Abrahams, Mika Desblancs, Taylor Owen, Jennie Phillips, and Aengus Bridgman — write. But the shock appears to have been one-sided. While “the ban has significantly impacted Canadian news outlets,” the authors write, “Meta has deprived users of the affordance of news sharing without suffering any loss in engagement of their user base.”

What the researchers found is that users are still using Meta platforms just as much, and still getting news from those platforms. They’re just no longer following links back to the sources. This has done particular harm to smaller local news organizations:

This remarkable stability in Meta platform users’ continued use of the platforms for politics and current affairs anticipates the findings from the detailed investigation into engagement and posting behaviour of Canadians. We find that the ban has significantly impacted Canadian news outlets but had little impact on Canadian user behaviour. Consistent with the ban’s goal, we find a precipitous decline in engagement with Canadian news and consequently the posting of news content by Canadian news outlets. The effect is particularly acute for local news outlets, while some news outlets with national or international scope have been able to make a partial recovery after a few months. Additionally, posting by and engagement with alternative sources of information about Canadian current affairs appears unmoved by the ban. We further find that Groups focused on Canadian politics enjoy the same frequency of posting and diversity of engagement after the ban as before. While link sharing declines, we document a complementary uptick in the sharing of screenshots of Canadian news in a sample of these political Groups, and confirm by reviewing a number of such posts where users deliberately circumvented the link-sharing ban by posting screenshots. Although the screenshots do not compensate for the total loss of link sharing, the screenshots themselves garner the same total amount of engagement as news links previously had.

I feel like I need to keep pointing this out, but: when you tax something, you get less of it. Canada has decided to tax news links, so they get fewer news links. But users still want to talk about news, so they’re replacing the links with screenshots and discussions. And it’s pretty impressive how quickly users switched over:

Meaning the only one losing out here are the news publishers themselves who claimed to have wanted this law so badly.

The impact on Canadian news orgs appears to be quite dramatic:

But the activity on Meta platform groups dedicated to news doesn’t seem to have changed that much:

If “news links” were so valuable to Meta, then, um, wouldn’t that have declined once Meta blocked links?

One somewhat incredible finding in the paper is that “misinformation” links also declined after Meta banned news links:

Surprisingly, the number of misinformation links in political and local community Groups decreased after the ban.

Political Groups:

• Prior to the ban: 2.8% of links (5612 out of 198,587 links) were misinformation links
• After the ban: 1.4% of links (5306 out of 379,202 links) were misinformation links

Though the paper admits that this could just be a function of users recognizing they can’t share links.

This is still quite early research, but it is notable, especially given that the US continues to push for this kind of law as well. Maybe, just maybe, we should take a step back and recognize that taxing links is not helpful for news orgs and misunderstands the overall issue.

It’s becoming increasingly clear that the approach taken by Canada and other countries to force platforms like Meta to pay for news links is misguided and counterproductive. These laws are reducing the reach and engagement of news organizations while doing little to address the underlying challenges facing the industry. Instead of helping news organizations, these laws are having the opposite effect. Policymakers need to take a more nuanced and evidence-based approach that recognizes the complex dynamics of the online news ecosystem.

America's tax code is notoriously convoluted, but the complexity really sparkles when it comes to the federal government's approach to alcohol taxation. Wine, beer, and liquor are all subject to varying tax rates based on intricate calculations, but the so-called "bubble tax" for hard cider is the star of this regulatory circus.

Unbeknownst to most Americans, the tax rate for alcoholic cider is based on, among other things, the amount of carbonation the drink contains. Yes, America technically already has a carbon tax and the feds have literally found a way to tax air. Craft cider makers are being flattened by an arbitrary system that is strangling the industry's long-term potential.

Under the federal code, alcoholic cider is taxed as either hard cider, still wine, or sparkling wine, and the implications of which category applies are not insignificant. Hard cider is taxed at a modest $0.226 per gallon, while sparkling wine is taxed at a whopping $3.40 per gallon—a staggering 1,400 percent increase. For every 100 gallons of cider produced, Uncle Sam either takes $22 in taxes or $340 in taxes. 

What determines how cider is categorized and taxed? A ridiculous three-part formula based on a) what type of fruit is used to make the cider, b) the alcohol content of the cider, and c) what carbonation level the cider contains. 

Imagine you're a cider maker aiming for the lower tax rate to apply to your product. You need to produce a cider that is made from apples or pears (with no other fruit additions), is less than 8.5 percent alcohol by volume (ABV), and has less than or equal to 0.64 grams of carbon dioxide (CO2) per 100mL. However, if you decide to add some blackberries or grapes, it's considered a still wine and taxed at $1.07 per gallon—but only if it has less than 0.392 grams of CO2 per 100mL. If you go over that carbonation threshold, you've unlocked sparkling wine status and with that the $3.40 per gallon tax rate.

Confused? It gets worse. 

If your pear or apple cider is over 0.64 grams of CO2, it gets the sparkling wine rate. But it's knocked back down to the still wine rate if it's less than 0.392 grams of CO2 and the ABV level is 8.5 percent or higher. Whether the bubbles are added via "force carbonated" or "bottle conditioned" carbonation creates another tax delineation for the sparkling wine category. A flow chart is needed just to unpack all the potential permutations and combinations:

The implications of this tax labyrinth extend to consumers. A report from Wine Enthusiast notes that modern drinkers have grown to expect beer-like carbonation levels in their alcoholic beverages, thereby creating pressure for cider makers to add more carbonation to their products. 

One cider maker from Oregon reported that he receives frequent emails from consumers complaining about flat cider, which they incorrectly blame on him rather than the government. If adding more carbonation could financially cripple a small business, it's little wonder many cider makers feel that their hands are tied. 

The disparity is glaring when compared to beverages like beer, hard seltzer, and regular soda, which face no such carbonation-based tax penalties. It's a clear disconnect from market realities and consumer demands, which increasingly favor diverse flavors and more carbonation in ciders.

Craft cider makers are doing their best to diversify the carbonation levels and fruits in their ciders to respond to consumer demand, but it's clear the industry has a hard ceiling on its growth due to these tax rules. This is why many cider makers state that their ability to expand—and the ability of the industry as a whole to thrive—is being pointlessly inhibited.

The bubble tax is now getting more attention due to a recent bipartisan bill introduced in Congress, which aims to level the playing field between apple and pear ciders and those made with other fruits. While promising, the best reform would be to convert the entire system of alcohol taxation to one based simply on a drink's ABV level rather than arbitrary classifications.

Craft cider, a beverage steeped in American history, deserves better. Another Michigan cider maker made it even simpler: "It's not expressing the free market. The government needs to get out of the way."

The post The Federal Government is Literally Taxing Air appeared first on Reason.com.

The Justice Department yesterday confirmed that the Drug Enforcement Administration  (DEA) plans to move marijuana from Schedule I of the Controlled Substances Act (CSA), a list of completely prohibited drugs, to Schedule III, which includes prescription medications such as ketamine, Tylenol with codeine, and anabolic steroids. The Associated Press notes that the change, which is based on an August 2023 recommendation by the Department of Health and Human Services (HHS) that resulted from a review President Joe Biden ordered in October 2022, "would not legalize marijuana outright for recreational use."

That is by no means the only thing rescheduling marijuana will not do. Biden wants credit for "marijuana reform," which he hopes will help motivate young voters whose turnout could be crucial to his reelection. The announcement of the DEA's decision seems designed to maximize its electoral impact. But voters should not be fooled: Although moving marijuana to Schedule III will facilitate medical research and provide a financial boost to the cannabis industry, it will leave federal pot prohibition essentially untouched.

Rescheduling marijuana will not resolve the conflict between the CSA and the laws of the 38 states that recognize cannabis as a medicine, 24 of which also allow recreational use. State-licensed marijuana businesses will remain criminal enterprises under federal law, exposing them to the risk of prosecution and forfeiture. While an annually renewed spending rider protects medical marijuana suppliers from those risks, prosecutorial discretion is the only thing that protects businesses serving the recreational market.

Even if they have state licenses, marijuana suppliers will be in the same legal position as anyone who sells a Schedule III drug without federal permission. Unauthorized distribution is punishable by up to 10 years in prison for a first offense and up to 20 years for subsequent offenses. That is less severe than the current federal penalties for growing or distributing marijuana, which include five-year, 10-year, and 20-year mandatory minimum sentences, depending on the number of plants or amount of marijuana. But distributing cannabis, with or without state permission, will remain a felony.

That reality suggests that banks will remain leery of providing financial services to state-licensed marijuana suppliers, which entails a risk of potentially devastating criminal, civil, and regulatory penalties. The dearth of financial services has forced many cannabis suppliers to rely heavily on cash, which is cumbersome and exposes them to a heightened risk of robbery. It also makes investment in business expansion difficult.

Although federal arrests for simple marijuana possession are rare, cannabis consumers likewise will still be committing crimes, even if they live in states that have legalized marijuana. Under 21 USC 844, possessing a controlled substance without a prescription is a misdemeanor punishable by a minimum $1,000 fine and up to a year in jail. Moving marijuana to Schedule III will not change that law, which only Congress can do. Nor did President Joe Biden's mass pardons for people convicted of simple marijuana possession under that statute, which apply only retrospectively, "decriminalize the use of cannabis," as he promised to do during his 2020 campaign.

Biden has repeatedly decried the barriers to education, employment, and housing that marijuana convictions create. But contrary to what he claims, his pardons do not entail expungement of criminal records and therefore do not eliminate those barriers. Nor did the pardons address the various legal disabilities associated with marijuana convictions, cannabis consumption, or participation in the cannabis industry, which include loss of Second Amendment rights (a policy that Biden defends) and ineligibility for admission, legal residence, and citizenship under immigration law. Rescheduling marijuana likewise will not remove those barriers and disabilities.

Moving marijuana to Schedule III will not even make it legally available as a medicine, which would require regulatory approval of specific products. Doctors can legally prescribe Marinol (a.k.a. dronabinol), a synthetic version of THC listed in Schedule III, and Epidiolex, a cannabis-derived CBD solution listed in Schedule V. But they will not be able to prescribe marijuana even after it is moved to Schedule III unless the Food and Drug Administration approves additional cannabis-based medications.

The medical "recommendations" that authorize patients to use marijuana for symptom relief under state law are not prescriptions, and they do not make such use compliant with the CSA. So rescheduling marijuana not only will not legalize recreational use; it will not legalize medical use either.

What will rescheduling do? It should make medical research easier by eliminating the regulatory requirements that are specific to Schedule I, and it will provide an important benefit to state-licensed marijuana suppliers by allowing them to deduct standard business expenses when they pay federal income taxes.

Under Section 280E of the Internal Revenue Code, which is aimed at sticking it to drug dealers, taxpayers may not claim a "deduction or credit" for "any amount paid or incurred during the taxable year in carrying on any trade or business" that involves "trafficking" in Schedule I or Schedule II drugs. As that provision has been interpreted by tax courts, marijuana businesses can still deduct the "cost of goods sold," which counterintuitively means they can deduct the expenses associated with obtaining and maintaining an inventory of cannabis products. But they cannot deduct any other business expenses, including rent, utilities, salaries and benefits, office supplies, security, cleaning services, insurance, and legal fees.

That rule results in a crushing financial burden, forcing marijuana retailers to pay an effective tax rate as high as 70 percent or more. But because Section 280E applies only to businesses that sell drugs in Schedule I or Schedule II, moving marijuana to Schedule III will eliminate that disadvantage.

"I cannot emphasize enough that removal of § 280E would change the industry forever," cannabis lawyer Vince Sliwoski writes. "Having worked with cannabis businesses for 13 years, I view taxation as the largest affront to marijuana businesses—more than banking access, intellectual property protection problems, lack of bankruptcy, you name it. This would be HUGE." In addition to making it much easier to turn a profit, Sliwoski says, the tax change would help attract investors and give marijuana businesses "more leverage" in negotiating those deals.

Aside from those practical changes, rescheduling represents a historic federal about-face on the benefits and hazards of marijuana. Schedule I is supposedly reserved for drugs with a high abuse potential and no accepted medical use that cannot be used safely even under a doctor's supervision. Explaining its rationale for recommending marijuana's reclassification, HHS acknowledged that the drug does not meet those criteria—a point that critics had been making for half a century.

HHS cited "credible scientific support" for marijuana's use in the treatment of pain, nausea and vomiting, and "anorexia related to a medical condition." Regarding abuse potential and safety, it noted that marijuana compares favorably to "other drugs of abuse," such as heroin (Schedule I), cocaine (Schedule II), benzodiazepines like Valium and Xanax (Schedule IV), and alcohol (unscheduled). "The vast majority of individuals who use marijuana," HHS said, "are doing so in a manner that does not lead to dangerous outcomes to themselves or others."

In agreeing to follow the HHS recommendation, the DEA likewise is implicitly admitting that the federal government has been lying about marijuana for decades. But that long-overdue reversal falls far short of addressing today's central cannabis issue: the conflict between federal prohibition and state tolerance, which extends to recreational use in jurisdictions that account for most of the U.S. population. Repealing the federal ban—a step that Americans overwhelmingly support—would resolve that conflict. And while Biden cannot do that on his own, he has stubbornly resisted the idea, even as he emphasizes the irrationality and injustice of the war on weed.

The post Rescheduling Marijuana Does Not Address Today's Central Cannabis Issue appeared first on Reason.com.

Another Tax Day has come and gone, and most Americans believe they pay too much. One recent poll revealed that 56 percent say they pay more than their fair share. Unfortunately, I fear this is just the beginning considering the insane level of debt Washington policymakers have accumulated over the years. With this in mind, here are some important facts about our tax system that you might not know.

The payroll tax is the heaviest burden for most taxpaying Americans, but the income tax is more visible and painful to a lot of people. While we are accustomed to it—and while it affects some Americans' decisions about how much to work, invest, or save—the income tax didn't exist for most of our country's life.

In 1895, the Supreme Court ruled against a direct tax on the incomes of American citizens and corporations, something that had been included in the previous year's Wilson-Gorman Tariff Act. The court found that such a tax violated the constitutional requirement that tax apportionments among the states be based on population. It took a constitutional amendment—the 16th—to eventually change that and pave the way for the modern income tax.

The very first Internal Revenue Service Form 1040, introduced in 1913 after the ratification of the 16th Amendment, was remarkably straightforward compared to what we know today. It was only four pages long, including instructions, and the top tax rate was 7 percent on incomes above $500,000, which is over $15 million in today's dollars. Some people were horrified by a 7 percent tax and warned that it could put us on a slippery slope to higher rates—maybe even above 10 percent (!)—imposed on a vast majority of people. They were called crazy for fearing such a thing.

And yet, as predicted by a few realists, the income tax rate not only increased, but the threshold at which it's applied went down. During the 1950s and the Eisenhower administration, the top marginal tax rate on incomes reached 91 percent for individuals. This rate applied to incomes over $200,000 (about $2 million today) for single filers and $400,000 (about $4 million today) for married couples filing jointly. These high taxes were part of a broader policy to manage post-war fiscal adjustments and fund federal programs. These rates also failed to raise as much money as you would think due to many loopholes in the tax code.

While the top marginal rate is much lower today, the income tax code remains remarkably complicated. Will McBride, a scholar at the Tax Foundation, recently wrote that "as of 2021, the U.S. income tax code was 4.3 million words long and growing. That's much longer, and presumably much more complicated, than tax codes found in other countries." There are several reasons for this.

First, many welfare programs are administered through the tax code. In recent testimony before the Senate Budget Committee, the Cato Institute's Chris Edwards wrote, "The tax code is an increasing mess. The number of official tax expenditures has risen from 53 in 1970 to 205 today, making IRS administration and enforcement ever more difficult. We know from experience that complex tax expenditures, such as the low-income housing tax credit and earned income tax credit, generate substantial errors and abuse."

In addition, contrary to common belief, the U.S. income tax system is actually quite progressive. According to the Tax Foundation, "though the top 1 percent of taxpayers earn 19.7 percent of total adjusted gross income, they pay 37.3 percent of all income taxes. Just 3 percent of taxes are paid by the lowest half of income earners." Maintaining this progressivity through all kinds of tax provisions increases the complexity of the code.

This progressivity is generally ignored by those who argue that taxing the rich is the solution to reducing the burgeoning U.S. national debt. Soaking the rich, while perhaps appealing in its simplicity, misses the scale of the problem. Brian Riedl, a Manhattan Institute senior fellow, noted that if we were to confiscate 100 percent of the income of everyone making over $500,000 per year, it would fund the government for less than a year. This puts into perspective the enormity of the $34 trillion national debt versus the income of the rich.

Taxing the rich is a convenient distraction hiding the reality that if spending isn't cut, taxes will have to be raised on everyone, a lot. On this tax week, I suggest Congress starts cutting.

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The post This Tax Week, Remember That the Federal Income Tax Is Relatively New appeared first on Reason.com.

The Republican chairman of the House Budget Committee made news recently by announcing that if his party is serious about changing the fiscal path we are on, they'll have to consider raising taxes. Politics is about compromise, so the chairman is right. Every side must give a little. However, "putting taxes on the table" is not as simple a fix to our debt problems as some think.

Looking at recent Congressional Budget Office reports, one can have no doubts about the fiscal mess. Annual deficits of $2 trillion will soon be the norm. Interest payments on the debt will exceed both defense and Medicare spending this year and become the government's largest budget item. With no extra revenue available, the Treasury will have to borrow money to cover these expenses. Meanwhile, we're speeding toward a Social-Security-and-Medicare fiscal cliff that we've known of for decades, and we'll reach it in only a few years.

Talking about the need for a fiscal commission to address Washington's mountain of debt, the committee chair, Rep. Jodey Arrington (R–Texas), told Semafor, "The last time there was a fix to Social Security that addressed the solvency for 75 years, it was Ronald Reagan and Tip O'Neill, and it was bipartisan. It had revenue measures and it had program reforms. That's just the reality." He made these comments after some people warned that a fiscal commission is a gateway only to raising taxes.

I understand the worry. That's what the most recent deficit reduction commission tried to do. And while I don't believe this is what Arrington is planning, I offer a warning to the chair and to the future commission: If the goal is truly to improve our fiscal situation, as defined by reducing the ratio of debt to gross domestic product (GDP) or reducing projected gaps between revenue and spending, increasing tax revenue should be limited to the minimum politically possible.

For one thing, our deficits are the result of excessive promises made to special interests—mostly seniors in the form of entitlement spending—without any real plans to pay. The problem is constantly growing spending, not the lack of revenue and taxes. The common talking point from the left that rich people don't pay their fair share of taxes is a distraction. Not only is our tax system remarkably progressive, but there are not enough rich people to fleece to significantly reduce our future deficits.

Furthermore, the work of the late Harvard economist Alberto Alesina has established that the best way to successfully reduce the debt-to-GDP ratio is to implement a fiscal-adjustment package based mostly on spending reforms. A reform mostly geared toward tax increases will backfire as the move will slow the economy in the short and longer terms, causing it to ultimately fail to raise enough revenue to reduce the debt relative to GDP. Legislators, unfortunately, have made this mistake many times without learning any lesson—at least until the deal that was cut in 1997.

As a 2011 New York Times column by Catherine Rampell reminded us, until then, all deficit-reduction deals were very tax-heavy. What the article didn't mention is that they failed to reduce the deficit. What distinguishes the 1997 deal is that it cut both spending and taxes. The result was the first budget surplus in decades helped by a fast-growing economy. Now, this lesson doesn't mean that a fiscal commission must cut taxes, but it does caution against attempting to reduce the debt largely by raising taxes.

Another risk looms in the idea of a tax-and-spending compromise; that the tax increases will be implemented while the spending cuts won't. We have many examples of this pattern, but I'll recount just one: In 1982, President Ronald Reagan made a deal with Congress (the Tax Equity and Fiscal Responsibility Act) which would have raised $1 in revenue for every $3 in spending cuts.

There were tax hikes, indeed. But instead of spending cuts, Reagan got lots of spending increases. Remembering the story years later in Commentary magazine, Steven Hayward wrote, "By one calculation, the 1982 budget deal actually resulted in $1.14 of new spending for each extra tax dollar."

The moral of this story is that putting revenue on the table to reduce the debt has a bad track record. As such, the chairman, who I believe is serious about putting the U.S. on a better fiscal path, will have to be careful about whatever deal is made.

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The post A Bipartisan Tax Hike Won't Fix This Deficit appeared first on Reason.com.

America is celebrated for its economic dynamism and ample and generously paid employment opportunities. It's a nation that attracts immigrants from around the world. Yet Americans are bummed, and have been for a while. They believe that life was better 40 years ago. And maybe it was on some fronts, but not economically.

Surveys repeatedly demonstrate that Americans view today's economy in a negative light. Seventy-six percent believe the country is going in the wrong direction. Some polls even show that young people believe they'll be denied the American dream. Now, that might turn out to be true if Congress continues spending like drunken sailors. But it certainly isn't true based on a look back in time. By nearly all economic measures, we're doing much better today than we were in the 1970s and 1980s—a time most nostalgic people revere as a great era.

In a recent article, economist Jeremy Horpedahl looked at generational wealth (all assets minus all debt) and how today's young people are faring compared to previous generations. His findings are surprising. After all the talk about how Millennials are the poorest or unluckiest generation yet, Horpedahl's data show them with dramatically more wealth than Gen Xers had at the same age. And this wealth continues to grow.

What about income? A new paper by the American Enterprise Institute's Kevin Corinth and Federal Reserve Board's Jeff Larrimore looks at income levels by generation in a variety of ways. They find that each of the past four generations had higher inflation-adjusted incomes than did the previous generation. Further, they find that this trend doesn't seem to be driven by women entering the workforce.

That last part matters because if you listen to progressives and New Right conservatives, you might get a different story: that today's higher incomes are only due to the fact that both parents must now work in order for a family to afford a middle-class lifestyle. They claim that supporting a family of four on one income, like many people did back in the '70s and '80s, is now impossible. Believing this claim understandably bums people out.

But it's not true. One of its many problems, in addition to the data evidence provided by Corinth and Larrimore, is that it mistakenly implies that single-income households were the norm. In fact, as early as 1978, 50 percent of married couples were dual earners and just 25.6 percent relied only on a husband's income. I also assume that there are more dual-income earners now than there were in the '80s. While this may in fact be true for married couples (61 percent of married parents are now dual-earners), because marriage itself has declined, single-earner families have become relatively more common.

Maybe the overall morosity on the economy has to do with the perception that it's more expensive to raise a family these days than it used to be. Another report by Angela Rachidi looks at whether the decline in marriage, fertility, and the increase in out-of-wedlock childbirths are the result of economic hardship. She finds that contrary to the prevailing narrative, "household and family-level income show growth in recent decades after accounting for taxes and transfers." Not only that, but "the costs of raising a family—including housing, childcare, and higher education costs—have not grown so substantially over the past several decades that they indicate an affordability crisis."

So, what exactly is bumming people out? We may find an answer in the 1984 Ronald Reagan campaign ad commonly known as "Morning in America." It begins with serene images of an idyllic American landscape waking up to a new day. It features visuals of people going to work, flags waving in front of homes, and ordinary families in peaceful settings. The narrator speaks over these images, detailing improvements in the American condition over the past four years, including job creation, economic growth, and national pride.

I believe this feeling is what people are nostalgic about. It seems that they are nostalgic about a time when America was more united and it was clearer what being American meant. Never mind that this nostalgia is often based on an incomplete and idealized memory of an era that, like ours, was not perfect.

This is a serious challenge that we need to figure out how to address. One thing that won't help, though, is to erroneously claim that people were economically better off back then and call on government to fix an imaginary problem.

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The post The Economy Is Doing Way Better Than Many Believe appeared first on Reason.com.