By Simon Grey, on November 1st, 2011
There’s a lot to comment on here: I think most people like the idea of a simpler tax code. No argument there. But I’ve never met a person who would volunteer to pay higher taxes in exchange for simplicity.
I don’t know if most would actually pay higher taxes. Sure, direct taxes might increase for some, but a flat tax would really cut down on indirect taxes. If everyone paid a flat 15% income tax, I don’t think most people would see their tax payments rise because everyone already pays a base level 9% income tax (in the form of Social Security and Medicare payroll taxes), not to mention plenty of indirect taxes. So, while nominal net income might decrease, the purchasing power of that income would increase, assuming the money supply would remain stable (note: inflation is considered, for purposes of this post, an indirect tax).
The flat tax idea is a brilliant bit of psychological class warfare. At least I hope that’s what it is. I’d hate to think the people in the highest tax brackets, i.e. my peeps, are as dumb as the people they hope to screw with promises of unicorns and flat taxes.
The flat tax seems brilliant, but most of the supporters of either a flat tax or FairTax are decidedly upper-middle class, and they know that they will be better off. The lower-class people I know don’t seem at all sold on the idea of increased rates, so maybe the flat tax isn’t as brilliant as is supposed.
The flat tax diversion is a deliciously cynical way to maintain the status quo while appearing to be in favor of change. The diversion works because the middle class has been duped by the media into thinking high income people pay a lower tax rate than the general public, so maybe a flat tax will set things right. That’s the power of anecdotes. If you hear a few stories about Warren Buffett paying a lower tax rate than his secretary, you assume your dentist is beating the system too. He probably isn’t.
I don’t personally know of any middle class people who think that high income people pay lower rates. I’ll chalk Adams’ analysis up to self-selection bias. Also, Chuck proved that Buffet wasn’t paying a lower rate than his secretary. Another brilliant aspect of the flat tax argument is that it’s simple to explain, and our brains are wired to perceive simple solutions as better than complicated ones. In reality, the simplest solution is usually the one that comes from someone who is either trying to screw you or who isn’t capable of understanding the full situation.
Actually, the simplest solutions are the best. However, that doesn’t mean that everyone will benefit from changing to a simpler solution. For example, in the case of a Flat Tax, lots of lawyers and lobbyists would be out work. And possibly several bureaucrats.
Furthermore, I don’t see how it’s “screwing over” people to make them pay for the benefits they receive from the government.
The flat tax diversion is weasel-clever because it shines a light on the absurd “fairness” argument coming from the folks who want to raise taxes on the rich. Fairness is an illusion our parents taught us as kids to make us stop fighting with our siblings over the appropriate division of candy. Fairness isn’t an objective quality of the real world. The reality is that the rich willingly pay higher taxes for the same reason that the British monarchy willingly converted from a dictator model to a symbolic role: If you want to avoid being beheaded, sometimes you need to be flexible.
If I could ban one word from the common vernacular, it would be “fairness.” It doesn’t exist, and never has. Plus, no two people and ever agree on what it means, at least in terms of practical application. Justice is a much better concept, and more objective in application, though not perfectly so.
Personally, I’m quite comfortable paying taxes at the highest rate. It’s like paying protection money to the Mafia, and I mean that in the best possible way. High taxes reduce the odds that jealous mobs will kill me for succeeding in my chosen field. Oh, and my taxes are also helping fund national defense, education, social program, and other good stuff. That’s a win-win. But please don’t insult me with arguments of fairness. Save the fairy tales for your kids.
I’d rather get rid of the mafia, personally. I suppose that buying protection is the next-best solution. However, never underestimate mankind’s propensity for killing the goose that lays the golden eggs.
I know some of you will leave comments about your own fairy tales of Laffer Curve economics, in which lower tax rates stimulate the economy and fill the treasury with free money. And then someone will point out that economic growth in the Unites States has often coincided with higher tax rates. Can we agree that the Laffer Curve has been debunked everywhere but on Fox News?
While I’m not one who has studied the Laffer curve with any degree of depth, I always thought the it existed to show a) that tax revenue is $0 and rates of 0% and 100% and that b) the rate optimal for maximizing revenue was somewhere between 0% and 100%. That’s all I use it for.
And I’m not sure how federal tax revenue equates to economic growth, except by definition per the widely used Samuelsonian macroeconomic metrics like GDP. Also, lower tax rates don’t stimulate the economy per se; they simply don’t disincentivize certain market behaviors.
By Simon Grey, on October 25th, 2011
Under Herman Cain’s 9-9-9 tax reform plan, 84% of U.S. households would pay more than they do under current tax policies, according to a report released Tuesday by a nonpartisan research group.
First off, there’s a word missing here. It would be more accurate to say that more households would pay more direct taxes under Cain’s plan. People already pay plenty of indirect taxes now; Cain’s plan would simply make people face their costs head-on. Also, this plan appears to eliminate one-time taxes like the estate tax, which is a good thing.
Second, it’s a good idea for more people to foot more of the tax bill. One way to increase government accountability is to make sure everyone has skin in the game. Fiscal prudence will become more of a national concern if most citizens’ tax bills go up.
Under the current system, most of the lowest income households end up owing no federal income tax. That’s because their incomes are so low that they’re exempt, or because their tax liability is canceled out by the standard deduction and tax breaks, such as the Earned Income Tax Credit.
The Cain plan doesn’t exempt very low incomes from taxation. And while it would eliminate the payroll tax, which is the heaviest tax for low-income families, that tax relief would be offset for many by the elimination of the EITC and other tax breaks they qualify for now.
From what I gather, the lowest earners wouldn’t pay that much more. Employee-side payroll contributions are already 7.6% of income; bumping it up to 9% is not going to be that huge a difference. Actually, factoring in employer-side matching for Medicare withholdings, employee withholdings are already effectively at a 9% income tax. Thus, the only poor see their tax burden increase is by the elimination of tax credits. I don’t have enough information at this time to determine how much of an increase the lowest quartile of income-earners would see their tax burden rise by. However, since the lowest quartile of earners take a decent amount of government benefits, I don’t really have a problem with the government charging for them.
But the majority of the highest income households would get a tax cut. For instance, 95% of those with more than $1 million in income would receive an average tax cut of $487,300.
These people would then spend their newfound riches more efficiently than the government, which is a plus in my book. At any rate, I don’t get caught up in this class warfare because I just don’t care. I don’t think the wealthy are inherently more or less deserving of their wealth than others.
Under Cain, capital gains — a notable source of income for the wealthiest Americans — would be tax-free. He would also preserve the charitable deduction. And taxing all non-capital gains income at 9% would amount to a considerable break from today’s top rate of 35%.
At the very least, the tax code should not disincentivize investing, since investing is a key to wealth and economic growth. Better yet, the tax code should encourage people to invest and save (if I recall correctly, the capital gains tax applies to savings where the interest earned exceeds $50).
Cain’s plan has been criticized by those on the left, who say it would hurt the poor, and those on the right, who worry a new national sales tax is an invitation for the government to raise taxes over time.
I’m not a fan of wealth redistribution, so I view taxes as payment for services. If poor people want the government to do something for them, they should pay for it. And since the government does many things for poor people, poor people should rightly expect to either a) actually pay something or b) pay a closer approximation to the cost of the benefits they receive.
As for conservatives, I share their concerns about new taxes. If you give the government an inch, it will take that as a sign to increase taxes. I would suggest that the introduction of a new type of tax (e.g. consumption tax) be accompanied by the elimination of a tax of similar scope and coverage (in terms of revenue). While simplification is good, I don’t think Cain’s proposal simplifies things enough. Also, I don’t think that his proposal is going to survive once the class warfare aspects of politicking start up in earnest during the upcoming election cycle.
By Simon Grey, on October 14th, 2011
Things are never so simple, of course. The tax has already been received by many Danish firms as a ‘bureaucratic nightmare’, piling on additional costs to firms in an already tough period. Once more, any tax such as this is going to be inherently regressive; those least able to afford any price increases will be hit the hardest. But what does it matter? The French ‘fat tax’ is expected to raise an estimated €120,000,000 p.a.. A nice little earner.
Fat taxes are politically convenient in countries where obesity is a sizeable problem. There is presumably plenty of revenue to be had because fat people aren’t going to change their eating habits overnight, nor are they the type to be particularly cost-conscious, in terms of both direct and indirect costs.
Furthermore, defending fatties is political suicide for most, since fat people are generally reviled. Thus, a fat tax is politically brilliant because it will raise revenue easily and enjoy widespread support (or, at the least, it won’t face much political opposition).
Most are in agreement that obesity is a society-wide problem. The more rotund we become, the more our healthcare costs increase. So what’s the solution? Surely not pricing poor people out of the market for fatty foods. We must seek a solution other than ‘more taxes’ – the default position of any government. Perhaps our BMIs could be helped by making it easier for people to help out at sport clubs without undergoing a raft of CRB checks, or by reforming our health system which currently permits the cost of atrocious health habits to be picked up by someone else.
Sadly the precedent has already been set. When we already allow the government to dictate what we may and may not consume in the form of innumerable drugs, letting them control what we eat is a logical advancement. And it will all be done for our ‘own good’.
Actually, once you expect the government to provide free universal health care for every citizen (and all non-citizen residents), the natural consequence is for the government to enact some sort of cost-cutting measure, like rationing or queuing. Alternatively, the government can enact a tax on unhealthy things in order to make providing health more reasonable. If fat people ignore the increased prices, the government will at least have enough money to defray future health care costs that inevitably arise as a result of unhealthy diet. Alternatively, if fat people decide to respond to the tax rationally, then the government will have to pay less for health care later on, thus negating the effect of less-than-projected revenue.
In many ways, a fat tax mimics the natural workings of the free market. If there were no governmental guarantees of health care, people would more inclined to take care of themselves and eat properly. Thus, the fat tax serves as a replacement market mechanism.
Now, this is not to say that I support a fat tax. I simply view it as the rational response to the current conditions in Europe, with regards to how health care is provided over there. Personally, I think the best solution would be to have the government completely deregulate and desubsidize the entire health industry, and get out of providing and paying for health care in its entirety. But if the government is going to be involved in health care, it is going to have to find a way to manage costs. That much is certain.
By Simon Grey, on October 5th, 2011
The speed limit on Route 3 is 55. The speed limit used to be 60. It was raised to 60 over 40 years ago when a study found 55 was too slow. There was never an engineering study supporting a reduction back to 55. It was reduced by executive order in 1973 to comply with the national speed limit. When the national speed limit was repealed in 1995 the highway commissioner ordered the low limit retained because he was afraid the state would be sued or otherwise embarrassed. So the speed limit is known to the transportation department not to be about safety.
It gets better. Route 3 was completely rebuilt a decade ago. The design speed for the project was 110 km/h (68 mph). The design speed is like a warranty: nothing in the road design requires a driver to go slower than 68 mph, not even on a wet road at night (the design conditions).
The average speed is not far from the design speed. The 85th percentile speed, which is supposed to be used for setting speed limits, is around 75 mph. A little over by my measurement, which found 1% compliance with the speed limit.
Eventually the absurdity of the 55 mph speed limit sunk in and in 2006 MassHighway traffic engineers recommended a speed limit increase. State Police vetoed the change, preferring the 99% violation rate that let them write tickets at will. Police have no legal role in setting speed limits. Somebody in the Romney administration weighed the risk of losing ticket revenue against the risk of being blamed for accidents. Police won. [Emphasis added.]
In this day and age, anyone who claims that the absurdly low speed limits generally found across America are about safety is either ignorant, stupid, or lying. Most highways are designed to be traveled safely at high speeds (and even most roads and streets have unnecessarily low speed limits), and cars made in the last 20 years or so are quite capable of handling well at high speeds, even under adverse conditions.
So, if you want to know why speed limits seem artificially slow, all you have to do is follow the money.
By Christopher Briem, on August 19th, 2011
I am a little far away so I don’t know if this is an error in the print edition or not. PG’s online headline on its main web page says “Regions’s unemployment rate rises“ (emphasis added). But the news out was just for the state’s labor force. The online story itself has the right title though.
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Obligatory Marcellus Shale coverage. We would retitle the big biz story today as ‘Voting with your shale’.
Speaking of Marcellus. I wonder what those who like to confuse correlation with causality have to say about the two main stories today: 1) Marcellus Shale natural gas output in Pennsylvania spiked (which Platts pointed out earlier in the week) this year and 2) state unemployment is up (see link earlier). But we are all to smart too be that superficial. Looking in depth into the numbers we see that jobs are indeed up in the state and by industry are being lead by job growth in health care and education services. Clearly Marcellus Shale development is getting people into the hospital more and pushing folks to enroll in higher education.
Joking aside I really am wondering more and more about the displacement of employment in other industries being caused by the demand for workers derived from Marcellus Shale development. Could be a part of the jobs story for the state.
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I see the headline about how the Mayor wants to return expanded parking meter hours to their traditional 6pm. They were expanded to 10pm as part of the great pension imbroglio (as short as I can put it). Two big things to me. In terms of sheer transparency, and easy transparency it would be… there must me a giginormous amount of data the Pittsburgh Parking Authority has that would be fun to play with. Wouldn’t it be fun to parse the changes in revenues and tickets since the hours were expanded. If you are reading here you might actually say yes to that, but think about what we could do if that data were available in aggregate or even by neighborhood or finer detail? Can you say ‘parking revenue elasticity’?
The bigger point on the parking story is that it is curious the relatively minor story of parking hours is in the news at all right now. The city is on the hook to deliver to the state very very soon the most important number relevant to all of this. Is the city really taking to the very last minute to produce the benchmark pension actuary report which will be the key datapoint in deciding if the state will take over the pension system?? That number will be the single most important factor impacting the city for the next decade and beyond. No way they don’t have that number already. Waiting to the last minute to actually deliver it is only going to make the state’s situation worse as they try to evaluate the numbers… oh, yeah….duh! Seems like that is the most important story all around is why we don’t know the ‘final’ numbers on that yet. Gonna be an interesting ride.
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And everyone is talking bees. Multiple stories in the PG and even Mike is into it. We be bees here from the beginning. Ha. I do wonder what happened to Bob’s bees.
By Simon Grey, on April 15th, 2011
As reported by ABC News, what started out as a program to hold unclaimed property, such as the contents of safety deposit boxes owned by people who have moved away without a forwarding address, has gone wildly out of control. The program is now using the flimsiest of excuses to drill safe deposit boxes and sell the contents, often for below-market value, the proceeds going to the state’s general revenue.
In a case reminiscent of the Monty Python organ donor skit (or perhaps the movie Repo Men), a San Francisco woman’s jewelry appraised at over $80,000 was sold even though she lived a few blocks from her bank, had not moved, and was current on all of her box rental feeds. In another case, a man’s retirement savings consisting of $4 million of stock certificates were sold; and “A Sacramento family lost out on railroad land rights their ancestors had owned for generations”.
There’s a reason why some have said that giving power and money to the government is akin to giving whiskey and car keys to a teenager: It’s because the government can be counted on to do wildly irresponsible things when given more power and money. Is it guaranteed to do so? Technically no, but history demonstrates, yet again, that the answer is a resounding yes. As it stands, it is simply best to deprive the government of as much power as possible, for it is certain that the government will abuse it.
By Simon Grey, on March 29th, 2011
This will make more sense once my next IMF post is published, but I propose eliminating the corporate taxes. I say this because as I was completing my tax return, I took a look at the handy revenue chart the IRS placed in the instruction booklet. I saw two things that really intrigued me. First, debt accounts for 40% of the federal budget’s funding. Second, corporate taxes account for 4% of the federal budget’s funding. Given that corporate taxation is as much a redistributive system as anything else, it makes little sense to bear the administrative costs in light of little is actually contributed to the budget. Income taxes account for 26% of the budget, and have a higher return on costs. I propose, then, that corporate taxes be eliminated, and that revenue is supplanted by closing loopholes, especially for low-income tax payers. If they are going to receive government benefits, the least they can do is pay for some of them.
Of course, this proposal will seem somewhat hypocritical in light of my next post. I simply want to note that no matter how you analyze it, corporate taxes are simply a waste. Not only are they costly to collect, relative to revenue, they are also costly to comply with which makes starting and running a business in America less appealing. Eliminating corporate taxes encourages business growth and eliminates government inefficiency. Naturally, this plan is doomed to fail.
By Christopher Briem, on December 28th, 2010
Since several have asked, my general opinion of the latest news on the PPP front is that the latest plan reminds me of My Dinner With Andre.
Policy and philosophy are not really all that far apart. Or maybe it’s finance and philosophy that are more akin than we think. A promise to pay more into the pension fund is not exactly something new in the big picture. Act 205 pretty much requires the city to pay more into the pension fund in the future. So much more that the pension fund will get to a fully funded state eventually. That is what the law already says, no need for any less statutory ‘promises’. So if you step back from all the competing minutia of made up numbers all around, I don’t see what will be different on January 1st. We will have traveled a long winding road to wind up at the status quo. If this promise is made that is, and the state accepts it to forgo the impending takeover by PERC… we will be exactly where we would have been if none of this ever happened. There will still be a large and growing unfunded pension liability and no state takeover. Like it was all a bad dream. Did it all really happen?
Something more substantive: This plan as I understand it it is that somehow the state will accept a somewhat vague promise of future revenue from the parking authority and meters to meet the mythical 50% threshold in pension funding. Remember the 50% number is arbitrary and notional. Come January 1 the new cycle of actuarial calculation will start and we will eventually learn the current state of the pension fund. With lease payment or without, with notional promise of future parking revenue or not, the new calculation will show that the pension fund will never really achieved a 50% funding ratio.
But something I have wondered about in the past, but really might impact this plan more than others (though I wonder about the others as well). Here is what the law actually states is allowable rationale for setting rates in the parking garages owned by the parking authority.
This is an excerpt of section § 5505. Purposes and powers of the Commonwealth of Pennsylvania Parking Authority Law (Act of June 5, 1947, 53 P.S. § 341 et. seq.) that describes the valid factors such an authorities can use to set rates:
(d) Powers…….An authority has all powers necessary or convenient for the
carrying out of the purposes under this section, including:
……..
9) To fix, alter, charge and collect rates and other charges for its facilities at reasonable rates to be determined exclusively by it, subject to appeal under this paragraph, for the purposes of providing for the payment of the expenses of the authority; for the construction, improvement, repair, maintenance and operation of its facilities and properties; for the payment of the principal of and interest on its obligations; and for fulfilling the terms and provisions of agreements made with the purchasers or holders of such obligations or with the municipality. Any person questioning the reasonableness of rates fixed by the authority may bring suit against the authority in the court of common pleas of the judicial district where the project is located. The court of common pleas shall have exclusive jurisdiction to determine the reasonableness of the rates and other charges. This paragraph supersedes a contrary provision in any home rule charter, ordinance or resolution.
So absent some explicit obligation, as in a bond or loan, then it is permissible for the parking authority to raise rates to just fund the city’s pension obligations? Begs the question of what rates are proscribed in any circumstances by that paragraph, but that is why we have lawyers I suppose.
Do I think it matters? Not really. The law seems to give all legal authority to the local court so who knows how that would turn out if there is not path to appeal. It does seem to give a very broad definition of who would have standing in challenging the rates, something that is usually what trips up folks trying to litigate against tax issues. My non-lawyerly reading of “any person” would imply that even just a rate payer could sue; that it need not even be a resident. Plenty of disgruntled and underemployed suburban-living laywers around who would be more than happy to file something. Someone is going to sue is all I predict. Something that would not be an issue if the PPA decided to sell all or some of its Downtown garages which they are certainly permitted to do.
So who knows where this will all wind up? In my ideal world we would be thinking about these things strategically and not just making policy in this uber-reactive way. There is nothing more reactive than what is going on now with this mad rush to do something, literally anything, to meet an arbitrary deadline based on notional numbers with a deadline now measured in hours.
Strategically to me would be to think through what assets the city should own and what assets it really does not want to own any more. Then see if monetization of the former helps deal with the pension problem and go from there. Anyone notice that the stadiumless authority lives this week. More than a few assets over there on the North Shore nobody wants to talk about. Assets you would think would soon be appreciating as the T extension comes closer to opening.
Hey, let’s start talking about GASB 45.
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Wait… I’ve got it. This plan is all fundamentally one big huge TIF. Not really a TIF, more Fee-Increment-Financing. A FIF!
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By Thersites, on February 11th, 2010
From Reuters:
WASHINGTON (Reuters) – Adding a $1 per pack tax to cigarettes could raise more than $9 billion a year for states, health advocates said on Wednesday, and a poll released with the study shows Americans would support such a tax.
The poll, conducted by International Communications Research, found 60 percent of voters would support the tax to help struggling states and would prefer it over other tax increases or budget cuts.
An increase in tobacco tax rates is not only sound public health policy but a smart and predictable way to help boost the economy and generate long-term health savings for states facing deepening budget deficits,” said John Seffrin, chief executive of the American Cancer Society Cancer Action Network.
“We have irrefutable evidence that raising the tobacco tax lowers smoking rates among adults and deters millions of children from picking up their first cigarette,” Seffrin said in a statement.
The report was released by the Cancer Action Network, the advocacy arm of the American Cancer Society, the Campaign for Tobacco-Free Kids, American Heart Association, American Lung Association and the Robert Wood Johnson Foundation.
All these non-profit groups have long supported taxing tobacco more as a way to discourage smoking.
The report, available here, projects the revenue that each state could earn by increasing cigarette taxes, based on research that shows a 10 percent cigarette tax increase reduces total consumption by 4 percent.
Now first off, let me just say that I am no fan of cigarettes. I have lived with smokers and I find it to be a repulsive habit. That being said, that people are advocating taxing cigarettes, junk food or anything else is wrong for numerous reasons. First, it is your choice whether or not you want to consume things that may be unhealthy. Forced “morality” through social engineering is immoral plain and simple. Second, these types of proposals that are sold as reducing consumption of these products (which is great so long as its voluntary) are also sold as being revenue generators, which is simply an insane concept when you think about it. The government would literally be coming up with rationalizations for taking money from you. Since the government has grown into such a Leviathan it will look for reasons to penalize the people to fund itself. This is legalized plunder. A state that has to search for things to tax is a state that has grown too big.
Now the argument that this is for the public good besides the fact that it makes our citizens healthier always falls along the following lines as mentioned in the Reuters article:
“Each year in the United States, smoking-caused disease results in $96 billion in health care costs, much of which is paid by taxpayers through higher insurance premiums and government-funded health programs such as Medicaid,” the report argues
“Indeed, higher Medicaid costs are one of the reasons states are facing budget difficulties.”
Again here, as with almost all of these proposed government fixes, that smoking or obesity for example contributes significantly to healthcare costs which in turn kills the fiscal health of the nation merely addresses a symptom, not the root cause of our ultimate insolvency which is the social welfare state itself. Smokers, drinkers and obese people would not cost us so much if the social programs didn’t exist in the first place. Keep people off the dole and you won’t have proposals for ridiculous social engineering nor will you have massive budgetary problems.
By Thomas Knapp, on October 22nd, 2009
The “Laffer Curve” first came to public prominence back in the heyday of Reaganomics and “supply side” ideas. The concept is simple and, once you think about it, obvio
us (I say “once you think about it,” because even though it’s been around since the 14th century, it took Arthur Laffer to get people thinking about it).
What the Laffer Curve tells us is that the “optimal” tax rate t — the rate which will produce the most revenue for government — is less than 100%. There’s a tipping point in tax rates beyond which people work less and produce less, creating less wealth to tax, than they otherwise would have. This is because they’re not keeping as much of what they earn, making the earning of it less attractive. If the tax rate is x%, you get out of bed and go to work even if you have the flu; if the tax rate is x%+1, you take a sick day if you wake up with the sniffles, or maybe you pad your week of paid vacation out with a couple of unpaid days off on either side. The Laffer Curve treats that in the aggregate — everyone’s “tipping point” can be different, but there’s still an overall tipping point at which increasing taxes would decrease, rather than increase, government revenues and vice versa.
One problem with the Laffer Curve as illustrated: 100% taxation would probably not produce zero government revenue. Even in the most complete state socialist system — a system where every dime you earn goes to the government, which doles part of it back out to you in “benefits” — some people would continue working right up to the minute the system was overthrown.
Anyway, here’s the thing: Reaganites and other “conservative” politicians love the Laffer Curve because it allows them to promise tax cuts and maintenance of the welfare state. That’s been the mantra since the 1980s: “We can cut taxes and still grow the federal budget — our revenues will go up, not down, because we’re on the right side of the Laffer Curve!” This is a great way to sell tax cuts (and the politicians who promise them) to those who are directly employed by government or who depend on a government check, a government contract, etc. for their livings.
BUT!
Reducing the size, scope and power of government is a worthwhile end aside from the issue of how heavy the tax burden is. Increased government revenues are a bad thing, because most of what government gets up to is mischief of one sort or another.
More government revenue means more drug warriors prowling the streets and locking people up for possession of unapproved plants.
More government revenue means more education bureaucrats sending more money to more “public” schools to teach our sons and daughters how to not read, not do math, not learn science and not know history.
More government revenue means more “national greatness” idiots sending more troops to far-off places to prove how big America’s penis is.
More government revenue means more money coming out of your pockets and flowing into the bank accounts of the various privileged elites who lobby Congress for subsidies, protections and other favors.
More government revenue means more government.
So, when someone tells me that a tax cut will enhance government revenues, my reaction is “the tax cut you’re proposing isn’t big enough.” There may even be a point at which a tax cut which keeps the rate to the right of the Laffer Curve’s t is a bad idea because the evils the enhanced government revenue will pay for outweigh the evil of the marginally higher taxes themselves. I don’t see that point as calculable, so it’s not worth belaboring, but it seems theoretically likely.
Setting aside the possibility of abolishing taxation entirely (a worthy goal!), the least we can do is work to get taxation over to the left side of the Laffer Curve — to the point where politicians who want to grow government have to try to sell the public on a tax increase to pay for that growth, instead of being able to have it both ways.
How do we know that we’re to the left of t? Once again, there’s that calculation problem — this isn’t a zero sum game, since tax cuts feed money back into the economy and strengthen it. The best we can do (as long as we insist on keeping government around, anyway) is cut taxes and then cut taxes, and then cut taxes some more, while keeping an eye on government revenues to see when they start going down (and then keeping an eye on them after that, too — t will probably move downward as lower taxes improve the economy, making more people more prosperous and thus more able to say “screw it, I’m taking the day off — government would just take x% of what I earned anyway”).
My income tax cut proposal (in lieu of repeal of the tax until we can get that) is for a regular, annual increases to the personal exemption. Tying that into a project to get us onto the left side of the Laffer Curve would entail reviewing the results of the increased exemption each year. Did government revenues go up, or did they go down? If they went up, then the exemption needs to be increased even more. If they went down, hey, we’re on the left side of t! We’re actually cutting government, not just taxes! At that point, some will argue that it’s time to stop cutting taxes. But (I say, with a cryptic politician’s smile) let’s cross that bridge when we come to it.
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