The problem with taxing products higher is that it essentially becomes a regressive tax on the poor. If milk is $2 more expensive per gallon, that hits a poorer person much more than a rich person. This is why it's a hard sell to tax goods everyone relies on, like food, oil, and electricity. You could possibly then give a subsidy to lower-income people, but it's hard to track exactly how much a person spent on smaller items throughout the year.
It's not a tax on products (like VAT), it's a tax on specific difficult to acquire resources.
The costs of some things that you mention (oil, electricity) might well go up, but the costs of others might stay the same or drop depending on how much of their cost if attributable to labour costs. Locally sourced food might go down in price.
These price changes are exactly what the tax aims to achieve (e.g. lower energy use)
As some other commenters have pointed out, those particularly hard up can be compensated in some other way (e.g. tax credits).
> These price changes are exactly what the tax aims to achieve (e.g. lower energy use)
OK, come be poor in eastern Montana, with no public transit (hello, increased gas tax!), food that has to be trucked in (hello, increased gas tax!), long dark winters (goodbye, solar!), and cold winters (hello, increased propane tax!).
Just because a group is a minority doesn't mean it deserves to get screwed over. It's MLK Day here in America, so it surprises me that this even needs to be said anymore.
I don't mean to be dismissive of the struggles that people in rural areas face, but I don't think that's an apt comparison. There's a difference between being disadvantaged by location (which can be changed) and disadvantaged by ethnicity. Also, Montana residents are free to use the white drinking fountains.
OK, how do you expect people to farm and ranch if you don't allow farmers and ranchers to live on their land?
You can solve one problem by mandating universal veganism and banning the keeping of pets which are obligate carnivores (cats, mainly), but that just increases the demand for farmers and farming.
Tax code artificially makes for "terrible geographic selections". You aren't very far from "Well of course you got raped, look at what you're wearing" logic.
No, its not tax code. Its expensive to drag food to the middle of nowhere. Its expensive to drag fuel to the middle of nowhere. Both have externalities that aren't paid for.
It is not anyone's right to have everyone pay for their choice to live far from infrastructure that already has a sunk cost.
cbd1984 specifically mentions tax, so yeah - it is tax code. In absence of tax the cost would naturally be higher, and that is the price you pay for living in a remote location - but that is a real economic cost of moving the resources. Tax is completely artificial and if the stated goal is a progressive structure, than this is an obvious case of stated goals not matching reality.
I liked the FairTax proposal - subsidy is given to everyone regardless of income level or spending and is enough to cover the tax on necessities. Of course it's never going to happen.
Every redistribution of the tax burden has winners and losers. With the FairTax, it's not poor people who consume very little because they get a bigger subsidy than before. It's not those people who make far more money in a year than they can possibly spend (especially once you cut the now tax-free real estate[1] and lavish consumption on foreign holidays out of the picture). It's the average working person.
[1]I've yet to see a sane argument for why you'd want to give property speculation a massive tax advantage over buying and selling consumer goods
The issue of tax burden is that the only loser are the people. Government issues taxes and can enforce it violently, so Government is the only winner in the tax game. For the wealthy, the move to a FairTax is neutral they don't benefit from it just as they don't have the same negative effects that a progressive system has with its loopholes. Also, we need to stop thinking that our economy will get better if we somehow increase the tax burden on the rich. What we need to start thinking is how to improve the plight of the poor and the needy.
The reason why I supported the FairTax because of the prebate and it increases the purchasing power of the poor. When the poor can keep 100% of their pay, they control what they can spend on. For the middle class, the same deal: we can have families improve their lives, save up for college, be masters of their spending, and pave the way for more charity. The rich will continue being rich, regardless but if we can ease the tax burden on the middle class and the poor by removing income taxes it'd be a big break.
Same here, the FairTax is a pretty good idea. I believe that Bill Gates even advocated that the US shift away from income based taxation to consumption base. If there's anything our economy that we can bank on, it will be consumption.
FairTax's motto: "because the rich don't have enough advantages already"
edit: Downvotes? Seriously? FairTax shifts the burden dramatically onto the middle class. A rich person pays no capital gains, and as long as they don't go buying billion dollar yachts, they'll pay next to nothing percentage-wise.
The FairTax replaces all taxes and the prebate makes it progressive. The rich actually have no net benefit because in the income tax world, they're still rich and in the fairtax world, they're still rich. What progressive income taxation says is that you want to pull down the rich to bring up the poor. We need to pull up the poor and leave the rich alone. The rich have their wealth and will continue to maintain it. A tax plan should be transparent and it should allow the poor to save money and invest their way out of being poor.
I'd vote for any system that gives the poor more opportunity to pull themselves up. With FairTax they would have more income, pay no tax on essentials, could save/invest more, and reduce dependence on the government. That combined with no capital gains makes investment attractive to all classes.
If you give someone the opportunity, but they choose to remain poor then it is not the government's job to take care of them.
If however you do not give them that opportunity then we are just encouraging the poor to stay poor and depend on the government.
I have to imagine no capital gains would have more meaning to the middle class saving for retirement as compared to a wealthy person netting 15% more.
Lastly - expenditures are at least linear with regards to income if not exponential past $150k looking at a recent census. If you read the FairTax proposal it states that the rich would end up paying more tax overall then they do today.
The poor don't tend to have the money to invest in things that generate capital gains in any meaningful capacity. That such a thing is touted as a benefit for the poor is indicative of either disingenuousness or naïveté on the part of FairTax backers.
FactCheck.org has a well researched and well citied piece at http://www.factcheck.org/2007/05/unspinning-the-fairtax/. Among the findings - anyone making between $15-30k and $200k suffers under the plan, while the rich see their tax burden drop dramatically.
I read the article in its entirety. While what they propose (a very small fractional increase in taxes among the middle class) is entirely plausible, it misses the point entirely.
A consumption tax is optional. Meaning I only pay that tax if I consume above a poverty level. An income tax however is not. If I earn an income, I pay the tax.
The reason this is such a big deal is that it empowers the individual to change their financial situation. For example my taxes may decrease by 50% under FairTax, simply because I live a simple life style.
If someone chooses to improve their situation, they can take all the extra money, save, invest without capital gains, and see the turnaround much quicker.
This is in contrast to today's system which penalizes saving & investment and HEAVILY penalizes those who go out and start a business (I pay quite a bit more tax as a self employed individual).
It is also much more logical to be penalized for consumption vs. contributing to society (similar to the OP).
We can expect an increase in the cost of inputs for essential consumer goods to be passed on to the customers in the form of higher prices for those products. Dairies, meat processors, and supermarkets are not going to just sit there and take the loss.
Yet at the same time, the labor gone into processing / handling manufacturing those consumer goods will be cheaper, possibly offsetting that rise in material costs. An increase in resource taxes doesn't necessarily mean an increase in consumer good prices.
> An increase in resource taxes doesn't necessarily mean an increase in consumer good prices.
Because income tax is taken out of a worker's gross pay, the Ex'tax plan is not going to substantially impact how much companies pay their workers. It will simply increase take-home pay. Assuming it's a revenue-neutral tax shift, three things happen:
- Workers with low incomes get a little bit more take-home money every month.
- Workers with high incomes get a lot more take-home money every month.
- Milk and eggs are uniformly more expensive.
That's why this is a regressive move that hurts people with low incomes.
Just because you tax labor less, does not mean salaries necessarily go down. The cost of labor is primarily a function of supply and demand + overall competitiveness of your economy on the global stage.
In fact if you increase the cost of consumer goods by pushing up the cost of manufacturing inputs, you're going to have to pay workers more to maintain the same standard of living. Their cost to drive to work goes up; their cost to feed themselves goes up; their cost to buy a house goes up; etc.
Is that really true? I guess I've always seen the meme that our (in the US, that is) food is artificially cheap, because of subsidies for farmers and ag companies.
Or does your "artificial scarcity" phrase really just mean "regulations keeping me from selling water with white food coloring in it and calling it milk?"
I didn't downvote, but I assume it's because you're making a strong counterfactual* assertion without any support or reasoning, and reasoning in counterfactuals requires strong assumptions about causality. These causal assumptions are highly contentious, rarely agreed upon, and almost never supported except by the barest loincloth of evidence, as evidenced by your cato.org link.
It was such an out there statement that it seemed like trolling to me, which is why I didn't even bother to downvote, and assumed that others would take care of it.
* Counterfactual in the sense is that it is about a world that does not currently exist.
Its rude to downvote without explaining why, if it requires domain specific knowledge. I can't speak for the downvoters but I do know from my gentleman farmer relative (I guess they call them hobby farmers now...) that's a very old article and a couple years after that one of the omnibus farm bills completely eliminated the milk price support. So your justification is a .gov program that no longer exists as of roughly the 9/11 attack era.
Everything about .gov manipulation of farmers is controversial. Milk's been a free-er market than most for about 15 years now. Corn for example is still corrupt as all heck leading to everything from obesity to anti-biotic resistances. But milk is currently a free-er market than most.
I think a lot of the issues that result in high resource usage emerge from the way as a society we change the norms of what is considered 'essential'.
A lot of the time, responsible decision making just has to be thrown aside if you want to actually function.
Take owning a car as an example (UK perspective here; may differ in the US). With some effort, you can structure your life in such a way that one is not necessary and therefore get by via cycling/public transport.
That may mean huge sacrifices, though. Families are often spread far and wide, it's not rare for two cohabiting partners to be stuck in a situation in which living close to work is a 'one or the other' choice.
Would taxing fuel more fix that? I'm not sure. I think it's just considered a 'cost of doing business' (i.e. being employed).
Similarly, 40 hour+ work weeks are normal. This results in people either trying to maximise their use of downtime (and thus choosing the bus that takes 20 minutes over the walk that takes an hour), or simply being exhausted enough that more 'convenience' purchases feel justified.
I think we would all be far better off simply 'doing less' (for lack of a better term), and I think proposals like a basic income go quite far towards achieving that.
> Take owning a car as an example (UK perspective here; may differ in the US). With some effort, you can structure your life in such a way that one is not necessary and therefore get by via cycling/public transport.
This is extremely tin-eared and utterly ignores the realities of farmers and ranchers. You know, the people who grow the food which the rest of the country relies on.
Just blandly stating that cars aren't necessary is wrong.
I took quite deliberate care to try to ensure that I spoke only of 'an individual', rather than the collective. You're spot on.
The point I'm trying to make, distilled, is that we live in a world that has people commuting tens of miles to work each day.
Could we fix that, preferably in a way that's not punitive?
I believe without proof that fuel is an inelastic good; doubling the price of fuel (for individual use only) would not result in a halving of its' use, because it's necessary for many.
Essentially; it takes effort for people to reduce their usage of some resources. For me to eat half as much cake is relatively trivial, it simply requires willpower. For me to use half as much energy than I do would require a very significant reshuffling of my life. My choices are limited, a tax hike would not change that.
I think some people seem to have this idea that taxes are magical beasts. They can work if replacements are actually viable. But taxing food won't mean I eat less, I need it to survive. Hopefully you see what I'm trying to get at here.
Farmers and ranchers are <1% of the US population last I heard. They could get an exemption for certain uses if they really needed it, hell we do that all the time.
Not sure where I stand on this proposal yet, but policies don't have to be all or none, though administration is far easier if they are.
Similar things exist in the US. They sell dyed fuels tax-free (or at a lower rate, I forget). You can apparently also claim a tax refund if you use taxed fuel for farm purposes.
The problem outlined by the economist article essentially boils down to the fact that the government wanted to subsidise renewable energy but didn't want to pay the subsidy so foisted the extra cost onto consumers with legislation requiring the utility companies to buy renewable energy when it was available.
That's not a problem specific to all "green laws" as you seem to imply.
The Economist does seem to come across as slightly biased in its reportage (I'm surprised), when they say "renewables undercut relatively climate-friendly natural gas on price". Relative to what? It becomes clearer as you read further, relative to coal, but the quoted statement makes it sound like natural gas is more climate-friendly than renewables. Clearly not.
"Not successful" according to conservative publication The Economist. A massive uptake in solar and wind power seems successful to me. They just need to iron out some kinks in the incentive scheme.
Indeed. Portugal had a similar system, the kinks are that the subsidies are a bit high, there's a lot of people buying solar panels just to sell the power back to the network. This is because the price per kilowatt uploaded is more expensive than downloaded.
This is great, you get a big installed base with this short-term carrot, and when the subsidies are removed the panels are still in use. Win-win.
I can't understand how they made this conclusion in the article "This means that traditional utilities have turned instead to much more climate-damaging coal for generation." Also cannot find references for the claim "Germans have ended up emitting more carbon dioxide as a result of the extra coal"
I've heard versions of this before. It sounds almost like a no-brainer to me. Of course you should tax resources more than labor, especially non-renewable resources and those with negative externalities.
Of course! I've never encountered any unintentional confusion when using the term "carbon tax." For more understanding of what is meant by the term, see for example http://en.wikipedia.org/wiki/Carbon_tax
There is an excellent book 'The Bet' about the wager. Over the course of the 20th century despite global population increasing by at least 200% and global GDP increasing even more prices of a bundle of metals decreased overall between 1900 and 2000.
There is an energy problem. Fossil fuels are getting more expensive and anthropogenic global warming is a concern. However, Europe already has big taxes on fossil fuels.
What Europe, and the rest of the developed world don't do is spend enough on researching better forms of nuclear energy. ITER and others are something, but it's not enough. A better approach would be to increase funding on energy research.
>Since 1950 the world has extracted more than the known reserves of tin, copper, iron ore, lead and zinc and yet known reserves are bigger than in 1950!
So, you propose that because we keep improving extraction methods / keep finding new deposits of non-renewable resources, that these resources are infinite?
The parent is very clearly not suggesting anything of the sort.
They're pointing out that the hysteria focused on resource scarcity is unfounded, has been proven to be unfounded over and over again for the past century, and will likely continue to be shown to be unfounded for the next century.
By almost any measure, we ran out of copper a long time ago. We used to find copper in almost pure form, yet now a modern copper mine processes ore that is only a bit more than 1000 parts per million copper, which isn't a lot higher than random earth.
We're not going to run out of earth any time soon.
It's more likely that this will end up being a new tax on resources, instead of ending labor taxes. The true purpose of the tax is to create a new tax on resources. Ending labor taxes just seems to be a sales pitch to get support. From a cynics point of view, it's just a new way to sell a carbon/environmental tax. More taxes!=More Rainbows.
So here's something I've been wondering about for a while. Say you tax everyone exactly equally and like bitcoin, provide easy ways to divide denominations of money. How is the tax actually hurting anyone? Wouldn't the value of currency simply normalize to the post tax level?
To me, the major difference between renormalizing currency and taxing (in this simple case) seems to be that the government can inject money into specific industries and projects without causing inflation (as the money supply is held level). Is this correct? If so, how does this apply to the real world? Is it just a special case?
If the government has some automatic way of making half the money in people's bank accounts disappear into thin air, then yes, prices can be redenominated. Except for all those long term debts and contracts with future prices agreed; it's not so simple to accept a 50% pay cut when your mortgage stays the same. And in practice, if the government does take half the value of the money in circulation out of people's accounts, most of it will be find its way directly or indirectly into other people's bank accounts, so prices won't go down anywhere near 50%
The major difference between taxing and renormalizing (or printing) money is stabilising the currency's value, but distributional effects are also important and mostly intended
Current consumerism is not long term sustainable where we throw away devices every year that's built in low cost countries and are not built for recycling. Taxing materials will make an economic incentive for both producers and consumers to recycle
The problem with ideas like is that the amount of tax raised is small compared to what is collected in income taxes. It's a fantasy to think we can replace an income tax of up to 60% of income with an indirect consumption tax.
An Ex'Tax also ends up being regressive like consumption taxes. The poor spend a lot larger percentage of their income on consumption (which are what those resources end up going into) then the rich do.
If the EU taxed metal mining, would EU car manufacturers be able to import from abroad and to save money? Or would there be an import tariff on foreign metal too?
Would the money be rebated if the cars were exported, so they were competitive with cars from other countries, or would cars manufactured in the EU be more expensive than cars manufactured in other countries?
Sounds reasonable. The political optics angle might be interesting, since the "1%" is heavily labor based (Lawyers, Doctors, etc.), and the 0.01% isn't labor based, and I wonder how much it is resource based (i.e. Bill Gates and tech moguls aren't using natural resources, and the inheritance crowd aren't either).
The lack of discussion of cap gains and corporate income tax is peculiar. The devil is always in the details.
There is an assumption in the plan that labor is infinite and fungible and interchangeable and therefore quite worthless as a limitless pool, but reality is that "growing a doctor" takes a lot more time and resources than "growing a coal mine". As a strategy for centrally controlling a market, it would probably lead to more volatility in prices and supply and demand overall.
I'm not sure how the excise tax would be different from a carbon tax. That may be the whole point, here's a new marketing spin on a bad idea, look, its got a new name and everything...
This proposal seems to make a lot sense for deciding what to tax, but I am curious about how this would affect who is getting taxed and where these changes would be felt.
It seems like decreasing taxes on labor (people) and increasing taxes on raw materials (things we dig out of the ground) would simply shift the tax burden away from urban areas (where people are) to rural areas (where the mines are).
Wouldn't this just make things worse for poorest parts of the country, like Appalachia, where the mining industry is typically the only provider of well paying jobs?
Something to think about is "the masses" are not going to quietly stop driving, stop working, stop eating, and die. They'll just pay more carbon tax. So if keeping 400M americans alive takes 400 train loads of coal, they'll still be mining and shipping 400 train loads of coal, just the next taxes paid to .gov will increase, everyone will be poorer, slightly lower standard of living, but the cops will spend money on more and better guns to shoot us with.
Its not like the mine owners are going to eat the tax losses out of their own pocket, LOL. The price of their product will increase.
As a side effect the more regulated an industry the more corrupt it'll be on average. So expect plenty of sweet tax loopholes to make up for it, so to be revenue neutral at the new higher tax rate the proles will have to pay even higher taxes.
Higher taxes always result in higher tax evasion, I'm guessing black market coal would be non-trivial to work, but black market charcoal or black market firewood would become a pretty serious issue under this carbon tax 2.0.
Why can't these kind of advocacy websites bring themselves to talk about the downsides of their proposed plans?
Nothing is perfect, and pretending that your proposal is simply flawless makes you look like a fool. Having the honesty to talk about weaknesses and drawbacks is what any sensible research should do (and not just so that they can hand-wave them away).
If you can't deign to admit you and your ideas are not perfect, your campaign website makes you look narrow-minded and foolish.
In fairness, they do have a more detailed report which considers some of the downsides (they acknowledge putting VAT up puts some jobs at risk) as well as makes it clear their proposals are quite moderate (there's an income tax cut, but still a substantial income tax) and that they haven't done any macroeconomic modelling. It's also relatively easy to pick loopholes in, but at least it actually gives some of the specifics the pretty graphics and "tax some metals" of the rest of the website sorely lacks.
I find proposals like this often miss the political side of the equation ie wealthy donors and multinational corps simply allow the law to be passed, knowing, in fact, by spending down the line, they can get loopholes put into the law that will circumvent the system.
Now, this, by in itself, is no reason not to support the idea (which I do, for the most part, esp. the lower taxes on wages), but I feel it should be addressed up front.
This is why I hate the whole "starve the beast" idea. Even Cato Institute (which I disagree with on so many issues) agrees that starve the beast was a resounding failure. If we want to cut federal spending, we need to cut federal spending. We can't cut income and hope that this cuts spending. http://object.cato.org/sites/cato.org/files/serials/files/po...
Of course, in reality, nobody is a real conservative. Everybody only wants to cut spending on things they disagree with but I doubt there's anyone who will advocate spending cuts across the board, even if they benefit from such spending (and therefore the spending cut would hurt them).
Sounds great - just make a list of what government spending is unnecessary, and compare with similar lists created by 10 random people from your city/state/nation.
Everyone has a different idea of which spending is unnecessary and what taxes are unneeded.
70% of the federal budget is mandatory spending on entitlement programs or interest costs. These programs are extremely efficient--over 99% of Social Security and 96% of Medicare dollars go to beneficiaries.
So what's "unneeded spending?" Voters have decided that our country should have a safety net. As long as that's true, even if you get rid of all other spending you'd save at most 30% of the tax bill. Still a huge need to think of better ways to raise the remaining 70%.
I'd argue we're not spending those Medicare dollars efficiently. Did you know you get a choice between expensive brand name drugs and generics, even if the generics have the same efficacy? Insanity. Cut the profit out of healthcare, and your Medicare health care dollars are going to go a lot futher.
I'd call that 96% figure generous, but it's not, it's wildly out of line.
Medicare might be somewhere between 33% and 50% efficient.
The amount of doctoring / healthcare consumed in the US is far beyond any other comparable first world system.
Far too expensive of procedures; too high of salaries for doctors and healthcare workers in general (eg the median radiologist salary in the US is $380k; in France it's ~$100k); drug prices that are drastically too high; and the over-consumption of all of it - the US Government's primary focus over the next 20 years should be to bring healthcare per capita costs in line with the rest of the first world.
Cutting the profit out of healthcare isn't going to make a difference unless you're willing to dramatically reduce: 1) the total consumption of healthcare services; 2) healthcare salaries; 3) drug costs.
Profit is a fraction of the problem. You might save 7%-10% by eliminating all profit from every company in the health sector, from hospitals to drug companies. Now how do you plan to deal with the other 30% to 40% of cost that needs to be eliminated?
Without knowing the exact figures, I would say you're (in part) missing the point. The parent was using "efficient" in the same way that a non-profit or other fund might say efficient (i.e. that money in is mostly money out, administration _by the program_ is not a significant source of cost). Whether the health system spend is efficient is strongly related, but a separate section of the pie.
> The parent was using "efficient" in the same way that a non-profit or other fund might say efficient (i.e. that money in is mostly money out, administration _by the program_ is not a significant source of cost).
Correct. Example: Watsi.org. They are amazingly efficient at delivering healthcare to people in the third world, and they run off donations. [+]
[+] Its true they are partially funded by YC now to run their ops, but I believe all of their healthcare provider spending is still entirely donation driven.
