Six Policies Economists Love and Politicians Hate

[Crazed Rabbit]

From NPR; there was a discussion among economists right, left, and center about great policies that no politician would support. You can listen to the show at the link or read the main points below.

The proposals

One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It's a kind of consumption tax, and can be structured to make sure it doesn't disproportionately harm lower-income Americans. More, it's taxing something that's bad, which gives people an incentive to stop polluting.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

There you have it, six major proposals that have broad agreement, at least among economists. Though we should note that there were some pretty significant quibbles about just how to implement the income-tax and carbon-tax proposals.

Ah, one can dream ...

Their's a list of economists on the site and links to their websites.

CR

[lars573]

2, 3, and 4 are libertarian fantasies that would destroy any country that tried and implement them.

[Crazed Rabbit]

Well that would mean left of center/democrat economists are libertarians. Two contributers:

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., and widely published blo "You could probably describe me as left of center. It'd be fair."

Robert Frank, professor of management and economics at Cornell University's Johnson Graduate School of Management. "I'm a registered Democrat. I think of myself as a radical pragmatist."

But seriously, you don't know what you're talking about.

CR

[Philippus Flavius Homovallumus]

Well that would mean left of center/democrat economists are libertarians. Two contributers:


But seriously, you don't know what you're talking about.

CR

Many Democrat policies are Libertarian, American politics don't map well to any recognised political axis.

To your point: eliminating income taxes completely would be foolish, as they garentee a minimum income for the government that scales up as the economy grows. HOWEVER, Scandanavian countries do have very low income taxes, but at the expense of extremely high consumption taxes.

As pretty much everyone in the US refuses to institute VAT, your ideas will never be workable.

[ajaxfetish]

As pretty much everyone in the US refuses to institute VAT, your ideas will never be workable.

I think that was pretty much CR's point: that the ideas are politically unworkable, but he would love to live the dream where people would be willing to make such changes.

Ajax

[Ironside]

Many Democrat policies are Libertarian, American politics don't map well to any recognised political axis.

To your point: eliminating income taxes completely would be foolish, as they garentee a minimum income for the government that scales up as the economy grows. HOWEVER, Scandanavian countries do have very low income taxes, but at the expense of extremely high consumption taxes.

As pretty much everyone in the US refuses to institute VAT, your ideas will never be workable.

We don't have low income taxes. But yeah, the VAT is one of the main income sources, but it's still a lower source than the income tax. Corperate income tax comes after reinvestment iirc, so point 3 is odd. One big point of it is to keep the money within the company for reinvestment, rather than coorperate cannibalism.

Capital gains tax should be comparable to income tax as well.

[Xiahou]

1. Good idea.
2. Sounds reasonable.
3. Eh... how about just massively slashing it instead?
4. Consumption taxes are difficult to enforce and require alot of tweaking to keep them from being regressive. Also.... "Taxes discourage whatever you're taxing, but we like income, so why tax it?" So, we like income but hate people spending it? How about we instead just flatten our tax brackets and streamline our tax code and not use it as a social engineering tool?
5. This is just stupid. A consumption tax would tax the gas you put in your cars (we have that), not what comes out.
6. I'm willing to entertain this notion...

[Papewaio]

1,2 & 5 are all done here.

We get a 30% deduction on private health costs. And if you earn over a threshold you get a tax penalty for not having private health. So clearly number 2 does not bring on the apocolapse.

[Jolt]

I can understand why 3 and 4 are politically unworkable: They are simply downright stupid. Any government that has projected spendings on the country (e.g. All governments) would never do away with Corporate Income Tax (Which makes complete sense, since if the taxed money is invested into projects which are for the public good - Health care, roads, illumination, police, military, etc - Something which is not in the company's or shareholders primary investment concerns. And most especially 4. That's one of the most stupid economical statements I ever seen. Replacing an income tax with a consumption one using the excuse of protecting the low earners when the consumption tax is widely known to be one of the most regressive taxation methods still being practiced.

[Fragony]

Most of these are in effect here

[Lemur]

Any government that has projected spendings on the country (e.g. All governments) would never do away with Corporate Income Tax

Actually, here in the U.S.A., corporate income tax only accounts for about eight percent of total tax revenue. So eliminating it would make a hole, but not a bottomless hole.

There's no doubt that the U.S. tax code is due for a radical overhaul and simplification. Unfortunately, I do not see the Republicans in the House, the Dems in the Senate, or President 44 arriving at anything sensible anytime soon.

[Fragony]

Actually, here in the U.S.A., corporate income tax only accounts for about eight percent of total tax revenue. So eliminating it would make a hole, but not a bottomless hole.

There's no doubt that the U.S. tax code is due for a radical overhaul and simplification. Unfortunately, I do not see the Republicans in the House, the Dems in the Senate, or President 44 arriving at anything sensible anytime soon.

Over here corporate profit isn't taxed at all, it works fine. The extra jobs are well worth it

[Xiahou]

There's no doubt that the U.S. tax code is due for a radical overhaul and simplification. Unfortunately, I do not see the Republicans in the House, the Dems in the Senate, or President 44 arriving at anything sensible anytime soon.

Hey, I do agree with him sometimes!

[classical_hero]

1,2 & 5 are all done here.

We get a 30% deduction on private health costs. And if you earn over a threshold you get a tax penalty for not having private health. So clearly number 2 does not bring on the apocolapse.

What are you talking about, number 1 is not done here, but i wish it was. You obviously have not heard of http://en.wikipedia.org/wiki/Negativ...28Australia%29 since you can get a tax benefit if you make a loss on the interest you pay for the house.