LC 2.28 Resolution to Establish the Budget of the Lincoln Government (Debating)

[Fmr. Representative Encke]

Does the carbon tax include the reduction in carbon use due to the tax?

Yes, it should, since the original number that Wallace provided for the Fremont tax bill was derived from a Brookings cost analysis that factored in the reduction of carbon emissions.

[Fmr. Representative Encke]

Reposting my analysis from the GM Office thread:

Preliminary Analysis of Pyro's Tax Plan

The following contains some analysis of Pyro's tax plan, which he suggested to me via Discord a little over a week ago. The plan contained:

[1] corporate tax brackets of 5% (100K-1M), 10% (1M-10M), and 15% (10M+),
[2] a 30% cap on itemized deductions for households making over $250,000,
[3] equivalent treatment of capital gains and income,
[4] estate tax brackets of 15% (10M-50M) and 20% (50M+),
[5] a 2% tax on alcohol and tobacco products,
[6] a carbon tax akin to Fremont's (already passed in the legislature),
[7] a 1% financial transactions tax on all stock trades,
[8] a 5% tax on covered liabilities for institutions with 50B+ in total assets
[9] a 10% increase to the luxury tax (previously at 15%)
[10] a 1% wealth tax levied on the top 0.1%

Combined, items 1, 2, 3, 4, 5, 6, 9 and 10 generate roughly 171.9 billion dollars in revenue (for reference, the Lincoln deficit is currently around 244 billion). Items 7 and 8 are much, much harder to quantify without more details about the nature of these proposals (which should probably have their own detailed bills). In particular, the suggested 1% FFT seems rather high. Sweden's famous FFT was of similar magnitude, had the result of pushing most trading overseas, and generated less than 5% of initial revenue estimates in any given year.

[Fmr. Representative Encke]

Ok, now we need to discuss whether we are going to include all those taxes in the budget or just a few of them. I am personally fine with all of them except the FTT (which should be of 0.1% or possibly a bit lower, not 1%)

With all the items in there, including the FTT and point 8, we should pretty much be able to close the hole entirely.

Even if we don't count those, we would only be 30 billion short, at which point small cuts or small further tax increases could get us through. Or we could just choose to have a small deficit and go for a 2/3 override.

Small correction, the carbon tax was included in this analysis, since it was part of the tax plan that Pyro gave me. I didn't notice that you'd already factored it into the budget. So we are actually around 70 billion short still.

[Fmr. Representative Encke]

Im not sure if this was mentioned already but the federal tax law is currently 39.1% corporate tax rates which is already one of the highest in the world and then adding another 15% tax for Lincoln's corporations will make Lincoln's corporations one of the least competitive in the entire world forcing them to increase prices which will only create a horrible loop of destroying corporations in Lincoln which in the end will just hurt Middle Class families.

We can stay competetive with a 39.1% but a 52.% is like 60% more than the OECD avg and a direct 16% increase over the 2nd highest which is Japan.

Current federal law is 28%.

[Fmr. Representative Encke]

Im not sure if this was mentioned already but the federal tax law is currently 39.1% corporate tax rates which is already one of the highest in the world and then adding another 15% tax for Lincoln's corporations will make Lincoln's corporations one of the least competitive in the entire world forcing them to increase prices which will only create a horrible loop of destroying corporations in Lincoln which in the end will just hurt Middle Class families.

We can stay competetive with a 39.1% but a 52.% is like 60% more than the OECD avg and a direct 16% increase over the 2nd highest which is Japan.

Current federal law is 28%.

Ok so it was lowered to a more reasonable amount through a federal bill? or was I looking at the wrong numbers?

https://uselectionatlas.org/AFEWIKI/index.php/Corporate_Tax_Reform_Bill_of_2016

This was where it was lowered to 28% (the bill itself is sort of bizarre and reads like a campaign platform).

[Fmr. Representative Encke]

Im not sure if this was mentioned already but the federal tax law is currently 39.1% corporate tax rates which is already one of the highest in the world and then adding another 15% tax for Lincoln's corporations will make Lincoln's corporations one of the least competitive in the entire world forcing them to increase prices which will only create a horrible loop of destroying corporations in Lincoln which in the end will just hurt Middle Class families.

We can stay competetive with a 39.1% but a 52.% is like 60% more than the OECD avg and a direct 16% increase over the 2nd highest which is Japan.

Current federal law is 28%.

So combining the federal and regional corporate tax we would be at 43% for the highest bracket? (28+15)

Correct (sort of).

[Fmr. Representative Encke]

Im not sure if this was mentioned already but the federal tax law is currently 39.1% corporate tax rates which is already one of the highest in the world and then adding another 15% tax for Lincoln's corporations will make Lincoln's corporations one of the least competitive in the entire world forcing them to increase prices which will only create a horrible loop of destroying corporations in Lincoln which in the end will just hurt Middle Class families.

We can stay competetive with a 39.1% but a 52.% is like 60% more than the OECD avg and a direct 16% increase over the 2nd highest which is Japan.

Current federal law is 28%.

So combining the federal and regional corporate tax we would be at 43% for the highest bracket? (28+15)

Correct.

Are corporate taxes not considered SALT for corporations?

Unclear if this applies to regions. Will look into relevant federal statute.

[Fmr. Representative Encke]

Im not sure if this was mentioned already but the federal tax law is currently 39.1% corporate tax rates which is already one of the highest in the world and then adding another 15% tax for Lincoln's corporations will make Lincoln's corporations one of the least competitive in the entire world forcing them to increase prices which will only create a horrible loop of destroying corporations in Lincoln which in the end will just hurt Middle Class families.

We can stay competetive with a 39.1% but a 52.% is like 60% more than the OECD avg and a direct 16% increase over the 2nd highest which is Japan.

Current federal law is 28%.

So combining the federal and regional corporate tax we would be at 43% for the highest bracket? (28+15)

Correct.

Are corporate taxes not considered SALT for corporations?

Unclear if this applies to regions. Will look into relevant federal statute.

A quick search of the wiki reveals no equivalent of the SALT deduction at the regional level. Perhaps someone who's been around longer than I have can comment on this and/or correct me if I'm wrong.

[Fmr. Representative Encke]

Trying to think of more ways to raise more revenue, I am surprised at how much revenue the property tax raises, almost as much as the income tax! That "feels" off for some reason.

Property taxes do raise a significant amount of revenue IRL (for instance, NY state has an average effective property tax rate of 1.65% and raises 55+ billion dollars in revenue annually). In fact, the sum of the RL property tax revenues in Lincoln's constituent states amounts to around 200 billion, with an average effective property tax rate of somewhere around 1.84% per state iirc.

[Fmr. Representative Encke]

Trying to think of more ways to raise more revenue, I am surprised at how much revenue the property tax raises, almost as much as the income tax! That "feels" off for some reason.

Property taxes do raise a significant amount of revenue IRL (for instance, NY state has an average effective property tax rate of 1.65% and raises 55+ billion dollars in revenue annually). In fact, the sum of the RL property tax revenues in Lincoln's constituent states amounts to around 200 billion, with an average effective property tax rate of somewhere around 1.84% per state iirc.

Wait, IRL Lincoln's constituent states get somewhere around 200 billion, yet here we only get 181 billion from the property tax.

I imagine it's probably a question that has no answer, but what are the current property tax brackets in Lincoln IRL? (or since they change from state to state, in NY State as an example, which I guess does get a ton of revenue because NYC is expensive but might also have more revenue)

A property tax increase might be a good idea even if I worry about possible effects in housing.

The difference likely comes from the fact that, based on some rough estimates of property ownership and population in each of the given brackets, the 'average' effective rate of the in-game brackets in Lincoln is around 1.7%, which is ever so slightly lower than the RL average (which, as I mentioned previously, was around 1.84%).

Lincoln's weird income-based property tax brackets are also a factor that make precise analysis difficult. There isn't really any good data on property ownership in each income bracket so estimates are rather rough. I did two separate analyses, each using two different data sets; one yielded 159 billion and the other 181 billion. Both were below the 200 billion obtained by adding the state revenues, and I took the higher estimate.

[Fmr. Representative Encke]

Analysis of the last two parts of Pyro's tax plan.

Note that, following Mr. R's concerns, Pyro altered the covered liabilities fee to a tax on 5% of gross income derived in Lincoln by financial institutions with combined total assets greater than $250 Billion. Negative economic effects of the FTT have been taken into account in that estimate.

[Fmr. Representative Encke]

The funding raised by the FTT seems awfully low.

I am not sure how comparable it is, but a similar proposal in the EU, which much lower tax rates (0,1% and 0,01% depending on what got taxed) raised 57.1 billion € according to the estimates.

https://en.wikipedia.org/wiki/European_Union_financial_transaction_tax#Tax_rate_and_revenues

Yes, Lincoln is not the EU, but I would expect a tax like that to raise $20B give or take a couple billion with the lower taxes of 0.1%; let alone Pyro's rate 10 times higher.

Are the negative effects of the FTT that large that they basically throw financial transactions to a complete halt and there is nothing to tax? If so there must be a happy medium where we actually get more than just 8 billion (0,1%? 0,025%?).

Pyro's FTT is only on shares. The EU proposal includes bonds and derivatives as well. The economic effects would actually be more severe if derivatives were included.

[Fmr. Representative Encke]

Amendment

PROPOSED TAXES

Excise Taxes
Gas:
Lowest 20% earners-5¢/g
Second lowest 20%- 15¢/g
Mid 40%-60%- 30¢/g
60-80%- 40¢/g
Upper 20%- 60¢/g


 
Diesel:
Lowest 20% earners-20¢/g
Second lowest 20%- 30¢/g
Mid 40%-60%- 50¢/g
60-80%- 60¢/g
Upper 20%- 75¢/g

Section II: Identification

1. For future purposes involving sales taxes, the Region of Lincoln will incorporate income into a form of identification
   a. Only applicable to gas and diesel taxes at this time
   b. Identification will be free and given and distributed at a local post office
   c. Information must be automatically changed after the annual time of tax filings

The following friendly amendment not only prevents a regressive taxation scheme that plagued the tax system of France—ultimately leading to the yellow vests—it also brings in more revenue to the Lincoln budget. I am free to talk about specifics and other questions at this time.

Since each bracket contains an equal portion of the population (the population is divided into 5 segments each containing an equal number of people), then one can simply add up the rates, divide by five to get an effective rate, and multiply by Lincoln's yearly gasoline consumption. This means that using a 'straight' analysis (namely, that each bracket consumes a roughly equivalent amount of gasoline), the effective rate is $0.30 for the gas tax and $0.47 for the diesel tax; compare that to the $0.50 and $0.70 rates in the amended version of the budget, and you can see that this proposal actually raises 60% (for the gas tax) and 67.1% (for the diesel tax) of what is raised in the current version of the budget. Of course, one could make the argument that the gasoline consumption within each bracket will not be the same; the poor take public transportation more than the rich, for instance (this brings up the question of how an income-based gas tax would work for local public transit). However, in order to generate the amount of revenue from the current $0.50 and $0.70 taxes, the gasoline distribution by bracket would have to be ridiculously skewed towards the highest bracket in an unrealistic manner.

[Fmr. Representative Encke]

Also, I have a few questions about the proposal:
1) How does this affect vehicles that are owned by businesses rather than individuals?
2) Are we talking per capita income or household income here? If a married couple consists of one person who works and one who doesn't, can the person who works take the other's ID card to bypass a higher tax rate?
3) Tying into 2), how is the ID verified at self-service pumps where paying at the register isn't necessary?
4) Is this identification requirement intended to go into effect immediately upon passage of the FY2019 budget?
5) If someone is unaware of the new law and goes to buy gas, will he/she be unable to do so?

[Fmr. Representative Encke]

Posting this here also:

More Lincoln Property Tax Stuff

I wasn't happy with my rough property tax estimate that I originally did for the Lincoln budget so I decided to root around for some more data and try to get a better estimate (and one that could be applied consistently without a lot of guesswork). Granted, there is still plenty of guesswork (particularly  in assessing the median value of a home within each bracket), but it's still an improvement.

The new assessment results in an estimate that is 19.335 billion dollars more optimistic than my initial one. The deficit in the last budget amendment was 83.62 billion; this change brings that down to 64.29 billion.



These property taxes are already rather high; if you look at the 'yearly tax per household' column, you can see how much a household with the median property value in each bracket would pay per year. Compare this to the values for the RL states in Lincoln:



At the third bracket for Lincoln (100K-250K) we're already looking at values exceeding that of New Jersey, which has the highest property taxes in the nation. If the current property tax rates were doubled, as was proposed, then this would bring the annual tax burden for people in the second bracket (50K-100K) above that of New Jersey. Not sure that that's a good idea.

In any case, if one were to raise the brackets to those proposed (0-1-3-5-7-9 or 0-2-4-6-8), then one would simply apply the relevant multiplier to the numbers displayed in the table above. Doubling the tax for all brackets, for instance, would double the revenue. Both proposals would more than get rid of the deficit, assuming no negative effects. I'll be looking at existing research to try to quantify or otherwise determine possible side effects of large property tax increases.

Up next: thr's extra income tax bracket (as discussed on Lincolncord) and the single-payer estimate

[Fmr. Representative Encke]

I'll finish doing the analysis for thr's extra bracket proposal tomorrow (preliminary estimate: it doesn't really change that much at all, at least compared to the current amendment, which has the top bracket at 0.33).

In the meantime, I found that the US Gov't Spending site has updated some of their FY2019 spending numbers, so healthcare should now be at 252.364 billion. I might go through later and see if any of the other numbers have changed since I last checked.