Wednesday, January 29, 2014

A New Tax System

I have been thinking about taxes, particularly about what we tax.  And I have been listening to some of the right-wing criticisms of classic liberal tax concepts, such as the progressive income tax.  And frankly, I think the right-wingers have some valid criticisms, although they don't seem to have any actual solutions. ("No new taxes" is not a solution, unless you think the existing tax system is perfect.)

First, it seems odd to tax things that we want to encourage.  It is generally a good thing for the economy if people have an income, and if that income goes up.  So why would we tax income?  Similarly, like it or not, we have a consumption-based economy - we want people to buy stuff.  So why would we tax sales of stuff?

Second, it seems like we should tax things that we want to discourage.  We already do to a small extent  with "sin taxes" on tobacco and alcohol, but that is not really my focus.  I would prefer resource extraction taxes - you take something out of the ground, like oil or gas or minerals or lumber or water, and you pay a hefty tax for doing so.  After all, once you have taken it, no one else can take it, and eventually we will run out of those things.  It seems like a good idea to discourage folks from depleting resources too easily and cheaply.

Similarly, I don't have a problem with property taxes.  Real property is finite, so the more you accumulate, the less there is for anyone else.  Maybe property taxes should be progressive, so owning a little property to live on doesn't cost you much, but the more you own the higher rate you pay.

In addition to resource extraction and property taxes, I would like toxics taxes.  Less poison in our food, water, and air would be good.  Hey, it might even reduce the incidence of cancer. (I would really like it if fewer people died of cancer, wouldn't you?)  So if you produce or use a toxic substance, you would pay a hefty tax for doing so.  That would likely reduce the number of toxics that are used just because it is cheap or easy to do so.

One right-wing complaint about high income taxes is that the people who are making those high incomes deserve those incomes because of their unusual hard work or special skills - in other words, they have earned that money, and it is not fair to take it away.  (Presumably lobbying skills count, too.) To ensure that this is in fact the case, it would make sense to have a high estate tax, at least on larger estates (whatever large is).  After all, inheriting money does not entail much work or skill (stay alive, don't annoy your relatives too much), so those who inherit large chunks of money have not earned that money.  And besides, Thomas Paine and Warren Buffett both support this idea.

So here is the basic outline: no income tax, no sales tax.  Progressive (with quantity of land) real property tax.  Sharply progressive estate tax.  Steep resource extraction and toxics taxes.

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