I am discussing
these two in the same entry as a lot of subsidies come in the form
of tax credits. First let’s talk about tax reform by starting with
the poster boys Warren Buffet and Mitt Romney.
A lot of people will
claim tax reform will only benefit the rich- however Warren Buffet
claims he pays a lower tax rate than his secretary
The tax issue is one
of the reasons I can’t stand Warren Buffett- he goes on TV
screaming his taxes are to low and asking for the “Buffett Rule”
while in private he seems to believe the real Buffet rule- is “if
you are Warren buffet you don’t pay taxes
http://nypost.com/2011/08/29/warren-buffett-hypocrite/.”
I digress- the two
of them both have such low tax rates because they are able to
structure their business in such a way to avoid as taxes as best as
they can. I don’t blame someone for wanting to do that so my
biggest issue with Mitt was the fact when he had a chance to address
the issue- he avoided details and seemed to quite ignorant on the
subject.
He was proposing to
reduce loopholes and and deductions and lowering the right. When
Obama claimed that this had never been done before- Mitt could have-
stated that both JFK and Ronald Reagan did that.
I consider this to
be the bare minimum that needs to be done with tax reform ideally we
should go farther- and adopt something a long the lines of a flat tax
or sales tax.
Examining the pros
and cons of those tax proposals is beyond the scope of this post- as
this is about why it needs to be done.
The first issue when
discussing tax return is simplicity- I don’t care if some one like
Warren Buffet or Mitt Romany- only pay 10% in taxes but I do care how
they get that rate and this is the first failing of our current tax
system. The amount of loopholes, credits and deductions- the argument
for the lot is to shape behavior and some are designed to favor
certain industries- which is the case with the green energy and
renewable fuel mandates.
Subsidies no matter
what their form is- are designed to give a boost to economic
activities that would otherwise be unprofitable or less profitable.
Let's take the green
energy mandates- the stated goal is to make America carbon neutral by
encouraging bio-fuel, wind and solar power with subsidies.
A person's choice to
buy any of these products should be based completely on their
advantages and disadvantages compared to the alternative and not a
government subsidy or tax credit. Some time the reason their
supporters give in congress is terrifying for example this lobbyist
stating one of the goals of the ethonal mandate is to increase the
price of corn- then he tries to argue it does not effect people
because it was feed corn and not sweet corn.
If the price of corn
were to drop- then perhaps you might be able to cut the budget for
food stamps- by making it so fewer people will qualify. I could hear
some people screaming this might harm the US farm industry- but if
the bottom falls out of the corn market- perhaps farmers will change
crops
or may be some one
will find away to make corn based bio-fuel profitable. I don't know
what is possible- but I do know when the economics side is market
driven- people will save money some how.
This might be cheap
food, cheap fuel or ideally both.
The next area to
simplify the tax system is removing the progressivity. The main
arguments for a progressive tax system are the ideas- that the rich
benefit proportionality more from the government than other people
and the idea the government should be redistributing income with out
thinking that policies like a fiat currency and low interest rates
are leading to inequality, or asking the question do people drop in
and out of income brackets or the negative effects of catering to
envy- like reduced investment, reduced savings, both of which can
lead to reduced employment or the possibility that increased taxes
might just lead to increased prices.
The charts that show
a growing income inequality tend to claim that this trend has existed
since the 1970’s- they will normally blame taxes and come out to
support a tax system that did not exist back then- perhaps there are
other issues could be causing the situation as I fail to see how this complex tax code helps the poor or how taxing someone else more would help me either as I expect them to pass the cost of their higher tax rates to everyone else
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