Planet Money found 6 economic policies that have broad support from economists all over the spectrum, but could pretty much never get political support...
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Tuesday's show presented the common-sense, no-nonsense Planet Money economic plan — backed by economists of all stripes, but probably toxic to any candidate that might endorse it.
You can still listen to the show, but we've had some requests for a post with our six-step plan spelled out in brief.
So here they are, along with a few words about each of the economists who helped craft it:
The proposals
One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?
Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.
Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
Five: Tax carbon emissions. Yes, that means higher gasoline prices. It's a kind of consumption tax, and can be structured to make sure it doesn't disproportionately harm lower-income Americans. More, it's taxing something that's bad, which gives people an incentive to stop polluting.
Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.
There you have it, six major proposals that have broad agreement, at least among economists. Though we should note that there were some pretty significant quibbles about just how to implement the income-tax and carbon-tax proposals.
The economists
Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., and widely published blo "You could probably describe me as left of center. It'd be fair."
Russ Roberts, George Mason University economics professor. "In the grand spectrum of economic policy, I'm a pretty hard core free market guy. I'm probably called a libertarian."
Katherine Baicker, professor of health economics at Harvard University's Department of Health Policy and Management. We simply called her a centrist on the show.
Luigi Zingales, professor of entrepreneurship and finance and the University of Chicago's Booth School of Business. "What I like to say is that I'm pro-market, but not necessarily pro-business."
Robert Frank, professor of management and economics at Cornell University's Johnson Graduate School of Management. "I'm a registered Democrat. I think of myself as a radical pragmatist."
Post by secretlyevil on Jul 23, 2012 8:17:19 GMT -5
Does consumption tax = flat tax? I.e. households are charged 7% tax across the board which means the higher the household incomes/worth; the more money? I have to consult the Google. With things like this, I can tell this was a bad morning to have not stopped at Starbucks.
Consumption tax + VAT? I would support these and see some of them cominging to our next tax restructing. With the current interest rates so low, those who have recently taken out a mortgage most likely wiill not be deducting interest for long even if there areno changes. The taxing of employer provided insurance has already been mentioned a few times and I see that as a real possibility as well.
I think a consumption tax is a fancier way of saying sales tax.
That's interesting to me that they'd put making marijuana legal into a list of tax solutions. I mean, I do get the argument that you can tax the drugs and reduce crime and all that, but it doesn't seem like it would have fiscal impacts anywhere near the other 5 options.
Consumption instead of income/payroll is drastic and difficult to make progressive, but I could get on board.
I was thinking about how much #1 would suck for us and I wonder how much it's keeping California and maybe New York afloat. Our federal tax rate is super low, but we make up for it in state taxes. I wonder if HCOL would be less feasible for a lot of ppl w/o the MID.
Sales and VAT taxes are consumption taxes, but you could also do something filed annually like we do now where you take income and subtract savings, and the difference is your consumption. Doing it that way lets you do other things to make it more progressive, like exemptions, deductions, etc.
I could get behind 5 of the 6. The one that concerns me is #3. I'm jaded enough by corporate greed that I don't necessarily trust people at the top to use the extra money to reinvest in their business; I could just see quite a few head honchos stuffing that extra money into their own pockets.
Yes, Dean Baker is left of center. Also, I love the concept of being a "radical pragmatist" because that seems to sum up how I see myself, or at least that to which I aspire.
I'm pleased to see that I agree with all of these.
Paul Krugman, OTOH, does not like this thread, and has called for government funding to have it removed.
I could get behind 5 of the 6. The one that concerns me is #3. I'm jaded enough by corporate greed that I don't necessarily trust people at the top to use the extra money to reinvest in their business; I could just see quite a few head honchos stuffing that extra money into their own pockets.
I could get behind 5 of the 6. The one that concerns me is #3. I'm jaded enough by corporate greed that I don't necessarily trust people at the top to use the extra money to reinvest in their business; I could just see quite a few head honchos stuffing that extra money into their own pockets.
But if they do that, you tax it as their income.
But what if there's no more income tax like one of the other above suggestions? Or would the consumption tax somehow cover all this?
But what if there's no more income tax like one of the other above suggestions? Or would the consumption tax somehow cover all this?
And based on what you said above, if they put it in their savings wouldn't that reduce their consumption so they wouldn't be taxed on it? Or am I misunderstanding?
This question totally depends on how you structure a potential consumption tax.
Post by secretlyevil on Jul 23, 2012 9:03:38 GMT -5
::has had half a can of Coke::
Consumption = sales tax makes way more sense. I'm not a big fan because a higher sales tax on certain things wouldn't affect higher household incomes as it would for those who are lower income. I'm thinking food and other necessities.
I really believe a flat income tax for the most part is a better answer.
So let's talk about which groups would hate any of these:
- Homeowners (though I'm a homeowner and would support #1) - Pot haters - Almost anyone who drives a car, especially in areas where you can't get anywhere without a car?
So let's talk about which groups would hate any of these:
- Homeowners (though I'm a homeowner and would support #1) - Pot haters - Almost anyone who drives a car, especially in areas where you can't get anywhere without a car?
But maybe over time it will increase public transportation and make it a better system overall.
So let's talk about which groups would hate any of these:
- Homeowners (though I'm a homeowner and would support #1) - Pot haters - Almost anyone who drives a car, especially in areas where you can't get anywhere without a car?
But maybe over time it will increase public transportation and make it a better system overall.
I can't support #1 because I just bought a house and I want my damn deduction!
It's all about me.
These two points are exactly why these kids of policies are super difficult to enact - current behavior is already predicated on the way things are structured now, and a change in tax structure puts an burden on people which may or may not be fair, and certainly would create economic hardship.
The consumption tax is essentially the Fair Tax proposal. It's an inclusive sales tax, but individuals are provided with a prebate of spending up to the 3x times poverty level -- so all basics can be bought without the tax. Everything is taxed, including food, but the rationale is that rich people buy more of the basics so if you didn't tax them they would get an unfair benefit. I'm a huge fan of the Fair Tax.
I always assume in these discussions that there would be some sort of extended sunset clause for almost any major tax code overhaul. These changes are politically difficult enough as it is without easing current voting beneficiaries in on a gradual basis.
I always assume in these discussions that there would be some sort of extended sunset clause for almost any major tax code overhaul. These changes are politically difficult enough as it is without easing current voting beneficiaries in on a gradual basis.
I'm not in favor of consumption taxes, but I would like to see the mortgage interest deduction gone. I'm OK with scrapping the employer-provided health insurance deduction only with a strengthened individual market. If some of the ACA's protections prove to be successful, then I'd be fine with that switch.
I think people over-sell the benefits of legalizing pot. Don't get me wrong, I think it should be legalized, or at the very least, decriminalized. I just don't think it's going to be a meaningful source of tax revenue. For example (anecdote alert!) I know someone that gets a prescription annually, but doesn't buy the pot from the regulated pot clubs. He gets the prescription to cover himself in case of random drug testing at work, but prefers to buy underground since it's cheaper. The underground networks are pretty strong and aren't just going to go away if pot is legal.
Thanks to boiler and y4m for more information on the consumption tax - I hadn't really thought much about how they might be implemented beyond a basic sales tax.
Count me in as someone who drives a car (but also pays more to ride a bus, largely for ideological reasons) but would welcome a large hike in gasoline taxes. Take some time to phase them in, of course. But we would reap so many health, environmental, and ultimately economic benefits from driving less that I think it's one of the most important changes we could make to our tax code.
Post by mominatrix on Jul 23, 2012 12:27:31 GMT -5
I don't know if I can fully articulate why, but I'm not a fan of 1-4.
I just find it difficult to believe that this would make the system more progressive than it is.
The mortgage interest deduction is a huge boon to middle class home ownership.
The deduction for health insurance is an incentive for employers to provide coverage. Using the tax code as a means to provide incentives to behaviors we like is a long-recognized use. And, I think a good one.
I think it's hilarious that we want to eliminate corporate taxes. They're people for purposes of the first amendment, but not for purposes of paying taxes. That's rich.
And I find it really hard to believe that the elimination of income and payroll taxes wouldn't end up being incredibly regressive.
Maybe I'm more lefty than mr. "left of center" economist.
...and I'm wondering if there's somebody more left than merely "left of center" who they could have asked about this stuff, to see if they truly were full-spectrum-unity-horses. Maybe Richard Wolff?
The mortgage interest deduction is a huge boon to middle class home ownership.
The deduction for health insurance is an incentive for employers to provide coverage. Using the tax code as a means to provide incentives to behaviors we like is a long-recognized use. And, I think a good one.
As a renter whose employer doesn't offer health insurance, it chaps my ass that I have to pay significantly higher taxes that someone else who earns the same as me, but owns their home and gets employer sponsored health care.
Part of the reason I can't afford a home because of my outrageous health insurance costs.
Why do people in privileged positions get to pay lower taxes than me?
The mortgage interest deduction is a huge boon to middle class home ownership.
The deduction for health insurance is an incentive for employers to provide coverage. Using the tax code as a means to provide incentives to behaviors we like is a long-recognized use. And, I think a good one.
As a renter whose employer doesn't offer health insurance, it chaps my ass that I have to pay significantly higher taxes that someone else who earns the same as me, but owns their home and gets employer sponsored health care.
Part of the reason I can't afford a home because of my outrageous health insurance costs.
Why do people in privileged positions get to pay lower taxes than me?
This is why I am also against lifestyle taxes (as I call them). Kids? Why should you get all sorts of tax credits. Home? Same. And on and on,
I don't know if I can fully articulate why, but I'm not a fan of 1-4.
I just find it difficult to believe that this would make the system more progressive than it is.
The mortgage interest deduction is a huge boon to middle class home ownership.
Approximately 75% of the mortgage interest deduction goes to the top 20% of earners. This is welfare for people who, in most instances, don't need it. Moreover, it incentivizes debt on a grand scale. Have we learned nothing from the past four years?