patrick.net

Tax reform, banzai!

Tax is used to pay for common goods. Let's first identify such goods or services that are difficult to charge to users.

I can think of: national defense and protection

I cannot think of anything else.

Almost forgot, research and development on strategic technology is one of the common goods too.

I agree with Ray W that the current interest deductibility system fails to reward saving for home-buying. If we are going to incent home owners with mortgage deductions and capital gains exemptions, then we should also provide incentives to save for downpayments.

The problem I see is in creating perverse incentives. That is, what kind of caps and limits would we place on this? Would homes be indexed by metro region? Would we accidentally end up creating a disincentive to buy a home before saving up huge downpayments? Without any kind of guidance, this could actually end up creating an even bigger housing bubble later, after people have tax-deferred/exempt saved up huge downpayments.

I cannot think of anything else.

* Critical transportation infrastructure
* Critical energy infrastructure
* Critical emergency response services
* Critical regulatory and policing agencies
* Capital intensive projects beyond the reach or interest of private industry
* High risk projects beyond the tolerance of private capital

...the problem is that this list goes on and on, thus the problem with the Libertarian Ideal.

How about schools? Just because you have crappy parents who won’t pay fro school doesn’t mean you should grow up to be a burden on society.

Schools can be charged to the users, the free market can take over. I agree that subsidies should be given to those cannot afford education. There can still be merit and need based assistance.

* Critical transportation infrastructure
* Critical energy infrastructure
* Critical emergency response services
* Critical regulatory and policing agencies
* Capital intensive projects beyond the reach or interest of private industry
* High risk projects beyond the tolerance of private capital

Yes, tax should pay for the strategic planning of these things, but most can be charged to the users too. (e.g. we can have electronic toll road systems)

As I haved added, strategic R&D should be part of it too. :)

I should add that I am not an expert. So please bear with me. When in doubt, trust Randy instead.

When in doubt, trust Randy instead.

lol. Hardly. If left up to me then sushi would be exempted from all taxes.

The problem I see is in creating perverse incentives. That is, what kind of caps and limits would we place on this?

Yes, this is the famous conundrum of government creating additional moral hazards (unintended consequences) of policies geared towards penalizing one behavior of form of investment over another.

Personally, though I'd MUCH rather see housing prices go up due to high savings/down-payments than high debt levels (less dangerous and prone to systemic collapse), but it's no bubble-killing silver bullet to be sure.

If left up to me then sushi would be exempted from all taxes.

I concur! We should even get a tax credit!

SFWoman, okay, schools too. I was just wondering if leaving schools to the free market may reduce the costs of education. I agree that education is the best strategic investment.

Should we say that all strategic investments can be fairly financed by taxation?

Have to second Randy H & SFWoman on the public education, transportation, police & emergency services. Healthy, safe well educated workers are a plus to corporations too. These are all public goods well worth the costs (assuming, of course, that they are well managed and government corruption is kept to a minimum).

So we basically have internal/external safety/security and strategic investments.

Can we tax churches? (*hides*)

personally, though I’d MUCH rather see housing prices go up due to high savings/down-payments than high debt levels

I'm not sure debt levels would go down, the numbers would all just get bigger. People will still put 20% down, the 20% will just be a lot bigger, and the total home price would just inflate to the new equilibrium. Then we're stuck fighting against qualified mortgage interest deduction caps, which people would start screaming bloody murder about.

Can we tax churches? (*hides*)

No need to hide. However, what is the point of taxing entities? I mean, why tax churches when we can tax church-goers? (*hide*)

Much of "The Futurist" is simple demogogery. And I say that as a decidedly free market capitalist.

Why not tax them for any amount they take in minus expenses plus social services they provide? Do they use snow removal, street lights, and benefit from national security?

Sounds fair.

Don't churches tax people? :) I remember that the tax rate is 10%.

Gas tax: funds highways, construction, military stationed in Iraq, etc.
Water tax: to tax for infrastructure for water
Electricity tax: fund for putting up electric poles, etc.
Property tax: Fund schools, lamp posts, library

We can have electronic toll roads that charges according to weight, distance, and speed.

We can charge more for water.

We can pass along all costs of electricity to consumers.

RE: We can have electronic toll roads that charges according to weight, distance, and speed.

Imagine a world without speeding vehicles (we can charge a huge fee for speeding, such fee can be flat or proportional to income). The world will be so much safer.

We can debate it but a "good friend" tells me that the mortgage deduction limits are being scheduled as we speak. In other words if you lean heavily on "bulking up" your Schedule A the good times are behind you. I for one hope he's right (usually is). We made the int. on 2nd mortgages and even 2nd homes deductible and then wonder why we have an entire population that believes debt=wealth.

How to get back on track? Let's consider this perhaps as an alternative to the Alternative Minimum Tax. Lenders have used debt to income (DTI) ratios for years. If you are below the median income then you get 2 for 1 credit for the dollars you pay toward your mortgage. If you are above the median income your deduction is 50 cents on each dollar you spend on your mortgage. I believe it was Face Reality that said why shouldn't Highly Compensated Employees go for the gusto on their mortgages b/c their day to day expenses are about the same as anyone elses, so this should nip that in the bud.

We can debate it but a “good friend” tells me that the mortgage deduction limits are being scheduled as we speak. In other words if you lean heavily on “bulking up” your Schedule A the good times are behind you.

I always think that there is every political reason to proceed with that tax reform. Think about it, most people have mortgages less than 300K and many people do not itemize. With this reform, only a few people (sadly most people in some states) will be adversely affected, but a lot more people can benefit from it.

One agent once told me to BUY before they take away the deduction. :)

I could not help but laugh.

I believe it was Face Reality that said why shouldn’t Highly Compensated Employees go for the gusto on their mortgages b/c their day to day expenses are about the same as anyone elses, so this should nip that in the bud.

Yes, everyone should spend as much as possible on the mortgage because

DEBT = WEALTH :)

Peter P,

Portland tried to have HOV lanes during the commute (as did Vancouver) and they were not widely used. In fact they were a failure. Now don't get me wrong, that doesn't mean we should just up and quit! The High Occupancy Vehicle lanes just didn't suit most commuters lifestyles. Toward the end they were actually putting HOV "stickers" up for sale in an effort to justify the program.

Portland tried to have HOV lanes during the commute (as did Vancouver) and they were not widely used. In fact they were a failure. Now don’t get me wrong, that doesn’t mean we should just up and quit! The High Occupancy Vehicle lanes just didn’t suit most commuters lifestyles. Toward the end they were actually putting HOV “stickers” up for sale in an effort to justify the program.

Instead of an "inflexible" HOV lane, how about a "premium" lane that charges a higher rate during certain time. HOVs and other "incentivized" vehicles will be given free credit to use the lane. The idea is that we can use price to improve traffic flow more effectively.

Peter P,

One of the reasons I am not on board with the Sched. A abuse is that I had it dialed in to a fine science. I was well paid, commuted long distances, paid no city taxes and parked on the company's dime. B/c I couldn't deduct dry cleaning, client lunches and especially commuting expenses I took the attitude that the mort. ded. "scam" was perfectly legit. Now I work at home and seldom drive but can write each mile driven and from Katrina on we were afforded an additional differential. Anyway, I know first hand that people are milking MD for all it's worth!

Peter P,

O.K that I can get on board with! The joke was that the city knew no one would carpool and it used as "ticket writing" revenue. It didn't happen to me often, but it was frustrating to be stuck in a car by yourself in grid-lock and look over at a completely empty lane!

Fewlesh,

Normally I would agree with you about "riding your bike to work" but I believe Portland is considered one of the most bike friendly cities in America. Cyclist use resources! Believe it. When the Hawthorne Bridge was refurbished (at a cost of 110mil) 10 foot bike lanes were added on each wing. Cyclist have refused to even pay a $10 a year reg. fee. "Well I pay OTHER taxes". O.K, but so do we all. Cycling has become the ultimate free ride in Portland. Yes we have drink and peddle offenders.

Normally I would agree with you about “riding your bike to work”...

I am ver adverse to bicycles since I broke my teeth falling off a bike at Stanford. :(

We made the int. on 2nd mortgages and even 2nd homes deductible and then wonder why we have an entire population that believes debt=wealth.

DinOR, I would love to see the 2nd home interest deduction AND capital gains exemptions completely eliminated. Does anyone "need" a second home? Why should I have to indirectly subsidize Specuvestor McDebtor's amateur experiments in momentum investing just because I'm a saver/renter?? Fuck, I'd just like to buy a FIRST home at a price reflecting actual housing-NEED demand valuations.

The big problem I see is, homedebtors and the industries they support (NAR, banks, mortg. lenders, etc.) are too numerous and powerful to let this happen anytime soon. After the coming Panic of '06-'11 (?), such changes *might* be politically tenable, but we'll have to wait and see.

Peter P,

Teeth and pavement do not mix. I can visualize NEW highways being fitted with the high technology you've been talking about but I just can't imagine how it would be retro-fit into existing roadways. Up here we have DEQ so when you go to get your pollution bill of clean health they can upgrade your car then?

Harm,

Good point. I never thought about it that way but you're absolutelt right! We are indirectly subsidizing some putzes 2nd home. Hey, wait a minute, damn that ticks me off! Like I need another reason to hate serial homedebtors. Like Peter P and I were discussing earlier about taking advantage of mr. specuvestor mcdebtor amateur experiments in "self impalement"! I'm a big guy, I'm a sport and I know when to give people a break. These aren't those people.

I just can’t imagine how it would be retro-fit into existing roadways.

We can use a network of transponders, in-car GPS receivers, and overhead sensors/cameras. I am not worried about technical feasiblity. I am more worried about outcries over "privacy".

Peter P,

O.K, more like trucking companies use to monitor their own employees progress on their deliveries. Not "mag" sensors installed in the actual roadway to actually control the vehicle?

I don't understand where all of the privacy issues would come in? It's Monday. It's 7:30am. We're all on our way to work, right?

I don’t understand where all of the privacy issues would come in? It’s Monday. It’s 7:30am. We’re all on our way to work, right?

Right. But people will make the slippery slope argument because the technology will enable the government to track vehicles. I do not have problem with that, but many people have problems with everything.

Actually, I think it is even possible to hook up the system to an anonymous payment system so that the privacy issue can be minimized.

But the cheapest way is to tax gasoline. ;) A $2/gallon tax should do wonder.

My favorite reasonable tax world? [...]
--Fewlesh

Very reasonably stated. Now if only we can get past all the self-interested incumbants.