And now we have Hillary Clinton embracing McCain's gas-tax "holiday": "My opponent, Senator Obama, opposes giving consumers a break," Clinton said, campaigning in North Carolina. "I understand the American people need some relief."

"The second is to do what Republicans do: propose spending increases and just don't worry about the taxes."

Whew, I was worried that the 2006 Democratic promises to be fiscally responsible might be serious. Happy to see that it was just a campaign ploy (though I suppose we knew that when Krugman changed his tune 2 days after the election).

Would it serve any useful purpose to ridicule anyone who isn't talking about "spending cuts" in multiples of $100 billion?

We're up the spout about a trillion a year right now (450 bn official deficit, 120 bn or so in social security taxes being spent as if it was general revenue, plus the off-budget Iraq war). You can't be serious if you're not talking in $100 billion increments.

So what does any serious person propose to do about this? Where is any Republican willing to commit to finding even five of these increments? Instead they're struggling to identify $20 million here or there. Pikers. They're talking about bailing out a sinking ship in a storm with a damn thimble.

How about we tax the rich for the fact that the government is far more responsive to their needs and wants than it is to anyone else's?

Needless to say, a carbon or gas tax will impact the poor most severely because they drive the oldest, least efficient (ie, crappiest) cars. The poor also drive the longest to get to work because they can't afford housing near their jobs.

Why do we make the people who depend on cars bear the brunt of the taxes and not the people who invented (and profited the most from) our automibile-based system of transportation? After all, people who drive cars don't have much choice in the matter. There is no debate -- Americans are poorly served by public transportation. Hell, the GOP and the courts won't even let Northern Virginia collect taxes to extend the rail line out from DC.

Remember, when income taxes were first conceived back in the 1800s the feeling was that the wealthy industrialists needed to pay a premium for the privilege of being able to lay people off and move capital wherever they pleased. Back then governments considered the social costs of layoffs as well as the continual re-building of new infrastructure to accomodate new factories, communities, etc. as costs that should be paid in proportion to the profit derived by the investors. We've come a long way in our thinking, haven't we?

How about a tax on the unnecessary use of the letter "e" as in "Towne Center" or "Towne Car" or "Hot Shoppe" or "The Greene?" A tax on pretentiousness -- hit 'em where it hurts.

Kevin Drum: The right will claim that an increase in the capital gains tax, for example, is a dreadful idea because it affects middle-class investors — despite the fact that only about 2% of capital gains taxes are paid by the middle class.

Then the appropriate response is to yell "bullshit" (or some family friendly version thereof). Also yell it when someone claims that it discourages investment. Empirical studies (as opposed to "reasoning" pulled out of someone's ass) show that the effect is somewhere between negligible and nada.

Lastly, scream "unfair" as loud as you can. You can debate endlessly whether taxes should be flat or progressive, but who the hell can justify a regressive tax?

On the left, you'll get social justice environmentalists inveighing against carbon taxes or congestion taxes or gasoline taxes because they impact the poor — despite the fact that the resulting revenues are usually used for programs that directly help the poor. [emphasis added]

LOL! Next you'll be telling us that individual losses due to "free" trade are compensated for by improvements in the "safety net". Personally I prefer the one about three pigs using different construction methods (at least it has a good moral).

Congestion taxes are just another sin tax, and the money gets dumped into the general fund. Sin taxes don't help anyone, but a little moralizing makes them politically easy to pass. Gas taxes are either used for roads or dumped into the general fund.

When Bush was cutting taxes on dividends, Gore (or Kerry) argued, "95% of this tax cuts goes to the richest 5% of the population".

Which was true.

Bush countered with something like, "over 65% of the dividend-tax-cut recipients make less than $75,000".

Which was also true.

Democrats should have have said, "what Bush says is technically true, but deliberately misleading. If a tax cut gives 99 "poor" people 1 dollar each, and gives one rich person one million dollars, saying that 99% of the people benefited from the tax cut is true, but misleading. 99.99% of all the money from the tax cut actually goes to the top 1% of the population."

When Bush claims you are using "fuzzy math", say that you need him to address your claims, are they true or not. Say that by the next debate, the population deserves to have an answer to that question, or challenge the media to evaluate it.

Don't let them get away with muddying the issue. Call them on it. It's not too hard.

wouldn't another option be to actually eliminate programs that aren't as useful re-direct the dollars to more important priorities?

revenue neutral and spent more efficiently

I think pj's idea of an e tax is good. But to be democratic I think we should also tax a consonant. So I vote for r.

That way Thersites will get dinged every time he signs his name!

Many government services can be paid for with revenues earned directily from the benefiting constituents. Gasoline taxes should pay for roads and other auto-transportation infrastructure. The SEC and Federal Reserve should be financed with use taxes paid by investors and privilege taxes paid by financial institutions. Social Security is financed by its users for its users, not from the general fund.

A big part of government expense is protecting the property rights of the wealthy. These expenses should be borne by those with property to protect, not the poor.

Income taxes should be used to pay for public goods that everyone shares equally in the benefit, like defense, education and health care. If most other government services were paid for with taxes paid by the specific benefiting constituency, a lot of graft would be easiier to detect and the actual benefits and costs of many governmental services would be more transparent.

The argument that carbon (or even just gas) taxes are regressive is specious. All tax 'increases' can be offset with changes in income taxes, and/or with spending increases targeted at those hit harder. The market incentives that follow sundry sin taxes are too important to forgo because of a mis-applied worry about regressiveness. Why not also worry about booze and cigarette taxes? Why not also worry about the extra sacrifices of those ( mostly poor) who go into the army ? Why not worry about the regressive sacrifices we inflict in air-pollution? Let's not let such arguments keep us from doing the right thing.

And cap and trade is just a tax in disguise. Equally regressive unless offset.

If we are going to spend $3 trillion a year then we need to figure out the best way to raise $3 trillion a year. You can argue that we should only be spending $2 trillion or we should be spending $4 trillion but that has nothing to do with raising revenue.

If you don't raise the revenue then you borrow the money. Again, the proper size of the surplus or deficit has nothing to do with a decent revenue policy.

I work in the tax avoidance industry and if we followed what I am suggesting then I would need to get a new job.

First of all, lower taxes and broaden the base.

Something here will tick everyone off but, as a whole, I think it would be far superior to what exists today.

Cut personal income taxes in half. There is far less need to try and evade or avoid taxes if the level is half what it is today.

Cut corporate taxes from 35% to 20% or 25%. Again, a bunch of tax lawyers will have to get a real job.

Cut payroll taxes in half. Why tax middle class people less than we tax Warren Buffet?

OK, the government needs serious revenue to make up for the above tax cuts.

1) put a serious tax on gasoline and carbon. Start with a tax of $1 a gallon and raise it by 10 cents a month until it gets up to $5 a gallon. The machinery already exists for a gas tax and we would have to figure out how to implement the carbon tax.

2) have a nationwide property tax of about .5% of market value. To a large extent, we have state and local property tax systems in place. We would need to integrate the new system.

3) Have a VAT of something like 7% to 10%. We have sales taxes virtually everywhere so this wouldn't be too different

4) Have a personal property tax of about .1% on anything with a title like planes, boats, and cars.

I am not sure of the exact numbers to make everything work but this would almost completely eliminate most tax evasion because if you evaded one tax you would probably end up paying most of the other taxes.

It might be worthwhile to risk jail for not paying $10,000 in taxes but you have far less incentive if your tax bill is lower.

I know everyone who read this whole post thinks i am nuts but the idea of making the tax rate low and the tax base wide is the best way to raise revenue for the government

Brojo,

Excellent post.

Serious question about use taxes: should people who drive '88 Hondas with 260K miles on them pay lower consumption taxes than, say, companies that send fleets of cement trucks and tandem trailers across our highways? The heavier vehicles not only deteriorate the roads faster they also pollute much more.

Very few industries have ever paid environmental costs.

congestion taxes

Taxes for use of public goods that everyone has already paid for is a way to limit their use by the poor for the benefit of the rich. My city has HOV lanes on the freeways that everyone paid for, but the benefit is limited to only a few. There are proposals for publicly financing toll roads to relieve congestion, which I am very opposed to. The government wants to use everyone's taxes to pay for a road that will exclude many people because of the toll cost so that wealthy people do not have to wait in traffic jams.

I say print money.

I'm not sure I agree with Neil Wilson about the specifics of his proposals, but he's right in his first paragraphs. What needs to be re-established is that taxes are how government should get the money to do what has been agreed it should do. If we don't pay for things out of taxes, we're just borrowing from our grandchildren and adding to the actual cost the cost of borrowing.
The casino mentality behind the last eight years needs to be changed.

pj, higher registration fees for commercial vehicles should be able to offset the increased wear they create.

Pollution taxes for industry need to be increased by a large factor.

neil wilson,

I am not sure of the exact numbers to make everything work but this would almost completely eliminate most tax evasion because if you evaded one tax you would probably end up paying most of the other taxes.

First you need the exact numbers otherwise you are simply wishing. Kinda like the flat tax folks who think they can replace all taxes with a 10% sales tax. That is not nearly big enough.

Second I agree this would eliminate tax evasion because it is shifting most of the tax burden onto those with the least ability to evade taxes - the poor.

Any attempt to "broaden the base" will be regressive, simply because the number of poor greatly outnumber the rich.

dennisBoz: see Neil Wilson's opening. "Revenue-neutral" means we go on borrowing at least a third of what we spend every year. It means we become a wholly-owned subsidiary of the Chinese government and of British, Dutch, and Canadian banks and businesses. This was my earlier point:

We have to get serious about revenue. Anything else is fatuous and infantile.

I don't go with most of Neil Wilson's prescription, but it gives us a reasonable place to start.

If Democrats and liberal pundits accept without argument the premise that all new social programs must be financed by new taxes then there will be no new social programs. Why surrender 99% of the battle (the framing of the issues) before the battle has even begun?

The argument for new social programs should be completely separated from the issue of finance. This is how we deal with ALL security issues. No one gets to argue that we can't invade Iraq because it would be too expensive. Or that we can't afford a new aircraft carrier or a new fleet of jets. (In fact, some do make these arguments, but they are laughed right out of the debate.) Money is no object when it comes to defense.

Liberals need to frame the argument for the most important social programs in a similar way. Money is no object when it comes to protecting us from global warming. Money is no object when it comes to ensuring the health and safety of the American people.

We can worry about balanced budgets in another debate, once new social programs are well accepted (and depended upon) by millions of Americans.

What is it about this that the liberal pundits don't get?

I would be in favor of efforts to "deprivatize" my taxes.

Currently, I pay a lot of money to support the profits of corporations that pay insane amounts to their CEOs, such as Lee Raymond. I would rather have that money going to the government, where it would do some good for the many.

Had I been paying higher taxes for a coherent government energy program, I wouldn't now be paying insane amounts to oil companies for gasoline.

I'm going to be paying, no matter what I do. The question is, who's getting the money, and what are they doing with it?

despite the fact that only about 2% of capital gains taxes are paid by the middle class.
It's not 2%,it's less than 10% but it's more than 2%. That figure may be from sales of capital assets owned by individuals but capital gains taxes on sales of stock or bonds is not the same thing.
According to the IRS (2005 data) of the 665 million in reported long term gains, more than $50 million was paid by taxpayers with income of $100k or less.

I'm afraid I don't understand how raising the marginal tax rate on incomes over $500,000 a year inadvertently targets the poor or middle class.
And of course the estate tax targets rich dead people--who are, moreover, too greedy to give away their money before they die.
Tell me how these are burdens to the middle class.

Tell me how these are burdens to the middle class.

The GOP has a highly skilled cadre of propagandists who will find a way to make it seem so, and a very loud set of microphones for them to use.

To the larger question of what to do about the fact that taxes of any sort can be spun in a politically damaging way, there is a cure for it. We can continue to deficit spend until hyperinflation breaks out, destroying everyone's savings and pauperizing the majority of citizens. At that point people may begin to understand that there are worse things than taxes.

Give me a break.

No one really knows how much a certain tax change will change revenue.

So, if my numbers don't add up they don't add up. Maybe we need to cut the tax rates by 39% instead of 50%. I have no clue.

However, I do know that I can make a living helping people avoid tax rates of 35% but I can't make a living helping them avoid taxes of 20%. Every point you get closer to 20% makes my job harder. Sooner or later, I might have to get a real job.

In the mean time, the only way to make up for the revenue is to broaden the base.

I think the most important thing for the country is a tax on gasoline and other oil based products.

I used to have a job where I had to drive 45 miles each way. I moved when I got the chance so that I now drive less than 5 miles each eay. I didn't do it to save money. I did it to save time. If we raised the gas tax then people would figure out how to use less of it. If it hurts the poor then there are other ways to help them besides keeping the gas tax low which helps rich people even more.

I dunno, neil, there *may* be a tax rate low enough that most people won't bother trying to avoid it, but I'm skeptical. For a lot of people tax avoidance is a game, like bitching about taxes is just something people do.

If there was only one tax in the world and it was 20%, I have to think there would be tons of people trying to duck it. Like the inflection point in the Laffer curve, it's hypothetical but never been demonstrated in real life.

I think avoidance isn't rate-dependent, but cultural. In the midwest people generally pay up because they want to have their roads plowed and salted. They still bitch, though. In the deep South tax avoidance is a frame of mind, a cultural value. And they bitch about taxes too.

But even if there was a rate low enough that most people wouldn't bother trying to avoid it, they would be looking really hard for some kind of payouts. I think your job's safe even if our system goes the way you mentioned.

Needless to say, a carbon or gas tax will impact the poor most severely because they drive the oldest, least efficient (ie, crappiest) cars.

I dunno about the premise there: A 1960-something VW bug, if it is still functional at all, is a lot more fuel efficient than a Hummer.

A naively-imposed gas tax would impact the poor most severely because they have the least ability to change vehicle and lifestyle choices in response to the tax, because many of the changes involved have upfront costs that they would be unable to pay, thus they would be stuck with paying the tax based on their pre-tax situation, even though in the long term that might be more expensive than changing, because without access to substantial assets or credit to make the changes, they couldn't make the changes.

Of course, there are a number of ways of mitigating the worst of these effects, which are strenuously opposed by the same (rich) people who will cite the disparate impacts on the poor in opposing gas taxes. The most general is to simply to make the non-gas tax system more progressive in a revenue-neutral way such that the poor would not be negatively impacted by the tax, the middle class would be partially impacted, and only the rich would be fully impacted. This would, in effect, make the tax (combined with the general tax shift, and compared to the pre-implementation situation) a positive incentive program for the poor (though one they would in most situations be unable to take advantage of), a mixed bag for the
middle class (who would face carrots and sticks), and almost all stick for the rich who would be most free to adapt to it. You can combine with this (or implement without the general tax shift) targetted income-sensitive incentive or government-subsidized loan programs to provide those with less means the up-front resources to make the kind of changes that the long-term incentives created by the tax seek to promote, as well.

Weenie: That way Thersites will get dinged every time he signs his name!

But 'w' uses more pixels, and thus more energy, or something...

No fair picking on me in threads I'm not reading. Where's my damn lunch, anyway?

Altoid:

Believe me, I know hundreds of lawyers making 6 or 7 figures who wouldn't have a job if the personal tax rate or the corporate tax rate was lowered to 20%.

The problem is that we would need to figure out another way to raise the revenue.

We would also need to make sure that we funded unemployment for ME

"The first is for liberals to get better (and braver) about proposing tax hikes. I'm all ears for any bright ideas on this score."

Here's a start: Kevin, as California state income taxpayers, we both know of the long list of programs/charities to which taxpayers can allocate dollars, on the California state tax form. What about a list of "preferences" on the federal form, that taxpayers can use to indicate where they would like their tax dollars to go? (Such as transportation infrastructure, energy research, etc. Military spending would need to be divided up by project area.) I wouldn't suggest that the results of this list be anything more than advisory to Congress and the President, but it could be useful. The results of the people's choices would be tabulated and made public at some point after April 15 each year, and while the Congress might not be able to address those priorities before the September 30 budget deadline, over time, I think, it could make a difference.

For answer #1, all the liberals have to do is demonstrate one simple truth -- which is that, for many Americans, lower taxes does not mean less money is being paid out. Lower taxes means higher individual medical costs, higher insurances premiums, higher tuition, higher public transit fares, etc., etc. It would be very easy for any liberal with a brain and a spine to do this. Where do we find them?

Step 1: A carbon tax on oil, natural gas, and coal. Start small, ramp up eventually to a big number. At the $50/ton of carbon dioxide equivalent that we need to get to over the long run if we're serious about saving the planet, we are ultimately talking a carbon tax of $10/gallon.

Step 2: Skim off a little money for an aggressive, long-term efficiency and renewable energy program, serious public transportation, and money for short-term low-income energy bills.

Step 3: Give most of the money back, in the form of lower taxes or a flat-out check in the mail at tax time. In effect, you now have a large, revenue-neutral tax that leaves people no worse off then they were before - they can choose to pay too much for gas if they want to - but gives a powerful price signal about what fossil fuels are really costing us. In effect, we are stripping away the subsidy.

Step 4: Just to make it more interesting, add a gas tax that covers a public auto insurance pool. Bad drivers would pay an additional premium for being bad drivers. Good drivers would be paying on the basis of how much they drive their car, by far the biggest risk factor.

My hunch is that Americans are less bothered by "high" taxes then they are by a tax system that aeems incredibly complicated and unfair, full of loopholes for businesses and the rich.

It's ridiculous that I have one job in one state for 2007 yet it takes 12 hours and a computer to do my taxes.

I think if some Dem leaders proposed the "simple tax" -- like the flat tax but with two or three tax brackets, and ALL income treated the same (whether its capital gains or wages), and wipe out the AMT...then taxpayers could support it, plus maybe attract some Republican support as well. In an ideal world, we'd radically simplify business taxes as well.

Proponents would have to keep saying "simple tax"...if they lose control of the debate and it becomes about "the biggest tax raise in history" then the plan is dead.