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

[Kralizec]

What are you talking about? Our corporate tax is 20-25% ("vennootschapsbelasting")

[Fragony]

What are you talking about? Our corporate tax is 20-25% ("vennootschapsbelasting")

There is no tax on profit for foreign company's investing here

[Kralizec]

Well yeah, corporote tax is levied in the country of origin.

[Fragony]

Well yeah, corporote tax is levied in the country of origin.

You can do it here is well, but you would have to pay to explain it. It's quite easy to evade taxation if you know how,hint: if you borrow money from yourself they got nothing on you

[Kralizec]

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?

We have that over here; they recently agreed to narrow it down in a half assed manner - most economists agree that it needs to go entirely at some point, but that's blocked by certain parties.

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.

Aren't investments already tax deductible? Over here you can write off an investment, proportionally, over the years of the economic life of the investment. Scrapping the corporate tax will just make it relatively more attractive to give away the profits as dividends. Unless I'm missing something here.

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.

I'm guessing the idea here is to make it more attractive to work and earn money. But if you at the same time discourage people from spending it, how's that any better? People will put it into their bank accounts, shifting the focus from demand from domestic consumption to financial products.

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.

I don't think that this is the best way to discourage pollution, personally.

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.

No argument here.

[Fragony]

'Aren't investments already tax deductible? Over here you can write off an investment, proportionally, over the years of the economic life of the investment. Scrapping the corporate tax will just make it relatively more attractive to give away the profits as dividends. Unless I'm missing something here.,

You are missing something here, my money is in a BV tax can't get it. If they try I will do my utmost best to hurt them personally and that is not a threat it's a promise.

[Kralizec]

'Aren't investments already tax deductible? Over here you can write off an investment, proportionally, over the years of the economic life of the investment. Scrapping the corporate tax will just make it relatively more attractive to give away the profits as dividends. Unless I'm missing something here.,

You are missing something here, my money is in a BV tax can't get it. If they try I will do my utmost best to hurt them personally and that is not a threat it's a promise.

I don't really see how that is relevant to what I wrote there, but...

You'll have to pay taxes over your BV as soon as you liquidate it. If it was worth 50.000 when you started it and 150.000 as soon as you liquidate it, the extra 100.000 are considered profits and taxable for you, personally.

[Fragony]

Not smart

[HoreTore]

I always find it fascinating that when a libertarian wants to fix the economy, they want to change something in the public sector.

Apparently, it's the belief of the libertarians that the market cannot turn things around, they need to use to state to turn things around... Just like any good little commie does.

[Fragony]

I always find it fascinating that when a libertarian wants to fix the economy, they want to change something in the public sector.

Apparently, it's the belief of the libertarians that the market cannot turn things around, they need to use to state to turn things around... Just like any good little commie does.

Ok explain that one, I see leftist logic, everywhere

[HoreTore]

Ok explain that one, I see leftist logic, everywhere

I have the worst hangover ever, so my ability to formulate what I want to say is probably not very good today.

I'll try again: Libertarians wants a minimalist state, and to have problems solved in the market. However, when society faces a problem, they don't seem to talk about what the market should do to solve it, but rather discuss how changing the state will fix the problem.

For example, take the problem with rising house prices. The libertarian solution is to change the state a little(remove a tax cut), not one word about how the market can work within its current set of laws and regulations to fix the problem.

[Crazed Rabbit]

I always find it fascinating that when a libertarian wants to fix the economy, they want to change something in the public sector.

Apparently, it's the belief of the libertarians that the market cannot turn things around, they need to use to state to turn things around... Just like any good little commie does.

Or, you know, it's distortion caused by government intervention in the first place, and the simplest way to correct is to lessen how the government intervenes.

For example, take the problem with rising house prices. The libertarian solution is to change the state a little(remove a tax cut), not one word about how the market can work within its current set of laws and regulations to fix the problem.

Like I said - lessen the government intervention in order to let the free market fix things. With these issues, it's not the the free market can't lead to a better solution, but that the government is actively preventing this.

CR

[Philippus Flavius Homovallumus]

CR, do you play any of the Elder Scrolls games?

Take a look here: http://oblivion.nexusmods.com/mods/topalltime/?adult=0

See the top 25 files of all time? Naked chicks, skimpy outfits and actual in game porn.

That's the free market for you, right there.

[Papewaio]

Interesting I thought most of the action to resolve the GFC was government bailing out private companies not vice a versa.

Corporations are formed to protect shareholder investments. Unfettered there is nothing that stops chemical companies dumping waste in rivers as long as the shareholder profits. So can someone explain to me again how maximized profit for some means better quality of life for all. Because this is the assumption that the free market is a better choice then a regulated one.

[Philippus Flavius Homovallumus]

Interesting I thought most of the action to resolve the GFC was government bailing out private companies not vice a versa.

Corporations are formed to protect shareholder investments. Unfettered there is nothing that stops chemical companies dumping waste in rivers as long as the shareholder profits. So can someone explain to me again how maximized profit for some means better quality of life for all. Because this is the assumption that the free market is a better choice then a regulated one.

It isn't and "maximise the profit margin" should not be the driving force behind Capitalism, efficient long term investment of Capital should be.

The clue is in the name and as these people aren't proper Capitalists I see no philosophical reason why an actual Capitalist should object to regulating them.

[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!

[ajaxfetish]

Corporations are formed to protect shareholder investments. Unfettered there is nothing that stops chemical companies dumping waste in rivers as long as the shareholder profits. So can someone explain to me again how maximized profit for some means better quality of life for all.

I think most libertarians would agree that preventing companies from dumping waste in shared natural resources is one place the government SHOULD intervene.

Ajax

[Greyblades]

CR, do you play any of the Elder Scrolls games?

Take a look here: http://oblivion.nexusmods.com/mods/topalltime/?adult=0

See the top 25 files of all time? Naked chicks, skimpy outfits and actual in game porn.

That's the free market for you, right there.

First, You do realise the list you linked to had only 2 files that are even slightly pornographic in any way, in the top 25, right?
Second. What the heck does the elder scrolls' modding scene got to do with free markets?