Re: Neutral taxation?
--- Birgir Runolfsson [EMAIL PROTECTED] wrote: But that makes the player indifferent between playing for the team that values him at $1,000,000 and the one that values him at $ 100,001, and therfore there is no certainty that the resource (player) will be allocated to its most valued use. If the tax is $899,999, this implies that the player was already getting paid $1 million. The tax will not make the player leave. Another team will not offer $100,001 because the premise was that the next best opportunity was $100,000. Fred Foldvary = [EMAIL PROTECTED]
Re: neutral taxation
On Sat, 18 Jan 2003, Fred Foldvary wrote: 2) The government does not know the economic rent among the basketball teams, but it does know that the next best opportunity if he does not play basketball is $100,000. The government taxes the income above $100,000 at, say, 90 percent, providing an incentive for the player to accept the best offer, but still taking most of the economic rent. Ummm...wouldn't we rather quickly see teams stop offering wages above $100K and offering in-kind benefits instead? Think about airline price regulation. Why wouldn't we see the same thing here? The player only has to value the benefits at x10% of their costs in order to prefer benefits to salary increases. Seems likely to be quite wasteful. How much government oversight are we going to need to prevent people from moving to provision of nonpecuniary benefits [or to value, price and tax such benefits]? Eric
Re: Neutral taxation?
On Thursday, January 16, 2003 4:06 AM Grey Thomas [EMAIL PROTECTED] wrote: even more than direct/indirect, you need to specify what is neutral. I don't think the definition of neutral in this context would be all that controversial. It would be one that would not impact any person or group more than any other person or group. I.e., there would be no redistributive effects from the taxation. This is what I thought Fred meant when he used the term. This is the way Sechrest defines it (p95 of the work cited previousaly and below:) -- and he's basically following Rothbard's usage here. I don't think a poll tax is neutral. That said, some taxes might cause less of a redistribution than others. Still other taxes might be more beneficial in terms of expanding production. I'm against taxation, but I don't think all types of taxes have the exact same impact. A poll tax, for example, would fall more heavily on the poor and historical experience seems to show it was used -- in the US at least -- to keep certain people -- namely, Blacks -- from voting. Therefore, it was not economically neutral, since this was a way of denying certain things to those who could not afford the tax. (You might think of the poll tax as the price of government, but that would only be the case if government did not enforce its monopoly on government services.) BTW, Larry Sechrest's essay Rand, Anarchy, and Taxes actually appeared in the 1(1) [Fall 1999] issue of _The Journal of Ayn Rand Studies_. Sorry for any confusion over that. Cheers! Dan http://uweb.superlink.net/neptune/ The factors that determine whether a family is well-functioning often are independent of the form that family takes, and have more to do with relationships among family members, dedication of the primary caregiver(s), and support from extended kin. Those sorts of considerations, and not form alone, determine how functional families are. Moreover, the form of families is often strongly a product of broader social forces, such as economic, cultural, and technological change. Most, if not all, of those changes are not reversible (nor would reversing them likely be viewed as desirable), so the real challenge is to understand how these new family forms function and to find policies that facilitate that functioning (and avoid policies that retard it), rather than hoping to turn back the clock. Any family form that creates attachment, socializes well, transmits moral rules and social norms and does so in environment characterized by love and trust, will function well. -- Steven Horwitz, The Functions of the Family in the Great Society, http://it.stlawu.edu/shor/Papers/Functions.htm
Re: neutral taxation
Fred Foldvary wrote: If the economic rent is to be taxed, there are two cases: 1) The government knows that the basketball economic rent is $899,999, and that amount is taxed. The player plays for A in order to pay the tax. 2) The government does not know the economic rent among the basketball teams, but it does know that the next best opportunity if he does not play basketball is $100,000. The government taxes the income above $100,000 at, say, 90 percent, providing an incentive for the player to accept the best offer, but still taking most of the economic rent. The tax is not neutral, even at a 90% tax, since there is no certainty that the player will end up playing for the team that values his services the most. He will be indifferent between playing for any team valuing him at more than $20. How would the government have any idea about what is rent and what is opportunity cost?
Re: neutral taxation
--- Birgir Runolfsson [EMAIL PROTECTED] wrote: there is no certainty that the player will end up playing for the team that values his services the most. He will be indifferent between playing for any team valuing him at more than $20. Given a tax on economic rent of 90%, with income above $100,000 being economic rent, with a team that offers him $1 million, his net is 100,000+.1*900,000= $190,000. With a team that offers him $210,000, his net is 100,000 + .1*110,000 = 111,000. Why would he be indifferent between $190,000 and $111,000? Fred Foldvary = [EMAIL PROTECTED]
Re: neutral taxation
--- Eric Crampton [EMAIL PROTECTED] wrote: On Sat, 18 Jan 2003, Fred Foldvary wrote: 2) The government does not know the economic rent among the basketball teams, but it does know that the next best opportunity if he does not play basketball is $100,000. The government taxes the income above $100,000 at, say, 90 percent, providing an incentive for the player to accept the best offer, but still taking most of the economic rent. Ummm...wouldn't we rather quickly see teams stop offering wages above $100K and offering in-kind benefits instead? Not if the benefits are taxed the same as wages. The issue is whether there is a neutral tax, and I concocted an example of one. The example premise is that income above $100K is taxed at 90%, and in-kind benefits are income. This is an example for illustration, and bringing in other data changes the premise. Fred Foldvary = [EMAIL PROTECTED]
Re: Neutral taxation?
[Tax neutrality] would be one that would not impact any person or group more than any other person or group. I.e., there would be no redistributive effects from the taxation. Dan I don't think that type of neutrality is possible. Suppose there is a poll tax, where everyone pays the same amount, and the funds are used to provide a collective good. Since utility is subjective and differs among persons, the value of the good would differ among the persons. Thus there would be an implicit redistribution from those who don't highly value the good to those who do. Fred Foldvary = [EMAIL PROTECTED]
RE: Neutral taxation? with respect to what?
Fred, ( Susan) even more than direct/indirect, you need to specify what is neutral. You have not yet adequately done so. As I try to do this, I realize that neutral must apply to some other characteristic, like a car's neutral color, or a car in neutral (gear). So, a policy change can be revenue neutral, clearly meaning total revenue is the same before, and after, the policy change. Thus, increasing a land tax and decreasing other local taxes can be revenue neutral, (and I would support such a change) but insofar as it will encourage some behavior and discourage other (eg idle land will cost more), it is NOT incentive neutral. Reducing dividend taxation will encourage more companies to pay out dividends, and more capital investment (stock price increases) in those companies that do pay more out (often not tech companies). I must say I favor ALL tax reduction proposals that mean less total gov't revenue, despite relative favoring of some less evil taxes (gas tax) as compared to more evil (income tax). Tom Grey
Re: Neutral taxation? with respect to what?
Dear Tom, By neutral I actually thought you mean one that wouldn't prejudice people's economic behavior. Opponents of the income tax often accuse it of discouraging work, saving, and investment and encouraging consumption. I thus thought that a neutral tax by comparison would be one that didn't favor consumption over saving, or saving over consumption, or one sort of consumption/saving over another. By that definition I can't imagine any neutral tax. Do you regard gasoline taxes as less evil than income taxes because gas taxes tax consumption instead of saving, or becaue gas taxes in theory at least attempt to match the tax to a funded benefit, in this case highways. (I say, in theory because in reality the federal gas tax trust fund has no more substance the social security trust fund; both are accounting fictions.) I've never been persuaded that government should intervene in individuals' free-market choices between consumption and saving, and while it may do so through the income tax, I don't believe that government should turn around and do the same thing in the opposite direction by replacing the income tax with a national sales tax (not that I believe, as Susan pointed out, that such a wholesale replacement has any chance of success). Some years ago I discovered that one major think-tank had come to the same conclusion, and thus proposed a federal tax system funded in part by a 15% flat tax and in part by a 15% national sales tax. While I find the attempt to avoid intervening in individuals' choices between saving and consumption, I also fear that both taxes would ultimately grow in complexity and that Congress would raise the rates under both, and that furthermore a national sales tax might easily devolve into what seems to me the most pernicious of all taxes: the value-added tax. While I enjoy discussing what tax system may or may not be less undesireable in theory, I see little evidence that there's any chance for even substantial change in the current system at the moment, much less a fundamental restructing. It seems on the contrary that the US and perhaps even most of the world seem to continue to drift in an increasingly statist direction. Does anyone seen evidence to the contrary? DBL In a message dated 1/17/03 4:58:20 AM, [EMAIL PROTECTED] writes: Fred, ( Susan) even more than direct/indirect, you need to specify what is neutral. You have not yet adequately done so. As I try to do this, I realize that neutral must apply to some other characteristic, like a car's neutral color, or a car in neutral (gear). So, a policy change can be revenue neutral, clearly meaning total revenue is the same before, and after, the policy change. Thus, increasing a land tax and decreasing other local taxes can be revenue neutral, (and I would support such a change) but insofar as it will encourage some behavior and discourage other (eg idle land will cost more), it is NOT incentive neutral. Reducing dividend taxation will encourage more companies to pay out dividends, and more capital investment (stock price increases) in those companies that do pay more out (often not tech companies). I must say I favor ALL tax reduction proposals that mean less total gov't revenue, despite relative favoring of some less evil taxes (gas tax) as compared to more evil (income tax). Tom Grey
Re: National sales tax (was: Re: Neutral taxation?)
Susan Hogarth: I could really get behind a national sales tax if I really thought the feds would have the balls to try to extract 20-30% at the point of sale - especially in a 'progressive' fashion. Would poor people be issued tax-exemption cards? Here's my prediction of what will happen: a 20-30 percent sales tax will be implementen - but because of massive fraud (making headlines, etc.), the sales tax will be changed to a VAT (valua dded tax) like we have in Europe. When Britain went from sales tax to VAT, the number of public administrators 6-doubled - and the number of affected private entities 19-doubled jacob braestrup Danish Taxpayers Association
Re: Neutral taxation? with respect to what?
--- [EMAIL PROTECTED] wrote: By neutral I actually thought you mean one that wouldn't prejudice people's economic behavior. By that definition I can't imagine any neutral tax. Why can you not imagine that a tax on economic rent is neutral? Fred Foldvary = [EMAIL PROTECTED]
Re: Neutral taxation?
--- Susan Hogarth [EMAIL PROTECTED] wrote: A tax on economic rent is neutral, since by definition, economic rent is income not necessary in order to put a factor to its most productive use. I don't understand this. Could you expand it a bit, please? Susan Hogarth Suppose a basketball star gets $1 million per year. If he did not play basketball, the next best opportunity would be to be a model earning $100,000 per year. So he would play basketball for $100,001. The rest of his income comes from his personal monopoly, and is not needed to get him to play basketball. This is economic rent, a surplus. The economic rent could be taxed, and he would still play basketball. Most of the rent of land is economic rent. By land I mean natural resources, including the space around the earth. So buildings and improvements are excluded from land, including the preparation of the soil or surface. Since land is here by nature and cannot be created nor moved, the supply is fixed. Unlike labor, land does not seek leisure. So to put a plot of land to its most productive use, the title holder need only retain a small fraction of the rent (say 10 to 20 percent), and the rest is economic rent. That rent can be taxed without any reduction in the amount of land or any diminution of its productivity. If the landlord had already been charging the maximum rent the market can bear, the tax on rent cannot be passed on to tenants, so it is neutral with respect to economic action. Fred Foldvary = [EMAIL PROTECTED]
Re: National sales tax (was: Re: Neutral taxation?)
--- Susan Hogarth [EMAIL PROTECTED] wrote: Has there *ever* been an instance where one type of tax has entirely replaced another, or even replaced in some 'revenue-neutral' fashion for even a few years, the tax it is proposed to 'replace'? Yes, prior to the Civil War, the US government several times enacted a direct tax on real estate and slaves. That helped to finance the War of 1812. As the Constitution required, it was paid in proportion to population (enumeration). Congress attempted such a direct tax in 1861, but now the western states objected. Their per-capita wealth was much lower than that of the richer northeastern states. So Lincoln pushed through the first income tax. The direct tax on real estate was never again implemented. With the passage of the 16th Amendment, Congress could now enact a tax on land rent without regard to population. Indeed, the Articles of Confederation authorized taxes from the states based on their land value. But now, this physiocratic concept has been forgotten and is no longer understood. It is still sound economics. Milton Friedman has called the tax on land value or rent the least worst of all taxes. Adam Smith said so too. Fred Foldvary = [EMAIL PROTECTED]
Re: Neutral taxation? with respect to what?
Tom Grey wrote: Thus, increasing a land tax and decreasing other local taxes can be revenue neutral, (and I would support such a change) but insofar as it will encourage some behavior and discourage other (eg idle land will cost more), it is NOT incentive neutral. Reducing dividend taxation will encourage more companies to pay out dividends, and more capital investment (stock price increases) in those companies that do pay more out (often not tech companies). I think Fred is concerned with incentive-neutrality as compared with no tax at all, rather than with an existing tax regime. -- Anton Sherwood, http://www.ogre.nu/
Re: Neutral taxation?
But the economic question is not whether the basketball star should play basketball or be a model. The economic question is for which team should he play; the one who values his services at $100,001 or another that values his services at $1,000,000. The same applies to land (and other resources whether natural or not). The economic question is not whether to put the land to use or not. The economic question is whether you put your acre plot in New York City to use for farming or an apartment building (and then what sort of building; etc.). Economic rent is therefore just like any other rent, it directs (provides incentives ) resources to their most valued use. - Original Message - From: Fred Foldvary [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Friday, January 17, 2003 2:04 PM Subject: Re: Neutral taxation? --- Susan Hogarth [EMAIL PROTECTED] wrote: A tax on economic rent is neutral, since by definition, economic rent is income not necessary in order to put a factor to its most productive use. I don't understand this. Could you expand it a bit, please? Susan Hogarth Suppose a basketball star gets $1 million per year. If he did not play basketball, the next best opportunity would be to be a model earning $100,000 per year. So he would play basketball for $100,001. The rest of his income comes from his personal monopoly, and is not needed to get him to play basketball. This is economic rent, a surplus. The economic rent could be taxed, and he would still play basketball. Most of the rent of land is economic rent. By land I mean natural resources, including the space around the earth. So buildings and improvements are excluded from land, including the preparation of the soil or surface. Since land is here by nature and cannot be created nor moved, the supply is fixed. Unlike labor, land does not seek leisure. So to put a plot of land to its most productive use, the title holder need only retain a small fraction of the rent (say 10 to 20 percent), and the rest is economic rent. That rent can be taxed without any reduction in the amount of land or any diminution of its productivity. If the landlord had already been charging the maximum rent the market can bear, the tax on rent cannot be passed on to tenants, so it is neutral with respect to economic action. Fred Foldvary = [EMAIL PROTECTED]
Re: Neutral taxation?
From: Fred Foldvary [EMAIL PROTECTED] The question under debate is whether there is neutral taxation. If the star plays for a team that pays him $1 million, and the government taxes $800,000 of that, he will continue to play, so the tax did not alter his incentives; the tax is neutral. You must mean that the government taxes him at $899,999 (if you are to tax all the rent away). But that makes the player indifferent between playing for the team that values him at $1,000,000 and the one that values him at $ 100,001, and therfore there is no certainty that the resource (player) will be allocated to its most valued use.
RE: Neutral taxation?/was Re: questions about dividend tax cut
Dan, even more than direct/indirect, you need to specify what is neutral. Given democracy, one (adult) person, one vote, a strong case can be made for a neutral poll tax. Of course it is not progressive like most income taxes. Flat rate taxes, sales/VAT taxes, even land taxes, affect some more than others. My own preferences are more towards a flat(er) tax, with a large (poverty level) deduction, and rates tending down (to zero?); a land tax, split between local, state, and federal (1/3 each? 50-25-25?); and ever increasing taxes on pollution. I am constantly annoyed at the greens wanting huge regulation but unwilling to support higher pollution taxes. Um, to get rid of the last 5% of income taxes, I'd even support deficit spending printing money (inflation, another fairly neutral tax, of about 2-3% per year). But of the course the MAIN problem is on the benfit side -- so many voters want, claim, demand, and only-vote-for those politicos who offer their favorite benefits. The demand for benefits drives the demand for tax revenue. And the coming (2020) Social Security baby boomer elephant-sized funding gap is gonna be a HUGE increase in benefit demand. Europe is even more vulnerable than the US or the UK. Sigh. What is to be done? (someone said that... I know, what's is name the commie!) Tom Grey But this assumes that taxes can be neutral. I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? Cheers! Dan http://uweb.superlink.net/neptune/
RE: Neutral taxation?/was Re: questions about dividend tax cut
To Tom Grey (and others) 2 points: 1: why not retain land tax as a local tax, as this would ensure tax- payers the possibility of voting with ther feet, end thus ensure some degree of fiscal competition between neigbouring counties / municipalities? 2: I believe Austrain Economic Theory does noit regard inflation as a neutral tax, as one of it's main beliefs is that the earlier you get your hands on new money, the more you benefit - and vice-versa. I don't know whether this holds true for constant (that is: expected) inflation as you are descibing as well - anyone? Jacob Braestrup Danish Taxpayers Association Dan, even more than direct/indirect, you need to specify what is neutral. Given democracy, one (adult) person, one vote, a strong case can be made for a neutral poll tax. Of course it is not progressive like most income taxes. Flat rate taxes, sales/VAT taxes, even land taxes, affect some more than others. My own preferences are more towards a flat(er) tax, with a large (poverty level) deduction, and rates tending down (to zero?); a land tax, split between local, state, and federal (1/3 each? 50-25-25?); and ever increasing taxes on pollution. I am constantly annoyed at the greens wanting huge regulation but unwilling to support higher pollution taxes. Um, to get rid of the last 5% of income taxes, I'd even support deficit spending printing money (inflation, another fairly neutral tax, of about 2-3% per year). But of the course the MAIN problem is on the benfit side -- so many voters want, claim, demand, and only-vote-for those politicos who offer their favorite benefits. The demand for benefits drives the demand for tax revenue. And the coming (2020) Social Security baby boomer elephant-sized funding gap is gonna be a HUGE increase in benefit demand. Europe is even more vulnerable than the US or the UK. Sigh. What is to be done? (someone said that... I know, what's is name the commie!) Tom Grey But this assumes that taxes can be neutral. I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? Cheers! Dan http://uweb.superlink.net/neptune/ -- NeoMail - Webmail
RE: Neutral taxation?/was Re: questions about dividend tax cut
I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? I suppose there *could* be a neutral tax, but what would be the point? It would be something like taking five dollars from everyone and giving them back five dollars worth of 'services'. Hmm, I guess that's truly not possible, though. Yes, I agree :) Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED]
RE: Neutral taxation?
I suppose there *could* be a neutral tax, but what would be the point? It would be something like taking five dollars from everyone and giving them back five dollars worth of 'services'. Susan Hogarth The whole point is to provide collective services. If you join a club and pay dues to get some services, do you then complain that you paid money and got services? Fred Foldvary = [EMAIL PROTECTED]
RE: Neutral taxation
--- Susan Hogarth [EMAIL PROTECTED] wrote: I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? I suppose there *could* be a neutral tax, but what would be the point? It would be something like taking five dollars from everyone and giving them back five dollars worth of 'services'. Hmm, I guess that's truly not possible, though. Yes, I agree :) Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED] = [EMAIL PROTECTED]
RE: Neutral taxation?
--- Grey Thomas [EMAIL PROTECTED] wrote: My own preferences are more towards a flat(er) tax, with a large (poverty level) deduction, and rates tending down (to zero?); a land tax, split between local, state, and federal (1/3 each? 50-25-25?); and ever increasing taxes on pollution. Given a tax on land value and on pollution, plus user fees, why would we also need a flat tax on income? It seems to me the former would be sufficient. Fred Foldvary = [EMAIL PROTECTED]
Re: Neutral taxation?
--- [EMAIL PROTECTED] wrote: I can't imagine any tax that would be neutral A tax on economic rent is neutral, since by definition, economic rent is income not necessary in order to put a factor to its most productive use. Fred Foldvary = [EMAIL PROTECTED]
RE: Neutral taxation?
Given democracy, one (adult) person, one vote, a strong case can be made for a neutral poll tax. Tom Grey The poll tax is what got Maggie Thatcher thrown out of office in the UK. The problem is that different people benefit differently from government services, and so the poll tax is not well correlated with benefits. The poll tax also amounts to forced labor. The poll tax is how the colonial governments in Africa got the natives to work in the fields. So the poll tax is not really neutral: 1) it is not related to benefits, hence it subsidizes some and penalizes others. 2) it forces workers to work extra to pay the tax in order to get some amount of net income. Fred Foldvary = [EMAIL PROTECTED]
RE: Neutral taxation?
SH: I suppose there *could* be a neutral tax, but what would be the point? It would be something like taking five dollars from everyone and giving them back five dollars worth of 'services'. FF: The whole point is to provide collective services. If you join a club and pay dues to get some services, do you then complain that you paid money and got services? Of course not. How does that apply to governments and taxation, though? Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED]
Re: Neutral taxation?
I have to agree with Susan. Health clubs are voluntary organizations which, unlike governments, lack the ability to legitimately threaten or employ force to get me to join. I have seen, furthermore, members of my old health club in Iowa complain bitterly at the provision or increase of services they didn't want, or the cutting of or failure to provide or increase services they didn't want. I know that I didn't want them to raise my rate in order to refurbish the men's locker room, which seemed just fine to me as it was. Some people complained bitterly about the club renting out the pool, tennis courts or other areas for parties and thus cutting down the hours during which general members could use the pool or tennis courts, etc. In a message dated 1/16/03 3:30:34 PM, [EMAIL PROTECTED] writes: SH: I suppose there *could* be a neutral tax, but what would be the point? It would be something like taking five dollars from everyone and giving them back five dollars worth of 'services'. FF: The whole point is to provide collective services. If you join a club and pay dues to get some services, do you then complain that you paid money and got services? SH: Of course not. How does that apply to governments and taxation, though? Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED]
Re: Neutral taxation?
In a message dated 1/16/03 3:31:01 PM, [EMAIL PROTECTED] writes: Given democracy, one (adult) person, one vote, a strong case can be made for a neutral poll tax. Tom Grey Fred writes: The poll tax is what got Maggie Thatcher thrown out of office in the UK. The problem is that different people benefit differently from government services, and so the poll tax is not well correlated with benefits. The poll tax also amounts to forced labor. The poll tax is how the colonial governments in Africa got the natives to work in the fields. So the poll tax is not really neutral: 1) it is not related to benefits, hence it subsidizes some and penalizes others. 2) it forces workers to work extra to pay the tax in order to get some amount of net income. Fred Foldvary It seems to me that we have a problem with the meaning of neutrality here. Tom seems to see it as meaning that we each pay the same amount regardless of circumstances, while Fred seems to see it as meaning that people in different circumstances should not pay the same amount. If I've come close with the apparent definitions here, it seems to me that Fred's meaning contains a value taken from Progressive thinking, which I find rather surprising. In colonial and early republican America, some colonies/states imposed poll taxes, and some made paying the poll tax a requirement for voting. I'm not sure what, if any, other penalties the states had for failure to pay the poll tax. Even though I've been relatively poor (by American standards) most of my adult life and yet have always voted, I find some appeal in the notion of having to pay some small poll tax in order to vote. If every adult had to pay a quarterly federal poll tax of merely $25, (an assuming for the sake of argument that most of them paid), the federal government would raise roughly $15 billion dollars. While that's only a percent of annual federal spending, it's still a sizable chunk of change (which I'd be happy to take if everybody else thinks it's too small). I couldn't replace the income tax of course, but it could be the keystone to a different, lighter federal tax system. Frankly I don't want to see the federal government take a third of the nation's income by any method. I do like the idea, however, that to vote for who runs the legal system you have to contribute at least something to the running of the system. I'm not sure that such a small tax would actually discourage net beneficiaries of government benefits from voting themselves more of other peoples' incomes, but it might discourage some of the core supports of socialist programs not to bother voting at all. It would also allow the libertarians (and independents) who don't want to vote to op out of paying for at least a share of the system they don't support (assuming no other penalty for non-payment besides not being able to vote). As I understand it, Thatcher allowed the local governments in the UK to impose the poll tax in the ways that they saw fit, and with Labour stronger in many of the local governments, they ensured that the poll tax got imposed in the nastiest possible way in order to discredit Thatcher. I do think, however, that the notion of poll taxes at least used to have a powerful negative connotation in American politics so that it might easily be a loser politically here, and of course if a Republican proposed it no doubt the Democrats and their allies in the news media would castigate it as another attempt to tax and disenfranchise the poor, etc. I think though that decades of liberal-dominated public education has so vitiated the historical education of most American students that by now almost nobody under the age of 40 even knows what a poll tax is, much less that, for instance, Southern racists once used it to disenfranchise blacks, so it might not receive as chilly a reception as it would have 20 or 25 years ago. Still, as an intellectual participating in a discussion with other intellectual I have some expectation that someone will bash me for saying I find some merit the idea of poll taxes; as a politician running for office I'd avoid it like the plague. :) David B. Levenstam
Re: Neutral taxation?/was Re: questions about dividend tax cut
Dear Tom, I hope I got your definition of neutral right in the last post. As I indicated, I'd support a poll tax (so long as I'm an armchair intellectual and not running for office, which with my abrasive personality would be a joke anyway). I also support a flatter income tax. In fact I'd like to see something along the lines of the Forbes flat tax with a single rate above the exemption. I've got a master's degree in taxation and used to work as a tax practioner, and so saw first-hand some of the heavy cost of complying with the complex income tax. A simpler system would reduce the compliance costs. I don't really want to replace all the tax revenue generated by the current income tax; personally I'd like to see the federal government spend a fifth to a fourth of what it does now. I agree that much of the problem comes on the benefit side, with almost everyone (except Democratic politicians in the federal government--I wonder why they lost the Senate?) supporting some sort of tax cuts but nobody wanting their own benefits cut. I'd love to hear some good (or even some mediocre) suggestions on how to overcome the problem. Under Gramm-Rudman, which lasted basically covered Reagan's second term, discretionary federal non-defense spending grew at its slowest rate since the 1920s, so it may be that the threat of automatic across-the-board cuts have the most success by forcing competing interests to fight with each other rather than cooperate to raise federal spending in the aggregate. It didn't last very long and only happened under the threat of huge deficits and indeed broke down when the automatic cuts got large, so I'm not actually too optimistic about the success of such things. DBL In a message dated 1/16/03 5:20:18 AM, [EMAIL PROTECTED] writes: Dan, even more than direct/indirect, you need to specify what is neutral. Given democracy, one (adult) person, one vote, a strong case can be made for a neutral poll tax. Of course it is not progressive like most income taxes. Flat rate taxes, sales/VAT taxes, even land taxes, affect some more than others. My own preferences are more towards a flat(er) tax, with a large (poverty level) deduction, and rates tending down (to zero?); a land tax, split between local, state, and federal (1/3 each? 50-25-25?); and ever increasing taxes on pollution. I am constantly annoyed at the greens wanting huge regulation but unwilling to support higher pollution taxes. Um, to get rid of the last 5% of income taxes, I'd even support deficit spending printing money (inflation, another fairly neutral tax, of about 2-3% per year). But of the course the MAIN problem is on the benfit side -- so many voters want, claim, demand, and only-vote-for those politicos who offer their favorite benefits. The demand for benefits drives the demand for tax revenue. And the coming (2020) Social Security baby boomer elephant-sized funding gap is gonna be a HUGE increase in benefit demand. Europe is even more vulnerable than the US or the UK. Sigh. What is to be done? (someone said that... I know, what's is name the commie!) Tom Grey
Re: Neutral taxation?/was Re: questions about dividend tax cut
In a message dated 1/16/03 11:57:03 AM, [EMAIL PROTECTED] writes: AdmrlLocke wrote: The farmer felt no compunction at all about complaining that while under the income tax system he pays no tax, under a sales tax he'd pay a hefty tax. He pays nothing and he thinks he's entitled to pay nothing while everyone else pays something.) This kind of rhetoric never seizes to amaze me. Why do people get away with it? I'm tempted to say that it's because America is dominated by WASP culture, and WASP culture promotes polite and confict-aversion over confrontational truth. I don't really think, however, that that fully explains why such people don't get confronted more, although it might explain much of that particular story, since I was sitting in a WASPy country club in small-town Iowa. :) I think that in America certain groups of people have gotten benefits because, deservedly so or not, many other Americans believed that the beneficiaries deserved the benefits. Much of the Great Society--occasional liberal protestations to the contrary notwithstanding--appealed to urban/suburban Northern white middle-income guilt over the treatment of blacks in America, particularly (but not exclusively) during slavery. These voters believed (rightfully so) that blacks had been oppressed (slavery, Jim Crow, etc.) and that therefore someone should pay them, or their descendants, something (a rather tenuous conclusion, I'll admit, and the one behind the 'reparations' movement these days). These voters also saw having the government make these payments as an easy, cost-free way (a decidedly false assumption) to expiate their guilt for evils perpetrated by other people. Until the Great Society's heavy costs (inflation, welfare-dependence, destruction of black neighborhoods and families) started to appear clearly in the 1970s, very few of these voters felt any desire to criticize the programs, or the recipients who developed an entitlement mentality, or feared to express such criticizms for fear of being branded racist, as the Democrats routinely do and have done since the 1960s. In the farmer's case, there's a centuries'-long American love-affair with rurality and the famer. We start with the early colonial stories of America as a great garden, the Jeffersonian ideal of the sturdy yeoman farming his land, the American notion of the farmer as the salt of the earth, the non-economic notion that the farmer feeds us (as though out of the goodness of his heart for us poor, starving urban dwellers). Indeed a hostility toward the sick, polluted, direct city and preference for the clean, growing countryside goes back to pre-colonial English (and Continental) roots. Farmers in America tried for decades starting in the late 19th century to get various types of government benefits, but only when their relative numbers had declined to less than half the population could they actually manage to start squeezing out some small benefits in the 1920s. Now that less than half of a percent of the US population engages in full-time farming, taxpayers can afford to exempt farmers entirely from federal income taxation, pay then individually tens and sometimes hundreds of thousands of dollars, and yet barely notice. For decades it hardly seemed worth the effort to debunk the noble farming myth in order to cut agricultural price subsidies, although in the mid-1990s the Democrats' allies in the media made cutting ag subsidies the key test of whether Republians were really serious about cutting entitlements. (Note: Republicans did phase out the notorious ag price supports [though not all federal ag subsidies] but got not credit from the news media, whose members conveniently forgot they'd set up ag subsidies as the key test). Civil War veterans, however, stand out as the first group to create a sense among the voters that they deserved to feed at the federal trough, and for the next half-century or so got increasingly large and wide benefits. Eventually Congress passed what some have called a Sneeze Clause or something like that: if a Civil War veteran ever sneezed in your direction you got veteran benefits. I understand that veterans today still get substantial, wide-ranging federal benefits, thought I'm not at all sure that having a separate, completely-socialized medical system doesn't hurt them much more than it helps. Here in Denmark, we often hear similar rhetoric on welfare benefits. If someone in the media is advocating a reduction (or more likely, advocating a lower increase) in welfare benefits, the interviewer will gladly turn to someone, who will say: “I actually receive welfare benefits, and I think they are too low”. That’s it – end of discussion!! The general feeling is: “Well, this guy actually receives benefits, so he’s gotta be the expert, right?” – “on the other hand, the idiot who proposed the cut (lower increase) doesn’t receive
Re: Neutral taxation?
--- [EMAIL PROTECTED] wrote: A tax on economic rent is neutral, since by definition, economic rent is income not necessary in order to put a factor to its most productive use. Fred Foldvary I'm not sure if I'm following this, but it sounds like you're saying that it's okay to tax non-productive income because that's bad. I'm surprised that it sounds like this, because I see nothing in my statement that implies it. From what do you infer a bad? That sounds very much again like a Progressive notion of taxation, Do you mean progressive as in the tax rate increasing with income? The rationale for taxing rent has nothing to do with this, and the tax rate would be flat. Incidentally, you talked earlier about taxing land value rather than rent Taxing land rent is the same as taxing land value. The price or value of land is based on the expected future rent. The simplified formula is: p = r / i, where p is the price of land, r the annual unchanging rent, and i the real interest rate. Given a tax rate t based on p, the equation is p = r / (i+t). The fraction f of rent taxed is thus f = t/(i+t) So for example if i=.05 and t=.20, the tax rate is 20% of the price of land, and the percent of rent taxed = .20/.25 or 80%. which might, as sometimes happens with existing real estate taxes, force the owner to sell his or her land just to pay the tax. That seems like one of the greatest wrongs of all. If that happens, the title holder is underusing his land. Otherwise, it would fetch a market rental higher than the tax on the rent. If the user holds idle land, then it is socially efficient for him to transfer the site to someone who puts it to a more optimal use. Fred Foldvary = [EMAIL PROTECTED]
Re: Neutral taxation?
I find some appeal in the notion of having to pay some small poll tax in order to vote. David B. Levenstam If there is no penalty in not paying the poll tax, and it is required for voting, then it is not really a poll tax but a tax on voting. Since the probability of my vote being decisive in large elections is epsilon, I would be very happy to have a voting tax and avoid voting. I just wonder how many people would pay the price of voting. Fred Foldvary = [EMAIL PROTECTED]
RE: Neutral taxation?
SH: I suppose there *could* be a neutral tax, but what would be the point? It would be something like taking five dollars from everyone and giving them back five dollars worth of 'services'. FF: The whole point is to provide collective services. If you join a club and pay dues to get some services, do you then complain that you paid money and got services? SH: Of course not. How does that apply to governments and taxation, though? FF: You asked what is the point in collecting taxes and providing services. SH: Actually, no. I asked what the point was in collecting an amount of money whose only purpose was to provide 'services' equal to the amount of money collected. And then I reflected that a government never could do such a thing, anyway (that was the part you snipped out in your reply). A taxpayer could *never* get his five dollars' worth of services for his five dollars taxation - if only for the reason that he has to pay the overhead cost of having the money extracted from him, costs he would not incur when obtaining those services through a business. FF: For most services, voluntary action can do the job fine. But many folks would not want to have private armies around, so the point in having government collect taxes and providing defense is to prevent private parties from doing so. SH: I'm not sure I understand this paragraph. Are you saying that we have taxes to give people 'services' they don't want? Or to keep people from obtaining services they *may*, in fact, want? FF: But the relevant issue was neutral taxation, not the desirability of government per se. The tax issue needs to be addressed GIVEN that government exists and takes revenue. SH: My apologies for straying off with the 'what would be the point?' comment. I was thinking out-loud a bit and following the thought to the logical conclusion that in fact there *can* be no such thing as a neutral tax, unless of course the government could have perfect knowledge of what people wanted and could provide it - which is clearly impossible. Is my thinking off on that? I was simply agreeing with a previous statement that a truly neutral tax was an impossibility. It seems reasonable to me to make such a statement. Isn't the idea that there could be such a thing as a neutral tax simply a belief that central planning *can*, in fact, provide a better value on 'services' than the marketplace? But perhaps I don't understand the term 'neutral taxation'. I took it to mean a tax which would - in the end - produce no net loss (or gain, I suppose) for the entity being taxed. Is there some more technical sense of the term which I don't understand? Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED]
Re: Neutral taxation?
A tax on economic rent is neutral, since by definition, economic rent is income not necessary in order to put a factor to its most productive use. I don't understand this. Could you expand it a bit, please? Susan Hogarth Triangle Beagle Rescue of NC www.tribeagles.org [EMAIL PROTECTED]
Re: National sales tax (was: Re: Neutral taxation?)
In a message dated 1/16/03 8:47:15 PM, [EMAIL PROTECTED] writes: This brings to mind an historical point which has been tugging at me - perhaps someone here will know the answer offhand. Has there *ever* been an instance where one type of tax has entirely replaced another, or even replaced in some 'revenue-neutral' fashion for even a few years, the tax it is proposed to 'replace'? Well I won't say never, but I know of no such case in American history. Typically Congress passes some new tax or taxes during a war, then sometimes the new taxes persisted after the orginal justification for them had passed. During the Civil War Congress raised tarrifs drastically, and imposed an income tax and an inheritance tax. After the war it let the income and inheritance taxes lapse, but kept the higher tariffs. The new tax regime was weighted much more heavily toward tariffs than the previous system, which relied proportionately more on internal excises, but Congress had used both types to a fair degree before, and tariffs did not replace excises. Likewise during World War I the income tax of 1913, which had raised little revenue at its inception, replaced tariffs as the single largest source of federal revenue, but it didn't replace tariffs, and indeed, during the 1920s shrunk back below 50% of federal revenue. While the income tax burst onto the scene rather suddenly as a major source of revenue (as it had during the Civil War) it just didn't replace another source of revenue entirely. Even today the federal government still collects revenue from tariffs (and excises). So Susan raises an excellent historical point I hadn't really considered in discussing alternatives to the income tax: there's never been a sudden wholesale replacement of one major source of federal revenue for another. I've always thought it was an unlikely prospect anyway, and now I'm clearer as to why. DBL
Re: Neutral taxation?/was Re: questions about dividend tax cut
Dear Dan, I actually do agree, which is part of why when my conservative friends would support a national sales tax instead of an income tax as though a national sales tax were a panacea I'd just shake my head and tell them, there's no such thing as an unburdensome tax. There's no unburdensome way for the federal government to confiscate a third of national income. Some taxes bear more heavily on some people than others, so shifting between them may change how much of the burden a particular individual shares. People naturally tend (and I do say tend) to support moving to a sytem that shifts some of the burden they bear to somebody else, or on keeping the status quo if the current system rests relatively little burden on themselves. (As a case in point, a farmer showed up to listent to Indiana Senator Dick Lugar, campaigning for president in Iowa, speak about replacing the income tax with a sales tax. The farmer felt no compunction at all about complaining that while under the income tax system he pays no tax, under a sales tax he'd pay a hefty tax. He pays nothing and he thinks he's entitled to pay nothing while everyone else pays something.) I can't imagine any tax that would be neutral, but some might be less injurious to economic growth than others. I'm not persuaded, however, that taxing consumption more heavily than income will discourage economic growth any less than taxing income more heavily than consumption, since the ultimate goal of producing income is to consume it anyway. In a message dated 1/15/03 10:51:58 PM, [EMAIL PROTECTED] writes: On Wednesday, January 15, 2003 7:11 PM Fred Foldvary [EMAIL PROTECTED] wrote: To achieve neutrality, unrealized gains should be taxed annually, and then we can forget about capital gains. But this assumes that taxes can be neutral. I would tend to agree with Larry Sechrest here -- viz., there are no neutral taxes. (Sechrest's position is laid out in his Rand, Anarchy, and Taxes in _The Journal of Ayn Rand Studies_ 1(2).) Do any of you agree? Cheers! Dan
