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Sunday, September 23, 2012

Our Unhealthy Political Life

Scott Sumner makes two sound, non-partisan proposals that would greatly improve our tax system. The fact neither has any chance of being enacted demonstrates how bad our politics have gotten: it's special interests all the way down.

5 comments:

  1. Well, one sound, non-partisan proposal, anyway. "Eliminate all the income tax loopholes" is extremely vague, considering that the income tax code has to answer a the difficult question of defining "income", and thus what deductions can be counted against it.

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    1. "thus what deductions can be counted against it."

      Well, that would be "no deductions" in Sumner's plan. Defining income is no *more* difficult with no deductions than with some!

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    2. I'm not talking about tax credits/incentives, but about the problem of defining income. Are you really saying that it's a sensible idea that, say, someone filing as a sole proprietor of a restaurant can't deduct the cost of the food he buys?

      Because that was the kind of deduction I'm referring to, and which constitutes all the complexity Sumner wants to wave away.

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  2. Eliminate all tax loopholes? Sound plan?

    Professor Callahan, surely you are not in favour of taxing donations to charity. Are you?

    A charity payment is not personal consumption. It is actually money out of one's own hands for the use of somebody other than that individual.

    The idea that giving $100 to the church is bad because it cuts $35 from your tax bill is baffling - who would pay $65 to save $35? Surely governments can accept allowing people to keep their money so long as it is done for a non-profit cause?

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    1. "Professor Callahan, surely you are not in favour of taxing donations to charity. Are you?"

      No, the tax would be placed on income, regardless of what that income is used for. There are arguments for every single deduction in the tax code. I think the argument for a simple, easy code is stronger, however. And remember, this is only the legal incidence of the tax: the economic incidence is different.

      "The idea that giving $100 to the church is bad because it cuts $35 from your tax bill is baffling..."

      Who said giving money to a church is bad?!

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