Honeywell CEO: Debt Biggest Drag on US Jobs
If CEO, David M. Cote, of Honeywell—a $38 billion Fortune 100 company— really thinks that the economic problems are due to government debt and the failure of the confidence fairy to appear, he could do the patriotic thing and give back the 15% of his company’s revenue that comes from the federal government.
And the journalist could share this fact with viewers.
Commentary reworked from the original post by Atrios on Eschatonblog.
A Tax on Christmas Trees?
The Obama administration has imposed a 15-cent tax on Christmas trees in order to pay for a new board tasked with promoting the Christmas tree industry.
In classic media reporting bias, Fox released this non-news article in faux outrage. The author trips over himself trying to position this as a slam on the Obama administration.
Nonetheless, the article has intermingled with tid-bits of facts a heaping dose of subterfuge. The bottom line is this, economically, the tax incidence is likely to be shared between suppliers and consumers. I don’t presume Christmas trees to be particularly inelastic, so there may not be a lot of leeway anyway.
Of course, Fox and its Conservative ilk, go on at length to marginalise government involvement in private affairs, and so when a private industry group effectively requests assistance and government agrees (and wants to do the sensible thing, which is to ensure the programme costs are covered), we hear complaints about government meddling.
Moreover, whether government assessed the fee or not, the industry would still have to pay for the campaign, in which case the costs still need to be covered.
Finally as with any advertising or PR campaign, the goal is to increase demand in order to diminish the marginal costs of operation. So, sorry, Judson Burger, you are the Grinch here.
via Merry Christmas? Agriculture Department Imposes Christmas Tree Tax | Fox News.
Americans Favour Taxing Rich
Americans generally favor raising taxes on higher-income Americans and eliminating tax deductions for some corporations as ways of paying for President Obama’s proposed jobs plan.
via Americans Favor Jobs Plan Proposals, Including Taxing Rich.
Recession Yields a Lost Generation of Workers
In record-setting numbers, young adults struggling to find work are shunning long-distance moves to live with Mom and Dad, delaying marriage and buying fewer homes, often raising kids out of wedlock. They suffer from the highest unemployment since World War II and risk living in poverty more than others — nearly 1 in 5.
via Recession yields a lost generation of workers – Business – Stocks & economy – msnbc.com.
Why Middle-Class People Fear Tax Increases on the Rich
“If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers,” said Bush in the Roosevelt Room on December 19, 2008.
Inside the Trillion-Dollar Underground Economy Keeping Many Americans Barely Afloat in Desperate Times
The Young Womens Empowerment Project [PDF] describes the “street economy” as “… any way that girls make cash money without paying taxes or having to show identification. Sometimes this means the sex trade. But other times it means braiding hair, babysitting, selling CDs/DVDs, drugs or other skills like sewing and laundry.”
6 Dumb Arguments Against Taxing the Rich, Explained
On Saturday, the Obama administration unveiled the “Buffett Rule,” a proposed tax on millionaires and billionaires named after celebrity investor Warren Buffett, who has long argued that the federal government should demand more of the wealthy. The millionaires tax is certain to become a major point of contention in the 2012 presidential campaign, and Republicans have wasted no time in heaping it with calumnies. Here are the six most popular conservative arguments against a progressive tax code, and why they’re wrong:
via 6 Dumb Arguments Against Taxing the Rich, Explained | Mother Jones.
The President Surrenders on Debt Ceiling
Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.
The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.
Response to Sustainable Taxation
This post is a response to Alex Zorach’s original post on sustainable taxation. He gives additional perspective on other pages of his site. In his post, he takes the position that sustainability should be a key component in a well-considered tax policy. Follow the links above to read his position, and then read this response. My response is written to Alex, so where I use the pronoun you, I am referring to him.
It is generally accepted that a tax system needs to possess the following attributes, which in summary are equitability, adequacy, simplicity, exportability, and neutrality.
A tax system needs to be equitable, by which we mean fair. Fair is a loaded term, and subject to personal bias based on one’s particular worldview. That said, there are two ways to look at equity: vertically and horizontally. By vertical equity, I mean from top to bottom—up and down the income and wealth scales, from rich to poor. By horizontal equity, I mean to ask, do taxpayers in a given strata under similar conditions have a similar burden.
Vertical equity is addressed by how progressive or regressive the employed tax system is. The system may be progressive, regressive, or proportional. These terms are in common use, so I won’t define them here.
Horizontal equity is assessed, say, by looking at two neighbours in the same demographic group, earning similar income, with similar wealth accumulation and measuring their respective tax burdens. One would expect them to be comparable. I might also compare across some other class such as wage-earners versus investors or natural persons versus corporations to ensure there is no built-in systematic bias toward one group
A tax system needs to be adequate to meet the needs it was designed for. If I need to fully fund a new infrastructure project that costs $100,000,000, then the tax base needs to support this amount. Since federal taxers need to support on-going programmes that might ebb and flow with business cycles, a good system needs to adjust accordingly.
Simplicity speaks for itself. A simple taxation scheme should have the added benefit of being comparatively cheaper to administer and likely easier to asses compliance.
Exportability is the concept that some persons outside of a jurisdiction benefit by services provided in a jurisdiction. Foreign firms and tourists benefit by utilising local services, and so should contribute to the local economy.
Neutrality or efficiency says that taxes should minimise economic impact, so that microeconomic decisions are made not made on the basis of tax policy. Unfortunately, this may be at odds with macroeconomic goals. Taxes do create incentives and disincentives, but as with anything economic, we need to look at the value proposition.
To these, you add sustainability. To some extent, I feel this is a subset of adequacy.
In your position paper, you state that you have “have heard the argument from some conservatives and libertarians that it is not good, proper, or ideal to think about incentives when designing a tax system.” Clearly, these people are not economists because fundamental to a good taxation scheme is to evaluate incentives. You also mention fairness, which, as I mention as well, is a subjective concept. One perspective of fairness is the Western productivity standard that says “to each according to what he or she produces” versus that Marxian view that says that says “to each the same.”
Regarding simplicity, we are in agreement, and moneyed interests vis-à-vis corporate lobbyists effectively write tax policy, and there are to varying degrees trade-offs between simplicity and fairness.
Now I comment directly on your ideal tax system as I summarise in turn. First, you support the elimination of individual and corporate taxes, and then you offer alternatives:
Carbon (Fossil Fuel) Tax: I presume you are taxing this on the basis of sustainability, and it is a negative externality. I don’t feel that it would be simple to monitor or measure this at the extraction level. You cite disincentivising buring natural gas off. Who is measuring this burn off in order to assess a tax?
Disposal of Resources: Clearly, evasion would be the incentive created here. If I can dispose of the items illegally or export them to another jurisdiction, I can evade the tax. Moreover, one person’s trash is another’s treasure vis-à-vis recycling. The United States already exports trash to other countries such as China. These countries reconstitute the materials into products they that export back to the US.
Political Contributions: This fails to meet the adequacy standard. Besides as the Citizens United case recently tells us is that an entity can simply advertise in proxy for the politician on the basis of free speech. In kind and indirect contributions of this nature would not be covered.
Holding Cash: This is all well and good, but one only needs to store cash offshore, which many already do. All this will do is tax the people without the wherewithal to export their wealth.
Fines and Penalties: Again, we fine and penalise all sorts of activities, but it is hardly adequate to support a four trillion dollar national budget.
Even if we were to assess all of these, I do not see how this would even close to support any significant needs.
As for the less radical proposal, I think it is important to earmark Social Security and Medicare, though in principle, they could be rolled into income tax and treated differently on the collection side, but a rose by any other name… I adamantly agree on removing any caps on income. Social Security reform is a political red herring and not key to any serious economic discussion. Medicare is a different story.
It is as important to tax interest, dividends, and capital gains at the same rate as earned income. Much tax revenue is avoided by this legerdemain. This meets the simplicity and equity requirements.
Regarding simplicity, deductions need to be severely curtailed—starting with home mortgages. Deductions are a surreptitious means to subsidise behaviour. A more open and honest way is through direct subsidies.
I don’t understand how taxing income shifts “the burden away from wage earners,” as this would be the crux of those affected. I don’t believe that saying that payroll taxes are “a major barrier to employment” makes it so. I have been involved in hiring decisions in small and medium sized businesses, and I have never heard a discussion that went something like, “Gee, I’d love to hire that person, if only it weren’t for that dreaded payroll tax and FICA/HI.” This is ideological subterfuge and is not a true economic consideration. When a business is considering the cost of a human resource, the question is how much gross salary (including payroll taxes) and benefits do I have to pay to get another worker. If the marginal cost of hiring that is less than the marginal contribution, the hire is made.
leave a comment