Right now I’m hearing a lot about the so-called “fiscal cliff”. Democrats want higher income taxes on the rich to raise federal revenue and ensure that the rich pay their fair share. Republicans respond that such taxes would give the rich less incentive to invest and create jobs.
I propose that we implement a federal luxury tax to be assessed on sports cars, gold-plated watches, ski chalets in Aspen, seven-star hotel rooms, and other things that are purchased entirely or mainly by the rich. This should satisfy the Democrats’ desire to raise new revenues from the rich while satisfying the Republicans’ desire to not discourage investment. In fact, inasmuch as it would discourage the rich from spending more on such pointless luxuries, it would give them more money with which to invest and create jobs.
Yeah, gold-plated chalet cars aren’t the greatest industry for America, but at least the people who make them will then, presumably, spend their income on more normal things.
How does one define a luxury item? It’s easy to say a yacht is a luxury item, or a Maserati is something only rich people buy, but what about less expensive items?Maybe an Audi A8 is unambiguously one (Tony Stark has one, so it must be), but what about the A6 or the A4? I know people with A4s that are unambiguously not rich. How do you objectively draw a line?
I also don’t really see how luxury items are a bad thing. If rich people spend the money on a mega yacht, it will work it’s way down to the people building it and creating the raw materials. If anything that’s better than just buying and selling a bunch of stock or even living off of just interest. That is, we need to encourage the rich to keep pumping their money back into the economy, whether investments or spending, rather than hiding it in tax havens and finding ways to basically make money by simply being rich rather than actually contributing to the economy.
Sometime in the 1990s, California instituted a “snack tax.” It basically required the government to figure out what was a snack and what was not. (Ok, three ounce packages of peanuts are probably a snack. Four pound bags of peanuts aren’t a snack, they are probably provisions. What about a 10 ounce bag of peanuts?)
It was totally ludicrous. Imagine if you got to Pizza Hut and a medium pan pizza is not subject to taxes, but breadsticks are, and what do you do about individual pan pizzas? Between the government making the rules and retailers implementing them effectively, it became a joke.
Luxury taxes seem to me to be the same thing. Why spend all that effort trying to determine what is a luxury and what isn’t? Just raise income taxes on the wealthy. Same effect, but the policy making and compliance system already exists.
Legalize and tax weed at the federal level. More revenue for Uncle Sugar, legal cover for the stoners. Win-win.
And it will trickle down, too. Legal weed means more people ordering pizza/chinese/etc delivery, which will generate sales tax revenue, gas tax revenue, etc.
Pot is easy to grow/process and, unlike cigarettes, the retail packaging is a profoundly cheap plastic bag. Also, there is already a pervasive illicit distribution and sales network. How much of the weed tax would be munched (ha!) by the costs of prosecuting the inevitable massive tax evasion?
I dunno…if stoners have an option to buy it with no fear of legal problems, I think they’ll choose that option over others, even if they have to pay more. How many people still drink moonshine instead of Jack Daniel’s (or other commercial alcohol)?
When a rich guy spends money on a car, a yacht, a business jet, a big house, a fancy hotel room in Aspen, where do you think the money goes? Does it just disappear into thin air? Perhaps the hotel puts it through a shredder or burns it in the alley?
Obviously not. It goes to pay all the workers who made those things, and keep them running. The mechanic who works on his cars. The workers who made the jet, who built the house, who staff and clean the hotel room. Your proposal would put a large fraction of these people out of work.
Additionally, unless you set the bar very high, you will needlessly punish a lot of ordinary, middle-class Americans who are not habitual big spenders, but choose to indulge themselves occasionally. Unless you define “rich” as anyone who has disposable income, there are millions of people in America who are not rich, but can afford a week at a fancy hotel, a nice watch, a nice car, etc. if that’s how they want to spend their money.
“Luxury goods” are what pretty much everyone wants to spend their money on - especially defined as broadly as you did in the OP. Once you’ve taken care of the basic necessities of life, people start thinking of how to achieve their dreams. Some people dream of a nice German sports car, some people dream of a big house, some dream of a modest house on a big plot of land in the country, and some dream of being able to take a two-week vacation each year at a really nice hotel. Personally, I dream of owning a small airplane, which is undoubtedly a luxury. But if not for the possibility of owning that airplane one day, I would not be working as hard as I am. Other than my inability to afford an airplane, I’m happy enough with my income and would probably be spending less time working and more time relaxing. People’s dreams are what keep them motivated to improve, and do better, and by extension what keep the economy growing. I think it would be counterproductive for the government to effectively say “We’re going to make it harder for you to achieve your dreams because your dreams are a pointless luxury and we need the money more than you do*.” That is a surefire way to kill economic growth. Not because of the direct practical effect, but because of the message it sends.
“so we can pay Pfizer for all the free prescription drugs we promised a bunch of retirees in Florida”
You’ve got a point, but in my experience stoners don’t give much thought to legal consequences already. What kind of penalty would one put on the purchase of untaxed weed? Surely not much worse than for buying untaxed cigarettes/booze, and it wouldn’t be worse than the current possession penalties, which are fairly light in most places.
In an environment with lower potential penalties and less chance of getting caught, would people really want to trudge out to the store, show ID, and pay more instead of calling their dealer and getting cheap stuff delivered, like they’ve always done?
Now, the sellers and smugglers would face serious penalties, but would it be any worse than the fairly harsh sentences they face now?
Just to be clear here:
[ul]
[li]The Bush tax cuts are set to expire 31 December 2012. Those tax cuts affect all income levels.[/li][li]The Democrats want to retain the tax cuts for the bottom 98 percent, while allow the tax rate for the upper two percent to return to former levels.[/li][li]The Republicans don’t care about the bottom 98 percent. They want the tax cuts to remain for the top two percent.[/li][/ul]
Are you asking about plans by the Democrats to increase the tax rates further for the top two percent, beyond the expiring tax cuts, as well as retain the Bush tax cuts for the bottom 98 percent, or even expand them? Are you asking about plans by the Republicans to increase the tax rates further for the bottom 98 percent, beyond the expiring tax cuts, as well as retain the Bush tax cuts for the wealthy, or even expand them?
Also the “fiscal cliff” phrase is a bit ambiguous these days in the media. It used to apply only to sequestration law, also taking effect at the end of the year calling for drastic spending cuts within the federal government. That carries its own set of issues. Of the late, the media seems to equate “fiscal cliff” just with tax rates.
In any case, if there are no changes to the expiring Bush tax cuts, all tax rates go back to their former levels. And if there is no modification to the sequestration law, the drastic cuts to federal spending will layoff thousands of federal workers and private contractors.
The key is penalizing the sale of untaxed goods. In the case of tobacco and alcohol, while black markets certainly endure, and even thrive in some limited local contexts, those penalties are sufficient to ensure that the overwhelming majority of transactions are taxed legal ones.
Gold plated watches aren’t luxury items. Solid gold watches are. The amount of gold in gold watch plating is very small. I’d be surprised if it was even worth $1.00.
The last time they tried this, the yacht building business shut down-and many firms closed, or moved operations to Asia. In the end, the loss of jobs (and the payroll taxes lost to the treasury) dwarfed what was raised by the tax-the government lost, the yacht builders lost, and the rich wound up buying their luxury yachts abroad (which meant that the trade deficit increased).
Sorta like the law of “unintended consequences”. The Federal Government has no revenue problem-it has a spending problem.
I agree with this. I have a medical MJ card. I am my mothers care giver and I make a salve for her. Anyway, I don’t think the price is much out of line from what I could get on the street. And the quality is something else.
Or I could grow it if it became a burden. I don’t because the price really isn’t out of line. At the moment, It is taxed locally, I don’t know what a Federal tax might add though.