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I’m not the only one... (Update x2: Trading Payroll for Gas Taxes is Popular)
Posted by: Bryan Pick on Saturday, December 27, 2008

Apparently, as I spent the last few days crafting my posts about an alternative set of policies for the GOP to propose to America, I was not alone in proposing a tax shift toward consumption/carbon.

The New York Times has an editorial up about raising the gas tax considerably with offsetting "tax credits to protect vulnerable segments of the population," and Charles Krauthammer at the Weekly Standard has a new article saying we should pass a substantial gasoline tax with a revenue-neutral cut in the payroll tax.

I like my version better.

Update: Arnold Kling has another variation on the idea:
Instead, I would like to see an immediate and permanent cut in the payroll tax. In the short term, let the deficit go up. In the long term, finance the payroll tax cut by phased-in increases in fuel taxes and in the age of government dependency (known as the retirement age).

The cut in the payroll tax would quickly attack the short-term job creation problem on both the demand and the supply side. It also would be more reliably helpful to the broad middle class.
Update 2: I hadn't seen these before, but Michael Kinsley in Time Magazine made the case for trading payroll taxes for gas taxes too, as did Greg Mankiw:
How about an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax? Make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there is no long-term budget impact. Call it the create-jobs, save-the-environment, reduce-traffic-congestion, budget-neutral tax shift.

Okay, I have to work on the marketing.
 
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Comments
All taxes punish, and all taxes alter human behavior. To a ’small l’ libertarian, the necessity of taxes is to be balanced against minimally intruding or coercing human behavior. Doesn’t a carbon tax coerce human behavior on behalf of some ’worthy’ social goal?

How is such a tax, in any way, "libertarian"?
 
Written By: a Duoist
URL: http://www.duoism.org
I didn’t say the tax itself was libertarian. But a set of broad-based consumption taxes is preferable to payroll taxes, in part because payroll taxes discourage production by punishing labor, at a time when unemployment is rising and consumption-led growth has exhausted itself. So it’s relevant to our current economic problems, and it seems like a politically feasible alternative to massive gov’t expansion.

It would also help accomplish the political task of rolling Social Security, Medicare and the like into the general budget.

And yes, I consider discouraging pollution to be a more worthy social goal than discouraging production. That’s a personal value; feel free to disagree.
 
Written By: Bryan Pick
URL: http://www.QandO.net
Mr. Pick,

Thank you for replying to my comment on your posting, and for kindly encouraging me to disagree.

I entirely agree that the more broadly based any tax is, the more effective it will be at both raising revenue and minimizing corruption. However, taxing consumption as consumption plummets, or taxing carbon as gasoline use is in a free-fall is counter-productive, if the ’goal’ is to switch from income based taxes to consumption based taxes without losing any revenue.

As for the greater ’worthiness’ of pollution-discouragement compared to production-discouragement, the two are not disconnected phenomenon. Pollution is an effect of production, a cost to GDP not yet recognized in any nation’s data, because the difficult to measure cost falls to the "commons." But if, as a "worthy" social goal, pollution-discouragement ever takes precedence over production encouragement, the unintended consequence will be a general impoverishment in the national economy.

The trick is to encourage production, and assess the costs of pollution to the source of the pollution, not to the commons, in as a broadly based manner as possible without government intrusion on behalf of worthy social goals. The carbon tax fails to accomplish this, since any such tax relies upon sharply disputed science of the deleterious effects of an atmospheric trace gas that is itself essential to life as we know it on our blue marble.

Thank you for replying to my comment: you’re exactly correct; we’ll just have to agree to disagree.
 
Written By: a Duoist
URL: http://www.duoism.org
The purpose of taxation should be to fund government, not bring about social change. The latter almost always fails at its goal and then even more intrusion is usually proposed. Have the lessons in ’The Road to Serfdom’ been forgotten?

 
Written By: tkc
URL: http://
My pick for an alternate system is The Fair Tax. It has been well researched and thought out. The Fair Tax Book and the follow-on book explain it in great detail. Your consumption tax idea seems to have hint of it, but the social control aspect of a carbon tax, or any tax, is something I cannot agree with.

What are your thoughts on the Fair Tax?
 
Written By: jjmurphy
URL: http://www.allthatisnecessary.com
I never see mentioned how this consumption tax is going to effect rural country folk. It is all aimed for cities. A lot of not rich people live in the country. They must drive 10,20,30 miles to goto the store.

What I see this as, is a way to farther the sustainable growth movement. A way to make people move to the cities so they can be better controled.Only the rich should be able to own land and live in the country (live the American dream).Right?
 
Written By: SkyWatch
URL: http://
A gas tax would be great. I would be the first guy in line to buy the Chevy Volt or another electric car. He he.

I think Bryan is choosing a carbon tax mainly because he thinks it will attract green support which would be helpful in the politics, not from any efficiency point of view. (I think Value Added Taxes are the best broad consumption tax around - they also hit imports and are rebated from exports.)

The Fair Tax has a major problem: double taxation on savings. If I have $100,000 of savings that I have already paid tax on from the old system, and then we implement the Fair Tax, I will then have to pay 20% tax on my savings again as I spend them.

The only solution I could think of for this problem (besides the Fair Tax people telling me to take one for the team) was to simultaneously implement a new currency, with a 1.2 conversion rate from "old dollars."
 
Written By: Harun
URL: http://
tkc -
The purpose of taxation should be to fund government, not bring about social change. The latter almost always fails at its goal and then even more intrusion is usually proposed. Have the lessons in ’The Road to Serfdom’ been forgotten?
My proposal, and Krauthammer’s, are both about how best to fund government — I proposed two revenue-neutral trade-offs, one cut in the tens of billions of dollars and taxation of a good that is currently banned.

And since I’m interested in the effects of taxation, including (yes) externalities and the effect on production (which is how people address the problem of survival) of behavioral responses to taxation, I doubt I’ve run afoul of "The Road to Serfdom."
-=-=-=-=-
jjmurphy -

I think the FairTax is a bit too ambitious, at least in its current form. While I obviously prefer taxing consumption rather than income, I don’t think we can eliminate the income, payroll, estate and gift taxes and move entirely to a national retail sales tax. The problem is that when you raise retail sales taxes above a certain level (and 30% is above that level, never mind 30% plus state and local sales taxes), tax evasion skyrockets. It’s much, much easier for an LCD HDTV to "fall off the back of a truck" than to pay a retail employee under the table.

That’s part of why my proposal is to rid ourselves of payroll taxes first.
Another reason is that it’s more politically feasible: Democrats don’t have solid ground to stand on to resist the replacement of a regressive tax with another, less regressive tax. They could much more easily muddy the waters on the fairness of the FairTax.
And finally, if we do things this way, we don’t have to get mired in the question of "prebates."
-=-=-=-=-=-
I never see mentioned how this consumption tax is going to effect rural country folk. It is all aimed for cities. A lot of not rich people live in the country. They must drive 10,20,30 miles to goto the store.
I don’t think a consumption tax is inherently hard on rural country folk, unless you’re saying rural folk consume more relative to what they produce than urban/exurban/suburban folk do. If they do, what does that mean to you? Are rural country folk so exceptionally virtuous that they should get other people’s tax dollars to finance their lifestyle?
What I see this as, is a way to farther the sustainable growth movement. A way to make people move to the cities so they can be better controled.Only the rich should be able to own land and live in the country (live the American dream).Right?
I don’t think "better controlling people" is either a stated goal or the likely effect of my preferred tax shift.

If the "American dream" is a certain type and level of consumption, then someone’s going to have to produce the stuff that gets consumed. If you want the big house with the big yard, the two cars, the big TV, etc., that’s great — let’s just not put the cart before the horse. We have to live within our means, and produce equivalent to what we consume. If we don’t, we have to make up the difference somewhere, and that means borrowing (which requires production later, with interest) or stealing from other people; are you comfortable with that? What level of that do you think we can sustain permanently?

Debt-financed, consumption-led growth has led us here: massive deficits, rising unemployment, real estate bubble collapse, and asset-backed securities tanking. What’s worse, a rather significant number of Americans have no savings or other liquid wealth to get through the lean times; rather, they have massive consumer debt.

If we can resolve the matter without falling back on massive (note how I keep using that word) government expansion, bailouts and money-printing, I think we should take our lumps and go for it.
-=-=-=-=-=-=-
Harun -
I think Bryan is choosing a carbon tax mainly because he thinks it will attract green support which would be helpful in the politics, not from any efficiency point of view. (I think Value Added Taxes are the best broad consumption tax around - they also hit imports and are rebated from exports.)
Yes and no. Not only does it make the shift more politically feasible, but it also ends up being fairly broad-based and consumption-oriented, which does have some efficiency arguments going for it.
The Fair Tax has a major problem: double taxation on savings. If I have $100,000 of savings that I have already paid tax on from the old system, and then we implement the Fair Tax, I will then have to pay 20% tax on my savings again as I spend them.
Good point. So your preferred consumption tax would be an income tax that excludes all savings and investment.
The only solution I could think of for this problem (besides the Fair Tax people telling me to take one for the team) was to simultaneously implement a new currency, with a 1.2 conversion rate from "old dollars."
Revaluation of a fiat currency. I foresee some problems with that.
 
Written By: Bryan Pick
URL: http://www.QandO.net
While I still prefer the Fair Tax, warts and all, I am under no illusion it will ever be enacted. It strips way too much power from the politicians. I do fear any system that keeps the current income tax system and puts another tax system alongside it. I just cannot imagine the government discontinuing any current tax. Put on a new one? Sure. Get rid of an old one. No way.

It is fun to speculate, though. The discussion here is much more intelligent than anything you see from Washington.
 
Written By: jjmurphy
URL: http://www.allthatisnecessary.com
I think you just have to give enough people a good enough reason to make the switch.

The problem with the FairTax is that it’s unfeasible, and all the protests of why it should work don’t stand up to the fact of huge rates of tax evasion. It’s very hard to sell people on a national sales tax of more than 30% in addition to what they’re already paying at the state and local levels.

If you want to make electoral inroads against the federal income tax, I suggest you abandon hope of a full switch to a FairTax and look into some of the flat tax proposals out there. Learn them inside and out, figure out who the proposals will appeal to, and start selling it.

I’m more confident that we can sell a few discrete shifts from consumption to production than from a progressive income tax to a flat tax.
 
Written By: Bryan Pick
URL: http://www.QandO.net
You keep losing me by stating a variation of this theme,...

The problem is that when you raise retail sales taxes above a certain level (and 30% is above that level, never mind 30% plus state and local sales taxes), tax evasion skyrockets. It’s much, much easier for an LCD HDTV to "fall off the back of a truck" than to pay a retail employee under the table.

Everyone should be willing to admit that any thing which becomes prohibitive and excessive (i. e. ANY BURDEN PLACED ON THE PEOPLE, whether it’s a sales tax or income tax, or anything!!!) will encourage people (rightfully, in my mind when the burden is as malicious as a tax of nearly any sort) to find ways to avoid being oppressed by it.

Ultimately the burden is evaded to the point where people, jobs, production, consumption,... everything, will be actively removed from the noxious environment and re-located (re-allocated) to friendlier settings.

Quit spending so much of my GD money G-Man! Then you won’t have to try to figure out more palatable ways for me to swallow your $h!te sandwich.
 
Written By: Mark Cancemi
URL: http://
Thanks for your contributions, Mark. Like I said in the other comment thread, I’d love to hack away at spending. Convincing a large enough number of my fellow Americans to want the same thing, and vote that way, is a taller order than I can fill right now.

In the meantime, I’ll say it again for your benefit: the Republican Party could propose this as an alternative to massive increases in government spending, bailouts, and money-printing... which is where the Democrats, who won the election, are planning to take us.
 
Written By: Bryan Pick
URL: http://www.QandO.net
I would prefer a flat income tax that does tax savings and investment income , but only once as regular income, i.e. the corporate income tax is abolished. The cap gains and dividend taxes are abolished. (I think that’s the original proposal anyways.)

If we do want to move to a consumption tax I would suggest a VAT tax. VAT taxes avoid a lot of the "fall off the truck" issues because everyone in the supply chain wants receipts. I believe Europe can have VAT’s up to 20% plus. Its also a great tax to encourage exports because the VAT is fully rebated on those, while imports have to pay VAT upon entry.

BTW, I don’t think converting "old dollars" to "new dollars" at some arbitrary rate would be that hard...many countries have done this and the Euro did something even more complicated without too much chaos. Still, I don’t want a fair tax because I think other ways are better.
 
Written By: Harun
URL: http://
Oh, and the flat income tax has another great advantage for those who want to start cutting government spending. Once its implemented, we could vastly reduce the size of the IRS. That would be part of the marketing for me..."yeah, one downside is thousands of IRS agents will lose their jobs." That’s a feature not a bug if I ever saw one.


 
Written By: Harun
URL: http://
I too would prefer a flat tax, but I’m afraid that’d be much harder to sell than my few suggestions.

I chose a few reforms that I think speak the most to people suffering in the current economic crisis, and I believe electorally feasible.
* The payroll taxes are vulnerable because they’re regressive and they tax labor at a time when people need jobs
* The mortgage interest deduction is vulnerable because it’s possible now to convince people that we’ve overinvested in real estate — and to create an outlet for our money, why not make savings and investment easier (we have an abysmally low savings rate, and the stock market’s taken a serious hit).
* Carbon and general consumption are vulnerable because the Left threw their weight behind a particular brand of environmentalism that decries consumption, especially consumption that emits carbon as a waste product (which is most consumption) and debt-financed consumption is especially abhorrent to them. So they’ve given us an opening to move toward broad-based consumption taxes.

So the Left has undermined the ground they’d need to stand on to oppose these tax shifts. But the Democrats don’t appear to be capable of making these proposals themselves, since they’re predisposed to enlarging government — that’s their "hammer". The Democrats have taken to saying, "Never waste a crisis." Well, we would be well served to steal the initiative.

Accomplishing those reforms I proposed — getting rid of a major interest deduction, cutting taxes on investment (capital gains/dividends), making health insurance an individual’s responsibility and trading payroll taxes (paid partly by firms and partly by employees) for broad-based consumption taxes could move us closer to a flat tax, which is, after all, designed to be a direct, broad-based consumption tax.

Heck, under my proposal, we could make the proposed consumption tax (in part or in full) operate by the flat tax model. I’m open to suggestions.
 
Written By: Bryan Pick
URL: http://www.QandO.net
I agree with you. And since the Dems will be in control, they will have to be the ones to shoot down these ideas and look like meanies or steal them.

I would suggest the GOP come up with ways to present these that the Dems are forced to oppose or support a GOP initiative rather than claiming it was their idea.
 
Written By: Harun
URL: http://
The payroll taxes that we pay now will not cover the promises made by Social Security. It is well documented that Social Security, Medicare, and Medicaid represent approximately a $50 trillon unfunded obligation. Cutting payroll taxes to keep a gasoline tax revenue neutral will only cause this problem to get worse. It already is the 800 lbs. gorilla in the room. Making it a 801 lbs. gorilla in the name of using gasoline taxes to promote social change is a perfect example of ignoring the lessons of ’The Road to Serfdom.’ The solution of more government intervention will make things worse.

 
Written By: tkc
URL: http://
I’d also like to point out that one of the main reasons for a gasoline tax used by many of its proponents is AGW. A theory that is more politics than science as this very blog just demonstrated.
 
Written By: tkc
URL: http://
tkc -

1. I know that at current taxation levels, we end up with unfunded entitlement obligations.

2. I didn’t say we should cut payroll taxes to keep a gas tax revenue-neutral, and the people I quoted didn’t say that either. If anything, they want it the other way around: cut payroll taxes, then raise the gas tax to keep it budget-neutral — because cutting payroll taxes is good, and gas taxes are less bad than payroll taxes.

3. A revenue-neutral tax shift will not make the problems of Social Security any worse. Not even 1/800 worse.

4. Look, I’d like to cut taxes, especially over the long term. I’ve been clear on this point. But if we’re going to tax something, why do you consider it so much worse that we tax gasoline rather than labor? And how am I running afoul of the lessons of "The Road to Serfdom," exactly? Be specific.

5. Frankly, I don’t mind if someone else has a thoroughly wrong reason for supporting a relatively broad-based consumption tax over a tax on labor. In coalition politics, you don’t need everyone to be right; you just need enough people to be on board.
 
Written By: Bryan Pick
URL: http://www.QandO.net
Give em a ’carbon tax’ and they’re going to use it to fix the ’carbon problem’.
And there is no such problem, but that won’t stop them from attempting to fix it.

So, consumption is one thing, don’t link carbon to it or the money will go down a sink hole (and in the case of sequestration, literally down a sink hole) and they’ll have excuses to add MORE taxes for all the other give aways they’re wanting to fund.
 
Written By: looker
URL: http://
I find it hard to believe in phrases such as ’budget neutral’ when their are unfunded obligations running into the tens of trillions of dollars. The concept is essentially meaningless in this context. Thus the comment about turning the 800 lbs. gorilla in the room into a 801 lbs. gorilla in the room. The reason for doing such a thing I think is dubious at best.

’The Road to Serfdom’ warns us about the dangers of central planning. The gasoline tax as proposed reeks of this. When the point of raising the gasoline tax is not to fund government but to bring about a social change then the lesson of the danger of going down this road is missed.

Certainly one can complain that a tax on labor is a bad idea. That does not make a gasoline tax for the sake of social planning a good idea. It is a case of two wrongs not making a right.
 
Written By: tkc
URL: http://
I find it hard to believe in phrases such as ’budget neutral’ when their are unfunded obligations running into the tens of trillions of dollars. The concept is essentially meaningless in this context. Thus the comment about turning the 800 lbs. gorilla in the room into a 801 lbs. gorilla in the room.
You misunderstand: "budget neutral" or "revenue neutral" mean that you raise the same amount of revenue after the change as you did before the change.

For example, imagine that you sell jars of peanut butter and loaves of bread for $2 each, and people always buy equal quantities of peanut butter and bread, no matter what the price difference.
Now imagine that the government has a 50% tax on both peanut butter and bread. They collect $1 on every loaf of bread, and $1 on every jar of peanut butter. The consumer pays a total price of $3 for each product, $6 for the pair. The government collects $2.

A revenue-neutral or budget-neutral change is one that leaves the government with the same revenue afterwards. So let’s say the government eliminates the tax on peanut butter and raises the tax on bread to 100%.

Now, when consumers buy one loaf of bread and one jar of peanut butter, as they always do, they pay no tax on the peanut butter but they pay $2 tax on the bread. The pair of goods still costs $6, and the government still collects $2 in revenue.

Whatever the government is doing with those $2 doesn’t change this equation.

Now, let’s change it up a bit: let’s stipulate that for every 50% tax you put on peanut butter, people buy 20% less of both products than if the rate were 0%. And at the same time, let’s stipulate that for every 50% tax you put on bread, people only buy 5% less of both products.

Then, the smart thing to do (if the government has to collect the revenue somehow, and you want people to enjoy more sandwiches overall) would be to not tax peanut butter at all, and collect all your revenue from bread sales instead.
’The Road to Serfdom’ warns us about the dangers of central planning. The gasoline tax as proposed reeks of this. When the point of raising the gasoline tax is not to fund government but to bring about a social change then the lesson of the danger of going down this road is missed.
The gas tax is no more centrally planned than the payroll tax, so trading one for the other doesn’t send you down the proverbial Road.

The point of raising the gas tax and cutting the payroll tax in a revenue-neutral manner is to fund the same level of government by a different mechanism, a mechanism which is less burdensome on the populace.
Certainly one can complain that a tax on labor is a bad idea. That does not make a gasoline tax for the sake of social planning a good idea. It is a case of two wrongs not making a right.
No, it’s a case of replacing one evil with another lesser evil, because you have the opportunity to do so.
 
Written By: Bryan Pick
URL: http://www.QandO.net
Trading one evil for a lesser one still leaves you with evil. You’ll have to excuse me if I don’t hop on board with that one.

Government is full of perverse incentives and many of them are a product of the tax code. Re-arranging the incentives to something that is more pleasing to you is not a solution. I think it is facade. So I guess we’ll just have to disagree.


 
Written By: tkc
URL: http://
Trading one evil for a lesser one still leaves you with evil. You’ll have to excuse me if I don’t hop on board with that one.
No, I won’t have to excuse you. I think you’re holding out for something you know you can’t accomplish, and trying to wash your hands of anything involving as much compromise as electoral politics.

I’ll excuse you for objecting to my proposals when you tell me what preferable alternative you have to any aspect of my plan — and your proposed alternative will be judged on practicality. Even if you’re just defending the status quo.

But if your core objection is that my proposals don’t convince the electorate to excise all evil, or overcome the electorate by other means, I have to ask how you think more evil could be excised, given the world as it exists now.
Government is full of perverse incentives and many of them are a product of the tax code. Re-arranging the incentives to something that is more pleasing to you is not a solution.
My proposed policies are a solution to a particular problem: how to minimize bad policies through practical politics, specifically electoral politics in this case. If you’re not interested in that problem, you’re in the wrong comment thread.
So I guess we’ll just have to disagree.
We’re already doing that. Either your disagreements have substance, or I won’t respect them.
 
Written By: Bryan Pick
URL: http://www.QandO.net
You talk of compromise with a result that is only less evil. Solutions that leave us with simply a different version of wrong are still wrong.

What I’d like to see is limited government, not a re-arranged version of intrusive government. Sadly, it’ll probably take an economic collapse to get there. In the meantime, putting on a new coat of paint while the foundation continues to crack is an exercise in futility.

Tinkering with the tax code for the sake of pleasing the electorate gets you very little.
 
Written By: tkc
URL: http://
All right, tkc, you’ve worn out your welcome with me.

I’m not interested in how much better you wish things were. I’d like to see truly limited government too; I’d also like to have $10 billion in a tax-free account to spend as I see fit, but I don’t have a realistic plan to achieve that, so who cares?

I’ve tried to propose something that the electorate just might accept as an alternative to massive expansion of government. That is, limiting government a little rather than doing nothing practical to prevent it from expanding.

And how do we get from here to your (undefined) idea of limited government? How are you planning on actually accomplishing limited government? If you haven’t thought that far, please don’t waste anyone’s time whining about how their plans don’t accomplish enough.
 
Written By: Bryan Pick
URL: http://www.QandO.net
http://www.qando.net/details.aspx?entry=2754

Re-arranging the deck chairs by trading one set of intrusions for another is hardly a solution. Pointing this out is not whining.
 
Written By: tkc
URL: http://
Thanks for the link; now please read it. Several elements of my "alternative vision" do exactly what Jon was talking about. In fact, I spoke with Jon earlier today about cutting the payroll tax and raising a carbon tax, and he’s all for it.

Trading payroll taxes for consumption-based taxes is a big honkin’ tax reform, creating a structural change in the economy and lessening the burden on economic growth. If we went as far as I want to go — eliminating the payroll tax, rolling SocSec and Medicare into the general budget, and raising a set of broad-based consumption taxes (including a carbon tax) — that would be a tectonic shift.

You’ll notice that Jon talked about a price mechanism; well, guess what? People notice consumption-based taxes much more than they notice payroll taxes; half of payroll taxes are paid by employers, and the other half is withheld from your paycheck before you even get to touch it. So only the self-employed and people who actually put together payrolls really get a taste of what they’re losing.

But consumption-based taxes, including a carbon tax, are felt fully and directly by individual taxpayers every time they buy anything. That makes Americans more price-sensitive to taxation.

This is not re-arranging the deck chairs, and yes, you are whining. You haven’t put forth a plan that solves anything, you’re just complaining that my proposals don’t do enough.

So please, come up with an alternative, or tell me how my plan could be improved.
 
Written By: Bryan Pick
URL: http://www.QandO.net
The problem does not lie with how much you and I are consuming. The problem lies with how much the govnerment is consuming. If you were arguing for something like eliminating withholding so that people would have to actually write the check for the avarice of government then I would be on board. I doubt many would be happy writing that check.

Hiding it in gas taxes versus hiding it in payroll taxes doesn’t do much for me.
I seriously doubt many people know how much gasoline taxes are so making a $1.75 gallon of gas cost $3.50 will probably only get the attention of people like truckers.

But what if it does get the attention of people and they cut consumption? You’ll probably get your payroll taxes re-instated and the higher gas tax will be left in place.

Sorry, but in my view, not only does this not address the real problem, the size of government, it has the possibility of generating unforseen results that very well could be worse. Yet another lesson of ’The Road to Serfdom’ is that a diverse, modern economy, cannot be centrally planned. When the plan fails, the solution is almost always more planning. I say no.
 
Written By: tkc
URL: http://
The problem does not lie with how much you and I are consuming. The problem lies with how much the govnerment is consuming.
How about, "both of the above"? We consumed ourselves into debt, at both the household and government level, and treated a consumptive asset as an investment—as our means of producing the payment for the rest of our consumption.

Taxing consumption instead of production allows us to save our income and thereby keep some portion of it out of the hands of government.
If you were arguing for something like eliminating withholding so that people would have to actually write the check for the avarice of government then I would be on board. I doubt many would be happy writing that check.
They probably would not be happy doing so, and many would find themselves without enough money at the end of the year to make their payment. This reform is a no-go with the electorate.
Hiding it in gas taxes versus hiding it in payroll taxes doesn’t do much for me.
I seriously doubt many people know how much gasoline taxes are so making a $1.75 gallon of gas cost $3.50 will probably only get the attention of people like truckers.
Well, if that’s your objection, I’ll be happy to tell you that you’re wrong. People buy gasoline frequently, and they notice when the price rises. If we legislated a tax shift of this magnitude, everyone would know about it in short order.

Now, I’ve seen stickers posted on fuel pumps, telling me what the excise tax on gasoline is. It’s good PR for gas stations, because then they get to blame part of the price on the government instead of taking all the heat themselves. I imagine that practice will be more widespread when a gas/carbon/sales tax of much greater magnitude is put in place.
But what if it does get the attention of people and they cut consumption? You’ll probably get your payroll taxes re-instated and the higher gas tax will be left in place.
And your belief in that outcome is based on what? I think that once a tax is eliminated, it’s much harder to bring back, and they’ll just raise consumption taxes a bit more to compensate. That could easily be made an explicit part of the legislation, since revenue-neutrality is part of the deal.
Sorry, but in my view, not only does this not address the real problem, the size of government, it has the possibility of generating unforseen results that very well could be worse.
It generates foreseen results that are better than the status quo, and it also has the possibility of generating unforeseen results that very well could be better. What, do you subscribe to the Precautionary Principle now?
Yet another lesson of ’The Road to Serfdom’ is that a diverse, modern economy, cannot be centrally planned. When the plan fails, the solution is almost always more planning. I say no.
I already told you, this doesn’t involve any more central planning than we already have. And it’s not "planning" anyway — it doesn’t order production or detail who must consume what. It doesn’t set prices, although it does trade the distortion of one price for that of another. And for the last time, it’s an alternative to nationalization and higher taxes! What part of this don’t you understand?

Actually, you’ve convinced me that you’re not interested in understanding my points, and since you’ve shown you’re incapable of listening or responding directly to my points, I’m done trying to convince you.
 
Written By: Bryan Pick
URL: http://www.QandO.net

 
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