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States Bearing Gifts

January 15, 2004

The increases in Roth IRA contribution limits, Health Savings Accounts, the tax-rate cuts, and the possible LSA's and RSA's are good, but we should all be wary of States bearing gifts. Though it may be difficult to see, The State, headed by President Bush, is eliminating many "loopholes" it previously created, upon astonishment that people are taking advantage of them. The most aggregious one is this:

Currently, certain provisions in the law permit US citizens to claim some credits in income earned abroad, so as to avoid double taxation. The Bush administration is making that impossible for foreign withholding taxes. It also requires a longer timetable on foreign property holdings to make them eligible for credits — Rockwell

and this:

the US has an emigration problem, as more and more people renounce citizenship to get away from the tax state. But it's not that easy. As if to remind us that we are all slaves to the state, the Bush administration plans to slap an extra link on the chain of expatriates. To the everlasting disgrace of the US government, it taxes people for a full ten years after they cease being citizens. Some aspects of the law allow people some flexibility and those will be repealed. Also, the government will presume the right to tax you forever until you give explicit notice to the effect that you are no longer a citizen, and once you do this, you can't be in the country for more than 30 days per year, and you must file an annual report. — Rockwell

This creates a division between economic man and moral man. On the one hand, larger contribution limits to Roth IRAs, RSAs, HSAs, and especially LSAs are good, the overall tax situation will become worse if Bush is re-elected. So, what is the voting tax-payer to do? If he supports his own interests — which for many, would be voting Bush, due to the RSAs and LSAs, though not necessarily, as they may not be enacted, and the already existing Roth's and HSAs are unlikely to be eliminated — then he is doing so at the expense of everyone else, who are now more heavily burdened by The State. This is a prime example of what Rothbard talked about when he said under The State, individuals benefit themselves by harming others; whereas under the free market, individuals benefit themselves by serving others. Likewise, voting for a Democrat is equally undesireable (though historically, the biggest increases in government spending occur under Republican administrations). Nor would voting for a Libertarian do much, as they're not likely to be elected, and even if they were, what could they do, other than forestall the US' march towards socialism? One thing is of relative certainty. Any good changes with regards to the tax situation — loopholes which allow people to keep more of their own money, reduced tax rates in some areas, tax-sheltered accounts — are likely to be transient. The bad things are here to stay.

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