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Chris Edwards

Chris Edwards

Chris Edwards is the director of tax policy studies at Cato. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation. Edwards has testified to Congress on fiscal issues many times, and his articles on tax and budget policies have appeared in the Washington Post, the Wall Street Journal, and other major newspapers. Edwards holds a BA and an MA in economics, and he was a member of the Fiscal Future Commission of the National Academy of Sciences.

Articles by Chris Edwards

Biden Corporate Tax Increase

April 5, 2021

Biden Corporate Tax Increase | Cato at Liberty Blog

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Biden Infrastructure Plan: Wrong Direction

April 1, 2021

Biden Infrastructure Plan: Wrong Direction | Cato at Liberty Blog

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Biden Proposes Massive Corporate Welfare

March 31, 2021

Biden Proposes Massive Corporate Welfare | Cato at Liberty Blog

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Federal Budget Deficits: Path of Fiscal Doom

March 30, 2021

Federal Budget Deficits: Path of Fiscal Doom | Cato at Liberty Blog

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Capitol Police Funding

January 7, 2021

The attack on Capitol Hill yesterday was disgraceful. It was also remarkable. After all the security breaches at both the congressional complex and White House over the years, and the many large protests in the city, you would think that the Capitol Police would have been better prepared.
The Capitol Police certainly has enough funding to be prepared. The force has 2,300 officers and a $516 million budget to defend two square miles.
The chart shows that outlays for the Capitol Police have soared over the past two decades. In actual or nominal dollars, spending increased from $115 million in fiscal 2000 to an estimated $516 million in fiscal 2021. That equals an annual average growth rate of 7.4 percent, much faster than the 2.1 percent average annual inflation over the period.
The Capitol

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State Policy Favoritism and Corruption

September 10, 2020

California leaders are in the news for passing a misguided law that requires most independent contractors to be treated as employees, and then realizing how harmful that is and passing another law exempting dozens of politically important industries from the mandate. Lee Ohanian describes the law’s damage here.
Last year, “Assembly Bill 5 included exemptions for many politically‐​connected occupations like real estate agents and doctors, but ensnared many others, drawing particular criticism from musicians, independent truck drivers, franchise business owners and freelance writers.” Then in response to the public backlash, the California legislature passed Assembly Bill 2257, which exempts “many occupations in media, music and other industries from AB 5’s requirements.”
Unneeded laws, such

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Senate Is Right to Resist State Aid

September 9, 2020

Another week, another news story about supposedly imploding state‐​local government budgets. A New York Times headline warns, “With Washington Deadlocked on Aid, States Face Dire Fiscal Crises.”
The story leads with, “Alaska chopped resources for public broadcasting. New York City gutted a nascent composting program that could have kept tons of food waste out of landfills. New Jersey postponed property‐​tax relief payments.” The piece is built around such anecdotes, which do not seem dire to me.
Senate Republicans are right to resist the additional state bailouts pushed by House Democrats because the states can and should handle their own budget challenges going forward.
The NYT discussion conflates the situations of state and local governments. While state income and sales tax revenues

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Repeal Local Restrictions to Revive Economy

September 4, 2020

The restaurant industry has been hit hard by the health crisis and recession. Governments have showered billions of dollars on businesses to help them through the tough times. But the real solution in many cases is for governments to just get out of the way. For restaurants, that often means letting them put tables outside while the warm weather lasts.
A local news source profiled a restaurant near where I live. After the county government blocked two of the owner’s proposals for outside tables, the restaurant is losing thousands of dollars a month and may go under after decades serving the community.
After nearly 40 years, Joe Javidara said the future of his soccer‐​themed bar Summers Restaurant in Courthouse hinges on a permit he said is being processed through Arlington County

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Federal Aid Creates Central‐​Planning Power

September 4, 2020

Federal Aid for State-Local Governments in New Jersey, 2020

$000
Child Care

104,700
Child Nutrition – School Breakfast

130,000
Child Nutrition – School Lunch

375,000
Child Nutrition – Special Milk

1,300
Child Nutrition – Summer Programs

14,047
Child Nutrition Administration

13,395
Child Nutrition Technology Grant

2,000
Farm Risk Management Education Program

282
Food Stamp – The Emergency Food Assistance Program (TEFAP)

3,596
Fresh Fruit and Vegetable Program

5,400
Indemnities – Avian Influenza

600
National School Lunch Program- Equipment Assistance

1,000
Produce Safety Rule Implementation

770
Specialty Crop Block Grant Program

1,600
Trade Mitigation Food Purchase and Distribution Program

2,000
Various Federal Programs and Accruals

8,761
Restricted Federal

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Federal Aid Dwarfs the Fall in State Tax Revenues

September 1, 2020

The Wall Street Journal published a news story last week suggesting that public schools face ruin without more federal aid. The story had the hardcopy title, “Schools Warn of Severe Budget Shortfalls,” and the first paragraph said, “academic officials are warning that vast budget shortfalls will further strain their districts unless Democrats and Republicans break their impasse on a new coronavirus‐​relief package.”
The WSJ article was essentially an advocacy piece for greater federal intrusion on an activity that is the responsibility of the states. It lacked hard evidence, but there is some solid data we can now look at on state‐​local budgets during the crisis.
The BEA released data on state‐​local finances last week (Table 3.3). The chart below shows seasonally adjusted first and

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Federal Aid for State‐​Local Police

June 10, 2020

Presidential candidate Joe Biden said that he does not favor defunding police but instead “conditioning federal aid to police based on whether or not they meet certain basic standards of decency and honorableness.” Biden is proposing to increase federal aid for state‐​local police forces.
The federal government currently spends relatively little on funding state and local police. Total federal aid to the states for the “administration of justice” in 2019 was $5.2 billion, a portion of which goes to police forces for programs such as COPS. Federal aid is a small share of total state‐​local police funding, but it is a tail that wags the dog in terms of federal control.
The chart below shows aid in this category since 1990 in actual or nominal dollars. (Data is from Table 12.3). The jump in

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Police Spending Soars at the Federal Level

June 8, 2020

Some protestors are calling for defunding the police in the wake of George Floyd’s death and other incidents of police misconduct. However, just 16 percent of Americans favor cutting police budgets, notes Emily Ekins. More people favor police department reforms such as better training and increased accountability.
That said, police budgets should be examined, particularly since policing costs vary widely across the country. Floridians, for example, should be asking why their police services cost twice as much per capita as police services in Indiana.
There should also be more focus on federal police spending. That includes spending on an alphabet soup of agencies such as the FBI, ATF, DEA, and CBP. This spending has risen much faster than state‐​local police spending in recent decades.

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Spending on Police by State

June 5, 2020

Amid the outcry over George Floyd’s death and subsequent protests, some people are calling for defunding the police. Zeroing out the police doesn’t make any sense, but citizens should certainly be looking at issues of police mismanagement, hiring practices, labor union protections, and accountability.
Citizens should also ask questions about police budgets. The Census Bureau reports that in 2017 state and local governments spent $115 billion on police, which represented 3.1 percent of overall state and local government spending that year.
Police spending varies substantially by state, as shown in the chart below based on the Census data. The U.S. average is $352 per capita. I don’t know what the proper level of spending is, and obviously the states vary in terms of crime rates, cost of

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New York Shortchanged but NY Politicians No Help

January 16, 2020

I reported that state and local governments in New York spend twice as much as governments in Florida. New York also has a larger bureaucracy. Carl Campanile of the New York Post reported on these findings yesterday and captured a retort from the office of New York Governor Andrew Cuomo:
“Sounds like this ginned-up study from a group of right-wing 19th century robber baron wannabes fail to mention that New York is Washington’s favorite ATM, paying $26.6 billion more in federal taxes than we get back while Florida receives $45.9 billion more than it pays,” said Cuomo senior adviser Rich Azzopardi. “Get a calculator.”

Actually, I am familiar with the “balance of payments” data Azzopardi refers to, and back in the 1990s aided then New York Senator Daniel Patrick Moynihan with such

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New York vs. Florida on Bureaucracy

January 14, 2020

New York and Florida have similar populations of 20 million and 21 million, respectively. But state and local governments in New York spent twice as much ($348 billion) as governments in Florida ($177 billion), as discussed here.
New York’s excess includes spending more on handouts such as welfare. Another cause of New York’s high spending is employment of more government workers and paying them more than in Florida. We can examine this factor using Census data for 2018.
In the table below on the left are the numbers of state and local workers measured in full-time equivalents. New York governments employ 34 percent more workers than Florida governments. Caution is in order because for some functions the state differences may reflect whether services are provided in-house or

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Neil Peart: An Appreciation

January 13, 2020

Neil Peart, drummer for Canadian rock band Rush, passed away last week after a three-year battle with brain cancer. Peart was 67. He was regarded as one of the best rock drummers of all time, and Rush carved out a unique place in music overlapping heavy metal and progressive rock.
Aside from his virtuoso drumming skills, Peart gained fame for the brainy lyrics he wrote for Rush’s remarkable string of 19 studio albums. Libertarians may be aware that Rush credited ideas on its 1976 album 2112 to the “genius of Ayn Rand.” Peart was not a full-fledged libertarian, but many of his songs were influenced by Rand’s individualism. The epic title track on 2112 describes a dystopian world where an all-powerful government crushes creativity.
Peart was a voracious reader and his songs reflected a

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New York’s Government Is Twice the Size of Florida’s

January 13, 2020

New Census data show that Americans are continuing to move from high-tax to low-tax states. One of the largest migration flows is from New York to Florida, as discussed in this Cato study.
The exodus from New York is sad, but the blame falls on the politicians who impose high-cost government on the state. New York’s high taxes are a side effect of excessive state and local spending.
The excess is clear when comparing New York to Florida.
The table below shows Census data for state and local spending in 2017. New York and Florida have similar populations of 20 million and 21 million, respectively. But governments in New York spent twice as much as governments in Florida, $348 billion compared to $177 billion.
On some activities, spending in the two states is broadly similar, such as on

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Tax Migration New York to Florida

January 10, 2020

Yesterday, I looked at migration from high-tax to low-tax states. Today, the Wall Street Journal focuses on wealthy tax exiles from the Northeast in Florida: “President Donald Trump and Carl Icahn both announced in the fall that they’ll be making Florida their primary residence, joining other high-profile executives like financiers Barry Sternlicht, Eddie Lampert and Paul Tudor Jones.”
The Journal had accounting firm BDO run some numbers: “A New York couple filing jointly with $5 million in taxable income would save $394,931 in state income taxes by moving to Florida.”
I noted in this study that the wealthy often bring their businesses and philanthropy with them, so the greediness of high-tax states really boomerangs on them. As the Journal notes:
Multimillionaires aren’t just moving their

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Migration to Low‐​Tax States Continues

January 9, 2020

The Census Bureau has released estimates of state population changes between July 2018 and July 2019. One component of population changes is migration between the states. The new Census data show that Americans are continuing to move from high-tax to low-tax states.
This Cato study examined interstate migration using IRS data and found that people are moving, on net, from tax-punishing places such as California, Connecticut, Illinois, New York, and New Jersey to tax-friendly places such as Florida, Idaho, Nevada, Tennessee, and South Carolina. The Census data confirms the trends.
In the chart, each blue dot is a state. The vertical axis shows the one-year Census net interstate migration figure as a percent of 2018 state population. The horizontal axis shows state and local household taxes

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Crescent Dunes: Another Green Flop

January 7, 2020

The Department of Energy called the vast and expensive solar project a “success story” and “milestone for the country’s energy future.”
But you can’t trust what the government says. Crescent Dunes is a flop and taxpayers are set to lose $737 million on it, according to a new Bloomberg report. That is even more than the $535 million taxpayers lost on the corruption-soaked Solyndra solar project.
With 10,000 mirrors arrayed in the Nevada desert, Crescent Dunes does look cool. But with the much lower costs of solar photovoltaic and natural gas projects, the government’s gamble on this alternative technology was folly. Politicians never apologize for their mistakes, and the main politician responsible for this one, former Senator Harry Reid, has retired and won’t face any tough questions about

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Are Tech Companies Too Big?

January 7, 2020

Politicians and pundits are claiming that technology companies such as Amazon, Google, and Microsoft are damaging monopolies. Some politicians, such as Elizabeth Warren, want to actively break up big tech firms. Ryan Bourne explains the folly of these sentiments in a recent study. A decent understanding of the dynamism in U.S. economic history reveals why aggressive antitrust policy makes no sense.
When a big tech company is earning high profits, it attracts competitors like sharks smelling blood in the water, which is a good thing. Meanwhile, what do tech firms earning high profits use them for? To push innovation forward by funding huge amounts of research.
The Wall Street Journal outlines current efforts to fund quantum computing. That technology would be a revolutionary leap, but it

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Top Wealth Is Business Assets

December 18, 2019

Anti-wealth fever grips the Democratic Party and seems sure to carry into the election year. Bernie Sanders and Elizabeth Warren are leading the billionaire bashing binge, but even rising star Pete Buttigieg says that he is “all for a wealth tax.”
Leftist politicians dish out lots of rhetoric about wealth, but they seem ignorant of how it is created and used. They assume that top wealth is just expensive toys such as luxury yachts.
Actually, most wealth of the wealthy is business assets, not personal assets, as discussed in my op-ed in The Hill today. The chart below shows the components of wealth of the richest 0.1 percent of Americans. Forty-two percent is equity in private businesses and 31 percent is equity in publicly traded businesses. Another 22 percent is bank deposits, debt,

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ITEP Study on Corporate Taxes

December 17, 2019

The liberal tax group ITEP has a new study suggesting that many large corporations did not pay income taxes in 2018. The study relies on taxes reported on financial statements, but those are often quite different than actual IRS payments, which are private and undisclosed.
Low corporate income taxes may seem like a scandal, but we should eliminate these taxes altogether. Corporate taxes ultimately land on individuals as workers, shareholders, and consumers, and in today’s global economy economists think that corporate taxes land mainly on workers. Cutting corporate taxes should boost worker compensation over time as business investment and productivity increase. Capital and labor are not enemies—as often assumed on the political left—but complements, as I discuss here.
Another reason to

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How to Improve Thanksgiving Air Travel

November 25, 2019

Millions of Americans will deal with the hassles of air travel this week as they join their families for Thanksgiving. Airports are crowded, flights get delayed, and travelers get stuck in long security lines. Things may get worse as aviation demand rises and puts even more strain on the system. The chart below shows total annual U.S. airline passengers on scheduled flights.
In most industries, businesses respond to rising demand by investing in new capacity. But in aviation, major parts of the industry—security screening, airports, and air traffic control—are run by the government, an institution not known for investing efficiently. The solution is to privatize all these aviation infrastructure activities, which is the successful approach taken by Canada and numerous European countries.

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HUBZones: Republican Central Planning

November 20, 2019

One of the more ill-advised federal activities is trying to micromanage local economies with tax and spending programs. Democrats tend to favor subsidies on things such as public housing and community development, while Republicans often support both spending programs and narrow tax breaks.
The Republican Opportunity Zone program enacted in 2017 used capital gains tax rules to expand federal control over local economies. The program divided the nation between winner and loser investment zones, as I discuss here.
Another GOP micromanagement scheme is HUBZones, which are the subject of a new Washington Post investigation. Businesses in these zones receive preferences in federal procurement. Reporter John Harden notes, “The HUBZone program was the brainchild of now-retired senator Kit Bond

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Deval Patrick: Tax and Spending Record as Governor

November 15, 2019

Deval Patrick announced that he is entering the 2020 race for the White House. Patrick was a Democratic governor of Massachusetts from 2007 to 2015.
Cato scores the nation’s governors every two years on their fiscal policy records, assigning grades of “A” to “F” from a limited-government perspective. We assigned Patrick an “F” in 2014, a “B“ in 2012, and a “D” in 2010. The grades cover tax and spending policies only, not other economic policies.
Here’s what we concluded on the 2014 report:
Governor Patrick’s low score results mainly from his record of proposed and enacted tax increases. In 2012 he proposed higher taxes on cigarettes and corporations. In 2013 he signed into law increases in sales taxes, cigarette taxes, and gas taxes. The cigarette tax was increased by $1 per pack. The same

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Rich Earn Wealth Slashing Prices for Poor

November 14, 2019

The Albrecht family of Germany is one of the richest in the world. They earned their wealth from innovations in price-slashing for European grocery shoppers. Their Aldi grocery chain is now spreading across the United States and bringing savings to millions of lower- and middle-income families. I profiled Aldi in this recent post.Rather than bashing the rich, Bernie Sanders, Elizabeth Warren, and other liberals should be praising wealthy entrepreneurs and corporations, such as Aldi, that are reducing poverty through aggressive market competition. Aldi was the subject of a fascinating profile in the UK Guardian. Snobby British observers did not think Aldi would succeed because they assumed consumers didn’t mind high prices. Aldi proved them wrong. UK grocery chains were used to fat profits.

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Wealth Tax Revenues

November 11, 2019

Presidential candidates Bernie Sanders and Elizabeth Warren have each proposed an annual wealth tax on the richest Americans. There are so many flaws with such a tax that it probably would not pass Congress. If it did pass, it would likely be repealed soon after as the damage became obvious even to the politicians.
The number of European countries with annual wealth taxes has fallen from 12 in 1990 to just 3 today. The Europeans found that wealth taxes induced avoidance, evasion, and capital flight, as I discuss here. The taxes were also full of exemptions and raised relatively little revenue.
Let’s look at that last issue. Warren and her advisors claim that her wealth tax with rates of 2 and 3 percent would raise 1 percent of GDP in revenues a year, or $2.75 trillion over 10 years. She

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Streetcar Named Quagmire

November 7, 2019

In a recent study, I explored how federal subsidies induce state and local governments to spend on wasteful projects. Case in point: a new “streetcar named quagmire” in St. Louis.
Joe Barrett of the Wall Street Journal reports:
St. Louis business leaders looking to boost tourism and development spent years bringing the Loop Trolley to fruition, a $52 million streetcar project that runs for 2.2 miles between a historic park and an entertainment-and-business district on the edge of the city.
But it has been a bumpy ride, and now it may have reached a dead end.
The trolley, after just a year of offering limited service, is out of money. The nonprofit that operates the trolley is seeking $700,000 in local funds to continue, or else the service is set to close this month.
… The U.S.

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New Study on Wealth Inequality

November 5, 2019

A growing number of political leaders consider wealth inequality to be a major economic and social problem. They complain that wealth is being shifted to the top at everyone else’s expense.
Is wealth inequality the crisis that some people believe it is?
A new Cato study examines six aspects of wealth inequality and discusses the evidence for the various claims being made. Here are some findings:
Wealth inequality has risen in recent years but by less than is often suggested. Faulty data from economists Piketty, Saez, and Zucman are behind many exaggerated inequality claims. Furthermore, wealth estimates overstate inequality because they do not include the effects of social programs.
Wealth inequality tells us nothing about poverty or prosperity. Inequality may reflect innovation in a

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