One more nerdy comment: Even a Pigou tax like taxing net emissions of CO2 also has a deadweight loss; people have to adjust to the new structure of relative prices, but the benefit or reducing the externality is greater, so no _net_ DWL.
Great discussion here Sam. It’s interesting how the most “popular taxes” are also the most harmful.
If the goal is growth, corporate income and personal taxes should be abolished. Consumption taxes, like a VAT are better (if imperfect). New essay on VAT coming on this at Risk & Progress soon.
Interesting that property taxes, of one variant or another, seem to be best over. This makes me wonder if the ideas posited by Eric A. Posner and Eric Glen Weyl have merit.
They suggested taxing literally everything that is owned, from cars, homes, to refrigerators, via Harberger taxation, with rates ranging from 2-7 percent. This would transform all property from a binary, either private or public, into a spectrum.
Leaving aside the obvious administrative challenges, a small levy like this can have a positive impact by balancing investment incentives with allocative efficiency: https://www.lianeon.org/p/the-dark-side-of-property
Of course, none of this can happen so long as elected politicians are in charge.
As someone who has to pay a car tax, it's kind of just an income tax. When you're considering getting another car so a spouse can work the car tax makes you think "eh, let her just stay home with the kids".
It's also a kind of backdoor tax on children (when you have more children you need a bigger more expensive car, which is no taxed more).
What ends up happening with VAT type stuff is they try to get all sorts of exceptions for things that people need like groceries or childcare or whatever, but the exception game has its own issues.
Anyway, an introduction of a VAT would probably mean the government could get away with a higher % of taxes relative to GDP, rather than say replacing the income tax. So I'm wary.
Marx and Freidman notwithstanding I don't think a land tax will work at scale.
My version of taxation is:
Eliminate all taxes on business income and impute it to owners.
Tax non-saved, non-reinvested income (i.e., “consumption”) at sharply progressive rates so as to collect more than is currently collected by income and business taxes combined.
Raise the EITC.
Replace the wage tax with a VAT that fully funds Social Security, Medicare, Medicaid, more generous unemployment benefits (whose levels and duration are tied to unemployment levels), and a child allowance. [https://thomaslhutcheson.substack.com/p/socia-insurance-20]
Tax net emissions of CO2 with revenue rebated pro rata.
Tax revenues should be enough that deficits < Σ(expenditures with NPV>0)
***
DBCF is just a VAT applied only on businesses and has no advantages except less visibility over a VAT.
I really want to hear your take Sam. I recently revamped my discussion on LVT and it turned out that it was harder to calculate Land Value than I had initially realized.
Why would a land tax not work at scale? Do you just mean it's not large enough? Because it's still the most efficient tax with near zero deadweight loss) (barring pigouvian taxes which have negative loss). Regardless of its magnitude, every dollar you tax with LVT is a dollar less you have to tax with something else, so might as well do it.
The problem is calculating the land rent. After doing a deep dive, the math starts getting very fuzzy. So while we can tax land and we should, we probably can't do it accurately enough to raise enough revenue to eliminate other kinds of taxes.
One more nerdy comment: Even a Pigou tax like taxing net emissions of CO2 also has a deadweight loss; people have to adjust to the new structure of relative prices, but the benefit or reducing the externality is greater, so no _net_ DWL.
Great discussion here Sam. It’s interesting how the most “popular taxes” are also the most harmful.
If the goal is growth, corporate income and personal taxes should be abolished. Consumption taxes, like a VAT are better (if imperfect). New essay on VAT coming on this at Risk & Progress soon.
Interesting that property taxes, of one variant or another, seem to be best over. This makes me wonder if the ideas posited by Eric A. Posner and Eric Glen Weyl have merit.
They suggested taxing literally everything that is owned, from cars, homes, to refrigerators, via Harberger taxation, with rates ranging from 2-7 percent. This would transform all property from a binary, either private or public, into a spectrum.
Leaving aside the obvious administrative challenges, a small levy like this can have a positive impact by balancing investment incentives with allocative efficiency: https://www.lianeon.org/p/the-dark-side-of-property
Of course, none of this can happen so long as elected politicians are in charge.
As someone who has to pay a car tax, it's kind of just an income tax. When you're considering getting another car so a spouse can work the car tax makes you think "eh, let her just stay home with the kids".
It's also a kind of backdoor tax on children (when you have more children you need a bigger more expensive car, which is no taxed more).
What ends up happening with VAT type stuff is they try to get all sorts of exceptions for things that people need like groceries or childcare or whatever, but the exception game has its own issues.
Anyway, an introduction of a VAT would probably mean the government could get away with a higher % of taxes relative to GDP, rather than say replacing the income tax. So I'm wary.
Marx and Freidman notwithstanding I don't think a land tax will work at scale.
My version of taxation is:
Eliminate all taxes on business income and impute it to owners.
Tax non-saved, non-reinvested income (i.e., “consumption”) at sharply progressive rates so as to collect more than is currently collected by income and business taxes combined.
Raise the EITC.
Replace the wage tax with a VAT that fully funds Social Security, Medicare, Medicaid, more generous unemployment benefits (whose levels and duration are tied to unemployment levels), and a child allowance. [https://thomaslhutcheson.substack.com/p/socia-insurance-20]
Tax net emissions of CO2 with revenue rebated pro rata.
Tax revenues should be enough that deficits < Σ(expenditures with NPV>0)
***
DBCF is just a VAT applied only on businesses and has no advantages except less visibility over a VAT.
Seems reasonable to me!
And I think most tax wonks would be approximately fine with this plan, simply because there's a lot of agreement on reasonable tax policy.
This isn't really the place to talk land value tax, but I do think it can work! I have another post on this that I've been putting off.
I really want to hear your take Sam. I recently revamped my discussion on LVT and it turned out that it was harder to calculate Land Value than I had initially realized.
Why would a land tax not work at scale? Do you just mean it's not large enough? Because it's still the most efficient tax with near zero deadweight loss) (barring pigouvian taxes which have negative loss). Regardless of its magnitude, every dollar you tax with LVT is a dollar less you have to tax with something else, so might as well do it.
I wrote about this a bit here if you are interested: https://www.lianeon.org/p/just-tax-the-land
The problem is calculating the land rent. After doing a deep dive, the math starts getting very fuzzy. So while we can tax land and we should, we probably can't do it accurately enough to raise enough revenue to eliminate other kinds of taxes.