The Omnishambles | National Review

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(Cemile Bingol/Getty Images)

The week of October 25: chaos, energy, inflation, taxation, stagflation, and much, much more (little of it good).

Omnishambles is a neologism first used in the BBC political satire The Thick of Itin 2009. The word is compounded from the Latin prefix omni-, meaning “all”, and the word shambles, a term for a situation of total disorder. Originally a “shambles” denoted the designated stock-felling and butchery zone of a medieval street market, from the butchers’ benches (Latin scamillus “low stool, a little bench”). The word refers to a situation that is seen as shambolic from all possible perspectives. It gained popularity in 2012 after sustained usage in the political sphere led to its being named Oxford English Dictionary Word of the Year, and it was formally added to the online editions of the Oxford Dictionary of English in August 2013 . . .
Via Wikipedia

The Capital Letter is, of course, a family-friendly publication, and it’s unfortunate that some of the background to — and the full quotation surrounding — this word, all of which appear in the Wikipedia entry, is on the rough side. Look away, the easily offended.

Nevertheless, a term connoting a “situation of total disorder” seems appropriate for the situation in which the U.S. now finds itself as tax proposals come, and tax proposals go, and the administration gives every impression of just wanting to get something done. Although those somethings vary, they do have one thing in common: They are unlikely to be helpful to the operation of a free-market system.

In the case of the (discarded) wealth tax on billionaires — and that is what it was, however much Janet Yellen attempted to dodge that constitutionally and politically tricky term by claiming, oh Janet, Janet, that it was merely “a tax on unrealized capital gains of exceptionally wealthy individuals”— the agenda was something more ambitious, a return to the premodern. As I have argued in the past:

A wealth tax is a sophisticated, lighter touch derivative of feudalism, but the core of it is the same: The state (“the king”) has, theoretically, a call on everything you own.

Progressives tend to believe that the arc of history moves in a certain (progressive, surprisingly) direction. The idea is nonsense (history is chaotic, to bowdlerize a famous line, “just one thing after another”), but it is bleakly entertaining to read that progressives now appear to believe that that arc is headed toward . . . feudalism, even if that’s not how they would describe it. Lenin, however, would have understood.

If the wealth tax is indeed dead, it is only dead for now. No one has put a stake through it. Now the idea has gained a certain vindictive respectability, it will be back when the votes are there.

Instead (at the time of writing: this is a very fluid situation), the latest attempts to loot the rich have shifted to attempting to slap a surtax on their income.

Howard Gleckman, writing in Forbes on Thursday October 28, explained how this would work:

A “millionaire’s surtax,” announced by President Biden this morning, would raise taxes on all forms of income, including wages, capital gains, and dividends.

It would impose a 5 percentage point surtax on adjusted gross income (AGI) between $10 million and $25 million and an additional 3 percentage points on income in excess of $25 million . . .

Someone with income between $10 million and $25 million would pay the ordinary 37 percent income tax rate for wages and salary plus the 5 percent surtax, for a combined rate of 42 percent. Long-term capital gains and most dividends would be taxed at 20 percent plus the 3.8 percent net investment income tax plus the 5 percent surtax, for a combined rate of 28.8 percent.

Put another way, aspiration and investment are to be punished.

The Wall Street Journal:

These surtaxes will raise the top marginal personal income tax rate to 45% or so and around 60% in New York and California, which would be higher than in European welfare states. The top rate in the U.K. is 45%, Italy 47.2%, Germany 47.5% and France is 55.4%. Congrats, Mr. President, you’ve won the tax race to the top.

And remember this, too:

Small business owners will get slammed by a 3.8% Medicare surcharge on active-investment income. A 5% surtax on income over $10 million and 8% above $25 million will hit the ephemeral rich who experience a windfall, say, after cashing in stock compensation after decades of work.

The war against aspiration — and against achievement — is what it is.

Companies are not spared either, with a proposal to introduce a corporate version of the alternative minimum tax.

The Washington Post:

Since the 2017 GOP tax cut, the number of Fortune 500 companies paying $0 in federal income taxes has continued to grow. One analysis found 55 corporations paid no federal income tax on more than $40 billion in profits last year, including brand names such as Nike and FedEx. The White House’s plan would aim to put an end to that practice, establishing a new “minimum tax” of 15 percent on all U.S. corporations earning more than $1 billion a year in profits. The minimum tax would be assessed on “book” income reported to shareholders, rather than on profits reported to the IRS.

But it’s worth recalling that there was an industrial logic behind some of the “breaks” responsible for those enviably undemanding tax bills.

The Wall Street Journal (my emphasis added):

Manufacturers and tech companies could be among those hardest hit by the plan, because the tax breaks they currently benefit from, such as expensing capital investments or stock options, would effectively be limited. If they get too much of a benefit in any year, the minimum tax would kick in, and they would have to pay some of the tax they otherwise would have avoided or deferred.

The political, financial, regulatory, and economic environment that is now being created by the Biden administration is not one designed to encourage investment (and the “scarring” effect created by the pandemic will only make things worse). Under the circumstances, putting in place measures that will act as an additional disincentive to corporate investment seems unwise. No investment, no growth.

Meanwhile, away from the omnishambles, inflation continues to rise, boosted by higher energy prices (themselves boosted by poorly judged climate policies) and the supply-chain chaos.

The spike in energy prices has filled significant portions of the last  five six Capital Letters, and is unlikely to go away anytime soon, at least for long. The good news is that European natural-gas prices have recently dropped; the bad news (on any long-term view) is why.

Bloomberg:

European natural gas and power prices dropped after more signals from President Vladimir Putin that Russia will send extra gas to the continent next month. The Russian leader ordered Gazprom PJSC late Wednesday to focus on filling its European storage sites from Nov. 8, a day after it completes the process in Russia. He said the move should ease supply tightness in Europe, where high prices are squeezing industry and fueling inflation . . .

Tom Marzec-Manser, an analyst at pricing agency ICIS, said the timing of Putin’s comments on adding fuel to Gazprom’s storage sites in Germany and Austria could be connected to Germany’s Economy Ministry saying on Tuesday that certification of Nord Stream 2 wouldn’t pose any risks to security of supply . . .

That move “will have been received positively in Moscow as it brings the new pipeline one step closer to operation,” he said. “We still don’t know how much extra gas could arrive from Nov. 8 in response to President Putin’s instructions.

There was more good/bad news on Friday (via the Financial Times):

Gas prices in the UK and continental Europe tumbled by as much as a fifth on Friday on further signs Russia will increase exports to the region after restricting supplies for months.

Russia’s state-run gas exporter Gazprom said on Friday it had hit its target for filling domestic storage two days after President Vladimir Putin ordered the company to start filling its European storage facilities. The intervention comes after allegations from some analysts that Moscow has stoked an energy crisis by holding back supplies.

The UK benchmark day-ahead…

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