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06/16/2013

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Thomas Rekdal

In the fantasy spirit of nominating federal tax deductions that ought to go, I suggest we get rid of any deductions for state and local taxes. Why should the taxpayers of one state subsidize the profligate governments of any others?

Gordon Longhouse

I have long been a fan of Becner but this post is pretty lame.

To begin with Becker's notion of expensing capital. Most capital expenditure has been financed which makes sense: match the benefits to the cost. Becker suggests allowing as an expense now an expenditure that will produce income for a period of years and was probably acquired in part with borrowed money over a period of years. Why? Surely it would be enough to get rid of accelerated depreciation. Even Italians in the renaissance saw the need to depreciate long life assets over time.

They both wistfully suggest a VAT might be worthwhile while ignoring the history of the VAT everywhere else. Lots of poor countries have brought in VAT as a price of joining the European Union but that hardly seems likely to happen to the US.
Canada brought in a VAT but got rid of a stupid tax: the Manufacturer's Sales Tax instead. Likewise Australia which used its VAT to get rid of a raft of stupid state transaction based taxes. What do Becner propose?
Use VAT to lower taxes on capital. That is to say that the poor who have no savings to speak of will pay the taxes of the rich who do.
When a poor person borrows to buy something, a car or house, the purchase will be subject to VAT.
The interest the poor pay to the well to do will not be subject to tax as this is distortionary to capital expenditure and some how makes the poor poorer.
Then there is the cascading effect of a VAT in a federal system that features sales taxes. Canada after more than 10 years is only just getting to grips with this. Becner don't discuss it at all.
All in all a disappointing post.

Neilehat

"Death and Taxes", both undesirable, but a fact of Life none the less. No matter how we slice and dice the Debits and Credits the fundamental fact still remains - the Government must still meet it's financial obligations. Along with every one else. Change and simplification? Hopefully, but I have my doubts.

Terry Bennett

At the risk of spontaneous combustion, may I raise the idea in this lair of the consequentialist that perhaps tax policy should be constrained not only by outcome but also by morality? (They are not the same thing, really.) I believe all men are created equal, and progressive and targeted tax schemes are an affront to that principle.

The manifest purpose of tax is to fund the government. If we did not need to fund the government, we would not need tax, and there would still be some extremely rich people and some extremely poor people and a multitude in between, but we would all be free people - free to carry on our affairs and apply our productivity as we saw fit, without having to surrender a share of, or even account for, our individual output. The equalizing effect of tax is a false ideal.

We all need government, and we should all pay for it. Furthermore, if everybody paid for it, everybody would be a budget hawk, and the government would be a lot smaller. Therefore, I am a serious fan of a consumption tax such as the Fair Tax, because it falls on all alike - even tourists.

Going even further, perhaps the most egalitarian tax is a per capita tax, because it does not depend on behavior. It is a tax on membership in society. You want the government to spend $3 billion this year? Divide it by 300 million, and let's each pay $10k, and then it's nobody's business what anybody else does for a living or how much they make. (Obamacare is actually the first such "tax", per the SCOTUS, because it is assessed on people who simply exist, not because of any conduct they have undertaken.) The bonus will be that lots of people will protest if they have to pay $10k, and they will demand that the government spend less.

Here's another approach. Let's exempt the lowest 20% of earners from tax, but put the onus on them to justify their exemption. The other 80% will pay 1.25 shares each, and anyone who pays will not be subject to any kind of audit or review. Maybe the 20% who don't pay shouldn't get to vote on how the money is spent. It should then become a point of personal honor to become sufficiently productive to be a paying member of society.

RossAnderson

I posted a very slightly critical comment on Becker's post yesterday. Now it's gone. Maybe Judge Posner should tell him to put it back, as a matter of credibility.

starsky

Terry, while I appreciate the sentiment regarding equality, I disagree with your conclusions. Men may be created equal in the eyes of God, but certainly not in terms of wealth or opportunity. Only those with excess wealth can take advantage of investment opportunities. Look at evidence from the Great Depression or the Great Recession -- those with limited means were forced to sell their assets at discounted prices, while those with excess wealth were able to acquire those assets at discounted prices. Furthermore, those with greater wealth have better access to education and contacts, giving them an even greater advantage. The rich get richer and the poor get poorer until, like every game of Monopoly, all the money becomes concentrated among fewer and fewer people until there is one winner and many losers. In short, any completely free, capitalist economy provides those with existing wealth an inherent advantage, which is precisely why taxation must be progressive.

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