No. I think you’re onto something here. Don’t back off. Keep going where you’re going.
Maybe. All taxes will change behavior to some degree, based on what is being taxed. All taxes are an infringement on freedom, to some degree.
In fact, maybe that is a good place to start. Ask the question ‘What behavior change might actually find the social optimum between the tradeoffs of behavior change and freedom infringement?’
I don’t think it is capital gains or dividends. Far from it. Since those things destroy jobs - that’s the behavior change.
My vote: Retail tax on consumption of gasoline and diesel. Across the board. I played around with $2 and $4 per gallon on other threads.
Reduces demand for a strategically vital energy input, 60% of which is currently imported from unstable regimes. Spurs development of energy efficient technologies without creating pork-fests like ethanol mandates and favor-trading games between the distinguished Senators from Michigan, Louisiana, the cornbelt states and God-knows-who-else. Also might put a dent in the whole global warming thing.
I think a retail tax on fuel overlaps the most circles in the Venn diagram of national strategic importance, minimal pork and games played by Congress, freedom infringement, and behavior change being A Good Thing.
Needs to be paired with a rollback of payroll taxes for the working poor, however, to keep them whole and sell it politically. I’ve run through some numbers in other threads to demonstrate how to pair this with a reduced capital gains and dividends tax, reduced corporate taxes, and more-or-less the same personal income taxes (for a while) to keep the budget breakeven.
Anything that can be justified as a matter of national strategic importance and can reduce the fiddling and gamesmanship that Congress can do. See above.
I would cut corporate rates to zero. Corporations don’t pay taxes. Their customers, shareholders and employees do.
I agree on higher gas taxes as a motivating factor in general. There are two issues with it that I see:
[ol]
[li]More heavily felt by low income. Your idea about payroll taxes may help, but it won’t do a thing for people looking for jobs or the self employed.[/li][li]It will increase th price of all goods due to high shipping. Long term, I see this as good because it will encourage local industry and agriculture, but it will cause a price increase that that will also hit low income earners hardest.[/li][/ol]
This seems good on paper, but I am afraid it would have serious bad consequences. Right now, corporation do not pay taxes on payroll or on profits paid out as dividends. If they could hold profits tax free, they would and you would see a lot more wealthy people forming holding companies to avoid all taxes.
I am not a Marxist, but I do recognize what he was good at: Analyzing the economic system of his time. He was terrible at predicting what was going to happen because he assumed that capitalists would not modify the system to protect themselves. If abolish things like estate taxes and capital gains taxes, the burden of supporting the government is lessened for top earners and must be picked by others. This would tend to move to a more stratified society with richer rich people and everyone else poorer. This is not good for anybody, long term.
Maybe she has a job, maybe not. Certainly, the secretary of a formally wealthy business man will see themselves out of a job. Plus, what else is Warren Buffet gonna do with his money that doesn’t involve some kind of risk or having it tied up for some time?
In addition to the other points that have been made, everyone takes risks everyday that they go to work. If the business you work for goes under, there is a good chance you won’t get paid. While this may not amount to any more that 2 weeks of pay, that is substantial to many people. You also risk your reputation. when I was working on the Hill, I overheard someone talking about his friend who worked for Mark Foley. The circumstances under which he lost his job basically made it impossible to find a new one. His reputation was ruined because his boss is a weirdo. Same thing applies to former Enron employees. You are not just exchanging your work product for a paycheck in many circumstances. Many people risk their image, professional reputation, and ability to secure future employment. There is a reason why (all other things being equal) being warren Buffet’s secretary is better than being Jesse Jackson’s. You are lending your name and reputation to the company to prop up their brand and image. Even if you could make more money selling penis-enlargement pills than you could selling fruit, most people would rather sell fruit so they wouldn’t be associated with such things.
The point is you always take risks, financial or otherwise. Just because Buffet, or any other investor is taking more active financial risk, doesn’t mean that it’s more “risky” in a general sense. The capital gains tax rate should be whatever rate achieves our collective goals - prudent investment and sufficient government revenue.
Any consumption tax will be either be (1) regressive or (2) exceedingly fair, depending on your point of view. I won’t wade into that pool right now.
But I’ll ask you a question:
Would you rather tax consumption, which will discourage consumption or
Tax capital formation, corporate profitability and the distribution of that profitability to shareholders, which will discourage capital formation, corporate profitability and the distribution of that profitability to shareholders?
If you want to make intelligent decisions about how to create jobs, you have to think carefully about the questions above. And at least for a little while, forget that the people who invest capital and receive dividends tend to wear nicer clothes and live in nicer neighborhoods than the average working poor person.
Those who get sucked into the class warfare game tend to make these types of decisions based on emotion and some sense of ‘social fairness’. The latter isn’t totally wrong, but if left unchecked it can have lots of unintended consequences. And as Arthur Laffer would argue, you’ll end up with less government revenue if you go that route, too. It’s the worst of all worlds.
Yes, consumption taxes will hit the poor on a higher % basis than the rich. Let’s make up for that as best as we can by eliminating payroll taxes, and by expanding the EITC.
There is a less talked-about point here that I think needs to be made as well. And that is, once the tax burden becomes more and more progressive, and is borne by a smaller and smaller share of the population, a destabilizing situation will develop. Sam Stone has talked about this before. It is destabilizing for at least two big reasons.
First, the smaller and smaller the ‘golden goose’ population becomes, the easier it is for them to just pick up and leave. Or ust retire. Or do something else, like paint landscapes. If that happens, you have nothing. Steeply progressive tax rates increase your downside risk for revenue by a huge degree.
States are finding out this the hard way. Two links are listed below for the highest tax states with the most steeply progressive tax rates: California and New York. California’s top 10% of taxpayers contributed 75% of revenues in 2005. New York’s top 1% contributed a shocking 40% of revenue in 2007. There is a great article I read, which of course I can’t find now, that illustrated how New York received $1 billion from tax revenue from a tiny handful of wealthy Wall Street households; about 300 households, if I remember correctly.
What if those shrinking number of households have a bad year? Or just pick up and move? Poof. There goes a massive chunk of your revenue in one fell swoop. Just like the 10th bar patron chugging a beer in the OP. What if he just gets up and leaves? Then what do you have?
Secondly, taxing a smaller and smaller % of the population is politically destabilizing. It will actually make the above problem increasingly worse over time.
If 51% of the population pays zero taxes, for example, and a new issue comes up that requires more revenue…a highway, education initiative, healthcare, space program, whatever…why wouldn’t at least 51% vote ‘yes’? It’s free stuff. They aren’t paying for it anyway. At least they don’t think they are.
It’s actually a healthy, self-correcting mechanism for everybody to pay taxes, so if tax rates have to rise, it hurts everyone to some degree. That way, everyone has to stop and think for an extra moment about whether a tax increase is really necessary. Otherwise, why would somebody who is paying zero ever vote ‘No’ to increased taxes?
I read this some time ago and when I’m more sober I’m going to come back to this thread, but doesn’t the basic premise remind anyone of the 3 men/$30 hotel room/$5 discount/where’d-the-missing-dollar-go false conundrum?
The tricky part about consumption taxes is what to tax. I think we all agree that it is better to tax video games and not bread and milk. That is the current situation. Taxing fuel is difficult because higher taxes may decrease unnecessary consumption (good) and encourage more fuel efficiency (good), but it may break people who need to drive to work and cannot afford new cars. NPR did a piece a while ago about a poor, predominantly Hispanic, neighborhood that had no bus service and was only accessible by freeway. As fuel prices went up some people could no longer afford to go to work.
The other problem with consumption taxes their success as a behavior modifier is counter productive to there use as a revenue stream. Look at tobacco and fuel taxes now. As people use less of both, the programs that there taxes support are losing funding. You would have to raise taxes as consumption, which would lead to even less consumption.
I think you are misunderstanding me. I am not for an aggressively progressive tax policy. I would be happy with a true flat tax burden, as a percentage of total income per person. I think mildly progressive overall is probably the best bet, but I don’t know of any way to calculate an “ideal” tax structure. I want one that encourages investment and allows for some generational wealth accumulation but also preventing or at least limiting the current increase in wealth separation. I think the more the bulge in the wealth distrobution curve moves to the right, the more stable and prosperous the society and economy.
BTW, in regards to the total tax burdens of certain sectors, if 10% of the people earn 90% of the total income, they will have to provide close to 90% of the tax revenues. I could not find the capitol gains info, but the top 1% of wage earners earned 19% of income in 2004.