Lunch Links: Philadelphia Approves Soda Tax; Bill Would Require IRS to Return Seized Assets; Smoot-Hawley Anniversary
June 17, 2016
Today is June 17, the date in 1930 when President Hoover signed the Smoot-Hawley tariff act into law. As the Great Depression began, Congress acted to protect American industry from foreign competition by raising tariffs to about 59 percent, some of the highest levels in history. One thousand economists of all schools of thought signed a petition to President Hoover urging him to veto the bill, and business leaders sent delegations to plead with him, but he signed it anyway. (A 1978 book found a link between the ups and downs of the volatile 1929-1930 stock market and good and bad news from Washington about the tariff’s chances for passage.) A brief sharp increase in production followed, then a steep drop-off in world trade as the new tariffs rippled through the international economy. By 1934, world trade had dropped by 66 percent and a banking panic had been transformed into worldwide economic collapse, with the U.S. economy contracting by a third. Traumatized by the Smoot-Hawley tariff experience, the post-war world embraced free trade and low or no tariffs on international trade.
Here are some interesting links I came across:
- Bill Introduced to Require IRS to Return Seized Assets: Before 2014, the IRS seized funds of small businesses accused of “structuring” (arranging deposits and withdrawals to avoid the $10,000 IRS reporting limit). Since then, the IRS says it will only seize funds if they’re used for illegal activities. Rep. Peter Roskam (R-IL) and Rep. Joseph Crowley (D-NY) want to write that into law, and to require the IRS to refund money seized under the earlier policy. (The Hill)
- Congress Passes IRS Missing Child Bill: Congress unanimously passed a bill allowing the IRS to disclose tax return data to child abduction investigators. Rep. Erik Paulsen (R-MN) pushed the bill after learning that in as many as 46 percent of cases, child abductors include the child’s Social Security number on their tax return. The bill now goes to President Obama for his signature. (Minneapolis Star-Tribune)
- Philadelphia Passes Soda Tax: Philadelphia’s City Council voted 13 to 4 to join Berkeley, Calif., as the second city to adopt a tax on soda. The tax, 1.5 cents per ounce (or 18 cents per can, or $1 per 2L, or $2.16 per 12-pack), will be levied on distributors and encompasses diet sodas, flavored waters, energy drinks, sports drinks, and any essentially beverage that is not at least 50 percent milk, fruit, or vegetables. Beverages where consumers add the sweetener themselves (like sugar in coffee) are also exempt. Former New York City Mayor Michael Bloomberg praised the action and pledged to fund lobbying efforts in other cities. (Philadelphia Inquirer / Tax Foundation)
- California Approves Budget: Governor Jerry Brown (D) is expected to approve the $122.5 billion budget sent to him by legislators. A separate transportation package is expected in the near future to raise gas or car taxes, and voters in November will decide whether to extend expiring income tax increases for another twelve years instead of at the end of 2018. Brown has pushed legislators to set aside money for a rainy day fund, which will now have $6.7 billion in it. That’s enough to fund the state government for a paltry 20 days, although that’s 20 days’ more reserves than the state had not too long ago. (Sacramento Bee / State Tax Notes / Ballotpedia)
- Kansas in Recession: New data from the Bureau of Economic Analysis (BEA) finds that Kansas has now had two consecutive quarters of a contracting economy, the classic definition of recession. Alaska, Oklahoma, and Wyoming—all states impacted by the drop in oil and natural gas prices—are similarly impacted but with non-mining sectors hanging on. Kansas’ economic drop is not limited to one sector. Farm states like Iowa and Nebraska also had a weak last quarter but still saw overall growth. (Bureau of Economic Analysis)
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