Serious Tax Reform, part 1 of 3

September 4, 2011
Forty Seven Percent of Americans pay no federal income tax.

47% of Americans pay no federal income tax.

Sorry for the delay in publishing.  Personal issues took precedence over blogging.

On an earlier post, one comment wanted a more thorough explanation of this:

Lower marginal tax rates should be financed by broadening the tax base and closing arbitrary loopholes. This will raise tax revenues by making more people stakeholders in the process.

So, here goes.*

Our tax base needs to be broadened.  Currently, 47 percent of Americans pay no federal income tax.  Additionally, many large corporations pay little-to-nothing in the way of taxes, especially after rebates and subsidies are subtracted from the money they pay in to the tax system. (For studies on this phenomenon, I direct you here and here; many more are available.)

Two damning features emerge as a function of these facts.  The most straightforward economic distortion comes from the shifting of the tax burden.  Taxes are far from neutral; instead, they are used to incentivize certain types of behavior, irrespective of its market efficiency.

The presumption among most is that businesses favor laissez-faire capitalism because it keeps the government from meddling in corporate affairs.  Considerable anecdotal and quantitative evidence says this is not true. Capitalism implies competition, and competition means that some businesses lose.  Businesses are generally eager to support legislation that gives them a comparative advantage over their competitors.

Shifting the tax burden to distort its equity is one of the ways that businesses compete, and by crowding out true competition, we get less equitable outcomes.**

The more harmful feature of our tax system allowing so many free riders is the destruction of a stakeholder conception of democracy.  Democracy works best when citizens have a sense of involvement in the process.  By allowing certain groups to avoid paying into the tax system, we discourage them from taking part in that system.

Serious quantitative research indicates that people are happiest when they exercise some level of control over their environment.  Net tax payers are substantially more likely (by about 30 percent) to say that self-reliance is an important component of citizenship.  Indeed, if our goal with transfer payments is to make those on welfare self-reliant, paying taxes seems to be one way to encourage that virtue.

More to follow.

*Please note that my area of expertise is not tax policy.

**To be clear, I’m not advocating RAISING corporate taxes.  Corporations, in general, pay lots of taxes already.  I’m saying we should make the system more equitably distributed.

2 Comments | American Dream, Economy, Election 2012, Taxes | Permalink
Posted by Vital Signs Blog

Over-Regulation, Part 1

August 31, 2011

In the vein of an earlier comment and my lemonade stand post, I considered putting up stats and figures to support the idea that overregulation was stifling entrepreneurship, but Conor Friedersdorf, associate editor at The Atlantic, is a much better writer than me:

The normal mindset among U.S. officials is that prior permission should be required to sell legal goods to a willing buyer.Kids selling lemonade on the street are shut down. A Missouri man has been fined $90,000 for selling rabbits (he made about $200). In Illinois, an artisan ice cream maker is being shut down for lack of a dairy permit. Manuel Winn was arrested, handcuffed, and booked for selling magazines door-to-door without a permit. A Maryland mother of three was arrested for selling $2 phone cards without a license. Lots of municipalities are going after food trucks. A group of Louisiana monks had to go to court to win the right to sell simple wooden caskets to consumers.

If you read enough of these stories, you’ll see the targeted entrepreneurs say the same thing again and again: I just had a good idea and started a business. It never occurred to me that I needed permission. And, of course, other would be entrepreneurs don’t ever get started because they’re too intimidated to assess and grapple with the bureaucratic hurdles. Or else the regulations are written in a way that excludes from commerce folks who are operating at a very small scale.

More to come on over-regulation.

2 Comments | American Dream, Depression, Economy, Innovation, Regulation, Ridiculous, Unemployment | Permalink
Posted by Vital Signs Blog

A Megaphone of Cash: Super PACs Super Spending

August 30, 2011

61% of American voters don't know and/or don't care about campaign finance.

61% of American voters don't know and/or don't care about campaign finance. Colbert is trying to change that.


Stephen Colbert last year quipped that corporations could now get their voices heard using a “megaphone of cash.”

As it turns out, Colbert himself is using that megaphone, spending money on campaign ads mocking other Super PACs in Iowa. The NYT has more:

While most of the rest of the news media continue to cover the coming election with long-running tropes — whose horse is ahead and who has the most loot? — Mr. Colbert has taken the equivalent of a political homework assignment and sprinkled a little silly sauce on top, and people seem happy to dig in.

“He is taking on a serious subject that many Americans find deadly dull and is educating the broader public on why it matters and what is at stake,” said Sheila Krumholz, executive director of the Center for Responsive Politics. Still, she adds, “it’s all fun and games until somebody gets hurt, like a specific campaign or the electoral system.”

Colbert’s PAC has signed up some 165,000 people to his new Super PAC, and he’s using it to confront the veiled corporate spending of the election cycle. Some PACs have done remarkably well fundraising and spending trucks of cash, like American Crossroads, which spent $28 million on the 2010 midterm elections.

Colbert faces an uphill battle: 61 percent of voters don’t know and/or don’t care about campaign finance.

Leave a Comment » | American Dream, Colbert, Election 2012, PACs, Regulation | Permalink
Posted by Vital Signs Blog

Turn off the Cell Phone!

August 29, 2011

Thirty Percent

Thirty percent of those between the ages of 18 and 29 in the US have used a cell phone at least once in the last 30 days to avoid interacting with the people around them.

Seventy percent have used their phone for entertainment purposes.

Forty-two percent have had trouble doing something because they couldn’t use their cell phone.

Those numbers are 13%, 42%, and 27%, respectively, for the general public (all adults).

Neil Postman, the Digital Era has arrived.  Welcome to the Brave New World.

(data courtesy of this report at the Pew Internet and American Life Project)

1 Comment | American Dream, Social Interaction, Technology | Permalink
Posted by Vital Signs Blog

Underwear’s Malaise

August 28, 2011


The men’s underwear industry may now be entering a “Lost Decade.”

The sale of men’s underwear has long been regarded as a bell-weather statistic in economics.  It might sound absurd, but men’s underwear can give a good indication about what’s going on in the markets.  Alan Greenspan has famously quipped that is one of his favorite economic indicators.

Sales of men’s underwear are relatively stable because underwear is regarded as a necessity.  At the same time, men are not generally inclined to buy new underwear when money is tight because few people ever see it.  Thus, when the economy is down, men’s underwear sales is usually a good indicator of both the crash and the recovery.

Right now, however, men’s underwear sales have largely recovered, but they’re not growing.  Much like Japan’s “Lost Decade” of the 90′s – where growth, unemployment, and the like were stagnant – men’s underwear sales are stable but not expanding.

The explanation is simple: the situation has become dire.  Wives are beginning to force their husbands to buy new underwear, and single men are buying it to increase their marketability.  Yet, as the economy has not recovered, men are buying the bare minimum.

The rest of the economy is following suit.  As long as men’s underwear sales are stagnant, it’s a good indication that we haven’t actually hit a real recovery.

Data on underwear sales can be hard to find and can be unreliable, so I’ve compiled an index of men’s underwear sales.  I’ll continue to bring you updates on the situation as relevant.

1 Comment | American Dream, Depression, Economy, Uncategorized, Underwear | Permalink
Posted by Vital Signs Blog

The War on Lemonade Stands

August 26, 2011

Thanks to the Freedom Center of Missouri, a map of the government’s war on Lemonade Stands is now available.

Government officials have been shutting down kid-run concession stands across the country for months.  If you’re new to the issue, rest assured that it is an epidemic.

You can read more about it in Forbes, and follow the assault on children’s lemonade stands, cookie concessions, and more at the Freedom Center’s website.

Raise your hand if you think the economy is over-regulated.

2 Comments | American Dream, Economy, Lemonade Stands, Regulation, Ridiculous | Permalink
Posted by Vital Signs Blog

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