Time for tax reform?

[opebo]

I'm awfully worried about the expiration of the repeal of the inheritance tax in 2011.  It will go back to a ridiculous one milllion exemption - ouch!  

[angus]

What is needed most is tax simplification, not tax replacement.  The first thing to do is to elimnate any tax provision that requires taxpayers to keep records that preceed the current tax year in order to file a return.  That means no tax on capital gains, no credit for depreciation, etc.

"The hardest thing in the world to understand is the income tax."
  --Albert Einstein

I strongly disagree with Albert on this.  At the risk of being made fun of by the other republicans, I voted no.  I don't keep such good records either, preferring to "estimate" when the time comes.  I suppose one day I will find myself facing an audit.  Until that day comes, I'm comfortable with the current system.  A colleague just loaned me a book about taxes and I'm finding all sorts of new ways to decrease my tax burden.  I had no idea that you could have a dozen beers with a colleague, and as long as you do a little shop-talk, you can chalk it up to "business lunch"

I love this country!

[swarch]

I voted for eliminating the income tax and replacing it with nothing. If the federal government were limited to its constitutional functions, the other taxes would be enough to finance it. The 16th amendment should also be repealed.

I'm philosophically opposed to taxes but support user fees under certain conditions. Excise taxes are more or less flat taxes on consumption. If they get too high, you avoid them by buying domestic goods. This makes them self-limiting, which is a good thing. This is not the case for across-the-board sales taxes.

A national defense--as opposed to our current international offense--could be funded by excise taxes. However, I see these as user fees because everyone benefits from defense. Gasoline taxes, same thing. They're more or less proportional to how much you drive, although the problem is that the revenues are often spent on things other than roads.

Wherever possible, taxes should be user fees in the sense that any government activity must be self-funded and paid for by people who actually use it. So if the feds want to provide medicare, revenues must match expenditures.

Further, all such activities should be open to competition on a level playing field. If you want private health insurance instead of medicare, you can opt out. If Fedex wants to go head-to-head with the post office on first-class mail, let them go for it. If you want to send your kids to private schools, then you don't have to pay for the government schools.

Strictly speaking, government shouldn't be doing things that can be done privately, but I wouldn't object as long as the provisions of user fees and competition apply. This would assuage those who believe that HMOs, for example, are out to screw everyone.

Most everything run by government is a mess because it becomes a political issue and operates as a near-monopoly that is totally unresponsive to consumers. A one-size-fits-all mentality applies. If the government ran the restaurants, we'd all be arguing over whether fast food, pizza, Chinese, Thai, or Tex-Mex should be the fare on every menu in the land. Fortunately this isn't the case. But education, medicare, traffic jams, line-ups at the post office and the DMV--these are the wellsprings of endless whining and debating.

[Fmr. Gov. NickG]

Most everything run by government is a mess because it becomes a political issue and operates as a near-monopoly that is totally unresponsive to consumers. A one-size-fits-all mentality applies. If the government ran the restaurants, we'd all be arguing over whether fast food, pizza, Chinese, Thai, or Tex-Mex should be the fare on every menu in the land. Fortunately this isn't the case. But education, medicare, traffic jams, line-ups at the post office and the DMV--these are the wellsprings of endless whining and debating.

In my experience, the services the federal government does provide it provides quite well.  

The US Postal Service is very cheap and dependable, and I've had much better experience with them than I've had with UPS or FedEx.   Lines at the post office are an annoyance, but everything I've ever had sent USPS has arrived basically when I expected it, and I've never had anything lost.  The one time I tried to get something send FedEx Overnight, it got here five days later, and FedEx wouldn't even refund the postage (they said they was no actual overnight guarantee)!  At this point, I will only order items online if the store will ship them USPS.

The federal highway system is also very good.  We have a lot of traffic, as does any society with as many cars as us,  but have you ever compared the quality of our roads to those in other countries!?

Our military is clearly top-notch, as is our medical research.  Social security and medicare have basically solved the epidemic of elderly poverty that plagued our country in the earlly-to-mid 20th century.

The quality of our schools varies widely, depending on the wealth of the community and the competence of the local government.  But I went to an excellent public school system, so obviously governments are capable of providing a good education.

[cwelsch]

Instituting a national sales tax without repealing the Sixteenth Amendment will just end up giving the government a new way to tax us.  I don't trust them to end the income tax.

We should stop working on new taxes and focus on getting rid of the old ones.

[swarch]

Most everything run by government is a mess because it becomes a political issue and operates as a near-monopoly that is totally unresponsive to consumers. A one-size-fits-all mentality applies. If the government ran the restaurants, we'd all be arguing over whether fast food, pizza, Chinese, Thai, or Tex-Mex should be the fare on every menu in the land. Fortunately this isn't the case. But education, medicare, traffic jams, line-ups at the post office and the DMV--these are the wellsprings of endless whining and debating.

In my experience, the services the federal government does provide it provides quite well.  

The US Postal Service is very cheap and dependable, and I've had much better experience with them than I've had with UPS or FedEx.   Lines at the post office are an annoyance, but everything I've ever had sent USPS has arrived basically when I expected it, and I've never had anything lost.  The one time I tried to get something send FedEx Overnight, it got here five days later, and FedEx wouldn't even refund the postage (they said they was no actual overnight guarantee)!  At this point, I will only order items online if the store will ship them USPS.

The federal highway system is also very good.  We have a lot of traffic, as does any society with as many cars as us,  but have you ever compared the quality of our roads to those in other countries!?

Our military is clearly top-notch, as is our medical research.  Social security and medicare have basically solved the epidemic of elderly poverty that plagued our country in the earlly-to-mid 20th century.

The quality of our schools varies widely, depending on the wealth of the community and the competence of the local government.  But I went to an excellent public school system, so obviously governments are capable of providing a good education.

I'm glad that you're satisfied with the quality of many government services. But what about people who aren't? Would you allow them the option of shopping elsewhere without having to pay twice?

[Fmr. Gov. NickG]

Most everything run by government is a mess because it becomes a political issue and operates as a near-monopoly that is totally unresponsive to consumers. A one-size-fits-all mentality applies. If the government ran the restaurants, we'd all be arguing over whether fast food, pizza, Chinese, Thai, or Tex-Mex should be the fare on every menu in the land. Fortunately this isn't the case. But education, medicare, traffic jams, line-ups at the post office and the DMV--these are the wellsprings of endless whining and debating.

In my experience, the services the federal government does provide it provides quite well.  

The US Postal Service is very cheap and dependable, and I've had much better experience with them than I've had with UPS or FedEx.   Lines at the post office are an annoyance, but everything I've ever had sent USPS has arrived basically when I expected it, and I've never had anything lost.  The one time I tried to get something send FedEx Overnight, it got here five days later, and FedEx wouldn't even refund the postage (they said they was no actual overnight guarantee)!  At this point, I will only order items online if the store will ship them USPS.

The federal highway system is also very good.  We have a lot of traffic, as does any society with as many cars as us,  but have you ever compared the quality of our roads to those in other countries!?

Our military is clearly top-notch, as is our medical research.  Social security and medicare have basically solved the epidemic of elderly poverty that plagued our country in the earlly-to-mid 20th century.

The quality of our schools varies widely, depending on the wealth of the community and the competence of the local government.  But I went to an excellent public school system, so obviously governments are capable of providing a good education.

I'm glad that you're satisfied with the quality of many government services. But what about people who aren't? Would you allow them the option of shopping elsewhere without having to pay twice?

It depends on the industry.  Certain industries have supply and demand characteristics that make them what economists term "natural monopolies".  Roads are certainly  a natural monopoly, and other industries commonly cited in this category are utilities, public transportation, defense, and pharmaceutical research.

These industries, due to start-up costs or economies of scale, are most efficiently operated as monopolies.  Market competition in these industries actually raises prices and decrease quality.  However, for-profit monopolists can extract excessive prices from consumers and provide less than efficient market supply, so the only truly efficient solution for these industries is a non-for profit monopoly that determines prices and quantities based on maximizing public utility rather than maximizing profits.

Our capitalist system often tries to solve the problem of natural monpolies by granting monopolies to for-profit enterprises but heavily regulating them...this is why you don't have a choice about what company supplies your electricity.  But a better solution would simply be to nationalize these industries, if we were willing to let go of our fetishistic attachment to capitalism-at-all-costs.

[swarch]

I'm glad that you're satisfied with the quality of many government services. But what about people who aren't? Would you allow them the option of shopping elsewhere without having to pay twice?

It depends on the industry.  Certain industries have supply and demand characteristics that make them what economists term "natural monopolies".  Roads are certainly  a natural monopoly, and other industries commonly cited in this category are utilities, public transportation, defense, and pharmaceutical research.

These industries, due to start-up costs or economies of scale, are most efficiently operated as monopolies.  Market competition in these industries actually raises prices and decrease quality.  However, for-profit monopolists can extract excessive prices from consumers and provide less than efficient market supply, so the only truly efficient solution for these industries is a non-for profit monopoly that determines prices and quantities based on maximizing public utility rather than maximizing profits.

Our capitalist system often tries to solve the problem of natural monpolies by granting monopolies to for-profit enterprises but heavily regulating them...this is why you don't have a choice about what company supplies your electricity.  But a better solution would simply be to nationalize these industries, if we were willing to let go of our fetishistic attachment to capitalism-at-all-costs.

The number of "natural monopolies" is usually exaggerated to put it mildly. Pharmaceutical research is competitive right now, and it would be more so if the FDA didn't create such burdensome barriers to entry.

Roads aren't a natural monopoly, at least not when you need to travel a reasonable distance. There are usually alternative routes that would enable competition. Dallas and Toronto, for example, have freeways and tollways that can sometimes be used interchangeably. They're not private, but they could be, and they give you the option of driving for "free" or paying and reaching your destination sooner. Both use transponders so that you don't have to stop at toll booths.

I'm about to move to Dallas and was surprised to learn that I had to choose an electricity supplier. The grid is a monopoly, but not the power itself. Even the grid could be opened to competition, in the same way that there are competing long-distance phone networks. At some point the grid becomes a monopoly, say when it reaches a subdivision, where the homeowner's association could own it, just like some local roads. The association would contract for its maintenance, as they do to maintain their roads and public areas.

Utilities aren't natural monopolies but appear to be because some government decided to make them so, often as the result of industry lobbying. Undoing these artificial monopolies can be challenging but is ultimately worthwhile. Look at what's happened to the price of long-distance phone service and airfare since these industries were deregulated. Neither is local transportation a natural monopoly: choices include taxis, buses, and commuter trains. Again, governments have decreed that these things be monopolies, either by licensing them (again the result of lobbying, as with taxis) or by taking them over and running them at a loss, making it look like competition wouldn't work.

Is defense a monopoly? Not at the local level, where rent-a-cops outnumber police even now. Defense contracting is competitive but susceptible to pork, corruption, and other inefficiencies, which is standard for large government programs where there is little incentive to manage costs. But with very few exceptions, it's not hard to find market-based solutions that provide better service and freedom of choice at a lower price.