This morning the National Rifle Association finally made an official statement in response to the Sandy Hook elementary school killings. They say the problem is not enough guns. Guns should be allowed in schools, and in fact that each school should have armed guards.
I am surprised they said anything, but the nature of their response is no surprise, Conservative anti-crime, pro gun folk always believe problems are solved by being tougher, meeting force with greater force, and they have dominated much of the debate in this country the last couple decades.
I don't think putting armed guards at schools is the best answer, but, in the spirit of compromise, I'm ok with armed guards at schools - if the NRA pays for it. Pay for the armed guards with a tax on guns and ammunition. As a taxpayer I am not interested in spending one more dime to support their narrow view of the world. Let the folks that love their guns pay for the consequences of easily available guns.
12/29/12 addendum - Interesting factoid relevant to the NRA arguments that guns aren't the problem, people are. The economist notes that on the same day 26 people died at Sandy Hook Elementary a fellow in Henen province in China, burst into a classroom and injured 23 kids, but no one died. The difference between 26 dead and 23 injured? Sandy Hook shooter had guns, the fellow in China only had a knives. (Econ 12/22/12 p.12)
Friday, December 21, 2012
Thursday, December 20, 2012
Tax Simplification
Now that the election is over, and the fiscal cliff is looming, tax policy is back on the pundit's lips. There is broad agreement across the political spectrum that our tax system is way to complex, often unfair and subjects government to unpredictible wild fluctuations in income. Unfortunately, there are also tax breaks for particular interest groups spread across the political spectrum that makes changes to the system very difficult.
In generall all the proposal's I have heard don't really address the basic underlying flaw I see in the tax system that makes it so complex and convoluted. In the 100 years since the income tax was reinstated (it had existed briefly during the time around the Civil War) the entire system has been based on drawing a distinction between invested capital and income from labor. The theory is you don't want to tax capital because it can be invested to create jobs and wealth.
The distinction is false to begin with because it looks backward to focus on where money came from rather than looking forward to see what the money is actually being used for in. So a wealthy guy with lots of Capital gain can use $500,000 of his wealth for personal living expenses and pay 14% tax on that money, while a person who makes $500,000 in a year by working really hard and long hours is taxed at something like 30% or more on the full amount the income, even though he may invest $300,000 of it.
So in fact our tax system sometimes punishes money being used for investment and rewards the personal consumption of converting investment to personal use.
What if we changed the whole underlying assumption of the tax law, allowed people to create capital accounts, and any money going into a capital account, or generated by the capital account, has no tax consequences? Only money that comes out of the account for personal use is taxed, and it is taxed just like any other income that goes to personal expenses. We target the tax benefit exactly on money being used for investment to reward investment and wealth creation, and target the tax on money used for personal expenses to cover the costs of government.
There could be minimal complexity with maintaining the capital account. All the government would care about is when money goes to personal expenses. As long as you keep pouring the income from the investment back into investment you don't have to engage in complex tax accounting. There would have to be some rules to control the tendency of taxpayers to try to cover personal expenses with transactions in the capital account to avoid taxes, but that would be vastly simpler than the current system involving millions of pages of laws covering depreciation, deductions, characterizing income etc.
We couldn't do this overnight. It would be way to disruptive. So we start by allowing people to create capital accounts while we started closing loopholes and tax benefits in existing law. The capital account would make investing vastly simpler and more efficient so over time investments would migrate into the capital account system. Eventually we could abolish the old system without causing massive disruption in the economy.
This is not an idea that will be an easy sell in Washington. It will take a long term, broad based effort by citizens to raise the idea to a level of credibility that a politician who values his job will be willing to sponsor it.
In generall all the proposal's I have heard don't really address the basic underlying flaw I see in the tax system that makes it so complex and convoluted. In the 100 years since the income tax was reinstated (it had existed briefly during the time around the Civil War) the entire system has been based on drawing a distinction between invested capital and income from labor. The theory is you don't want to tax capital because it can be invested to create jobs and wealth.
The distinction is false to begin with because it looks backward to focus on where money came from rather than looking forward to see what the money is actually being used for in. So a wealthy guy with lots of Capital gain can use $500,000 of his wealth for personal living expenses and pay 14% tax on that money, while a person who makes $500,000 in a year by working really hard and long hours is taxed at something like 30% or more on the full amount the income, even though he may invest $300,000 of it.
So in fact our tax system sometimes punishes money being used for investment and rewards the personal consumption of converting investment to personal use.
What if we changed the whole underlying assumption of the tax law, allowed people to create capital accounts, and any money going into a capital account, or generated by the capital account, has no tax consequences? Only money that comes out of the account for personal use is taxed, and it is taxed just like any other income that goes to personal expenses. We target the tax benefit exactly on money being used for investment to reward investment and wealth creation, and target the tax on money used for personal expenses to cover the costs of government.
There could be minimal complexity with maintaining the capital account. All the government would care about is when money goes to personal expenses. As long as you keep pouring the income from the investment back into investment you don't have to engage in complex tax accounting. There would have to be some rules to control the tendency of taxpayers to try to cover personal expenses with transactions in the capital account to avoid taxes, but that would be vastly simpler than the current system involving millions of pages of laws covering depreciation, deductions, characterizing income etc.
We couldn't do this overnight. It would be way to disruptive. So we start by allowing people to create capital accounts while we started closing loopholes and tax benefits in existing law. The capital account would make investing vastly simpler and more efficient so over time investments would migrate into the capital account system. Eventually we could abolish the old system without causing massive disruption in the economy.
This is not an idea that will be an easy sell in Washington. It will take a long term, broad based effort by citizens to raise the idea to a level of credibility that a politician who values his job will be willing to sponsor it.
Saturday, December 15, 2012
California as the Bellweather of Republican Irrelevance
For my entire life I have heard constant talk about how what's hot in California will be the norm everywhere else in a few years. Whether that is broadly true across the spectrum of human activities is doubtful, but California certainly is a pop culture leader. It has also been the leader in politics.
The anti-tax revolution started in California with Propsition 13 in 1978, then was picked up by Conservatives across the country. California had Republican Governors from the early 1980's until the late 1990's and Republicans dominated the legislature. Nationally domination of Congress began the the mid-1990's.
Both in California and nationally the Republican movement was marked by an absolute certainty they were right about all things, a disdain for ideas not their orthodoxy, and an unwillingness to compromise.
In California the movement began to collapse when they backed draconian immigration laws in the Mid-1990's and was accelerated by their inflexible ideological approach that gridlocked the legislature for years. The obtructionist tactics of the Republicans fired up their base but over time aliented non-ideological voters. Republican influence has gradually shrunk to the point that every state wide office is held by a Democrat and the Democrats have super majorities in both legislative houses.
Nationally the Republican decline appears to have begun with the collapse of the economy in 2008 after years of dominating government. They had a short revival in 2010, but their obstructionist tactics over the following 2 years have pushed more and more voters away from them, even as it fired up the true believers.
I imagine they are taking comfort from the fact they still hold the majority in the House, but I saw a statistic the other day that lumping together all the votes in all house races Democrats actually got half a million more votes than Republicans. The only reason Republican's have a majority is because they gerrymandered so many districts to create protected havens for themselves.
I think the masterminds of the Republican party, the Rupert Murdoch, Karl Rove and the like, have trapped the party in a spiral of obstructionist behavior that will continue to alienate voters and push them toward California style irrelevance.
The country would be better off if we had a rational and pragmatic Republican party, but I don't see anyone wresting control of the party from the manipulators at the top any time soon.
The anti-tax revolution started in California with Propsition 13 in 1978, then was picked up by Conservatives across the country. California had Republican Governors from the early 1980's until the late 1990's and Republicans dominated the legislature. Nationally domination of Congress began the the mid-1990's.
Both in California and nationally the Republican movement was marked by an absolute certainty they were right about all things, a disdain for ideas not their orthodoxy, and an unwillingness to compromise.
In California the movement began to collapse when they backed draconian immigration laws in the Mid-1990's and was accelerated by their inflexible ideological approach that gridlocked the legislature for years. The obtructionist tactics of the Republicans fired up their base but over time aliented non-ideological voters. Republican influence has gradually shrunk to the point that every state wide office is held by a Democrat and the Democrats have super majorities in both legislative houses.
Nationally the Republican decline appears to have begun with the collapse of the economy in 2008 after years of dominating government. They had a short revival in 2010, but their obstructionist tactics over the following 2 years have pushed more and more voters away from them, even as it fired up the true believers.
I imagine they are taking comfort from the fact they still hold the majority in the House, but I saw a statistic the other day that lumping together all the votes in all house races Democrats actually got half a million more votes than Republicans. The only reason Republican's have a majority is because they gerrymandered so many districts to create protected havens for themselves.
I think the masterminds of the Republican party, the Rupert Murdoch, Karl Rove and the like, have trapped the party in a spiral of obstructionist behavior that will continue to alienate voters and push them toward California style irrelevance.
The country would be better off if we had a rational and pragmatic Republican party, but I don't see anyone wresting control of the party from the manipulators at the top any time soon.
Wednesday, December 12, 2012
How to Control Public Sector Compensation
Politicians will never be able to effectively control public sector compensation in a democracy, since public employee organizations will always be much more involved than the average taxpayer. Public sector compensation needs to be controlled by constitutional provisions that provide an automatic limitation to keep Government from overly burdening the private sector.
Every Jurisdiction authorized to impose taxes should be required to either:
1. Adopt an ordinance explicitly linking public employee compensation to average private sector compensation within the jurisdiction, or
2. Submit an audited report at least once every five years to the public comparing average private sector compensation within the jurisdiction with average public sector compensation (mean, median and mode).
Maximum compensation in every jurisdiction should be the amount paid to the highest elected official in the jurisdiction.
Public employees should be catagorized in two catagories:
1. Career public servants who's compensation level is linked directly to private sector compensation within the jurisdiction.
2. Learning experience positions paid at or near minimum wage. Every citizen in the jurisdiction is entitled to such a position for a period of up to 1 year, after one year they can continue in the position but the longer they are in such position, the more controls on their behavior they must accept.
Every Jurisdiction authorized to impose taxes should be required to either:
1. Adopt an ordinance explicitly linking public employee compensation to average private sector compensation within the jurisdiction, or
2. Submit an audited report at least once every five years to the public comparing average private sector compensation within the jurisdiction with average public sector compensation (mean, median and mode).
Maximum compensation in every jurisdiction should be the amount paid to the highest elected official in the jurisdiction.
Public employees should be catagorized in two catagories:
1. Career public servants who's compensation level is linked directly to private sector compensation within the jurisdiction.
2. Learning experience positions paid at or near minimum wage. Every citizen in the jurisdiction is entitled to such a position for a period of up to 1 year, after one year they can continue in the position but the longer they are in such position, the more controls on their behavior they must accept.
Sunday, December 9, 2012
Defense spending - The Public Must Lead the Politicians
In the aftermath of the election Washington has settled into the same partisan gridlock that marked the last couple years. The relative power of Democrats and Republicans has shifted, Democrats may push through some modest tax increases on rich folks but likely without really addressing the problem that created our fiscal imbalance.
The fundemental problem is defense spending. The deficit exists because we spend enormous amounts of money on defense but are not willing to impose the taxes to pay for it.
Republican's caused the problem with tax cuts coupled with increases in defense spending by both President Reagan and President Bush II. The economy blowing up after the Bush II years was just the icing on the cake.
But Democrats are afraid to confront the problem. They fear being painted as weak on defense, so in fact often go meekly along with increases in defense spending.
Democrats need to suck it up and start engaging the public on what purpose our massive defense spending serves. We spend, per taxpayer, 4 to 5 times more on defense than taxpayers of any country other than Isreal and a couple of tiny belligerent dictatorships in the third world. It is not because we live in a dangerous neighborhood (like Isreal), most of those we perceive to be potential enemies are half a world away. Much of our defense spending is on maintaining the ability to fight two wars on the other side of the world. Why do we need the capability to fight wars on the other side of the world? To protect our economic interests around the world. We aren't the worlds cop, we don't step in when genocide is going on, we step in when our economic interests are threatened.
Osama Bin Ladin didn't send terrorists to bomb a synagogue or a church, he went after the World Trade Center as his primary target, and the Pentagon as his secondary target. The building that represents our economic interests around the world and the brain of the military that protects those interests.
I don't really have a problem with us having overwhelming military superiority, I do have a problem paying extra to protect private investments around the world, when the wealthy folk that own those investments and are making lots of money have been paying less and less to support our defense spending even as our spending increased.
The Democrats need to ask themselves, would the average voting taxpayer, if he/she understood who was financing our military and who was benefiting, really have a problem with someone standing up to talk about the folks that benefit from our military paying a fair share for that benefit?
But this is an issue, like gay marriage, serious career politicians won't touch with a 10 foot pole. Two many vested interests with the money and lawyers to bury their political careers.
If we want to really solve the deficit the public needs to lead the politicians into serious discussion about what we want our Military to do and who should pay for it.
The fundemental problem is defense spending. The deficit exists because we spend enormous amounts of money on defense but are not willing to impose the taxes to pay for it.
Republican's caused the problem with tax cuts coupled with increases in defense spending by both President Reagan and President Bush II. The economy blowing up after the Bush II years was just the icing on the cake.
But Democrats are afraid to confront the problem. They fear being painted as weak on defense, so in fact often go meekly along with increases in defense spending.
Democrats need to suck it up and start engaging the public on what purpose our massive defense spending serves. We spend, per taxpayer, 4 to 5 times more on defense than taxpayers of any country other than Isreal and a couple of tiny belligerent dictatorships in the third world. It is not because we live in a dangerous neighborhood (like Isreal), most of those we perceive to be potential enemies are half a world away. Much of our defense spending is on maintaining the ability to fight two wars on the other side of the world. Why do we need the capability to fight wars on the other side of the world? To protect our economic interests around the world. We aren't the worlds cop, we don't step in when genocide is going on, we step in when our economic interests are threatened.
Osama Bin Ladin didn't send terrorists to bomb a synagogue or a church, he went after the World Trade Center as his primary target, and the Pentagon as his secondary target. The building that represents our economic interests around the world and the brain of the military that protects those interests.
I don't really have a problem with us having overwhelming military superiority, I do have a problem paying extra to protect private investments around the world, when the wealthy folk that own those investments and are making lots of money have been paying less and less to support our defense spending even as our spending increased.
The Democrats need to ask themselves, would the average voting taxpayer, if he/she understood who was financing our military and who was benefiting, really have a problem with someone standing up to talk about the folks that benefit from our military paying a fair share for that benefit?
But this is an issue, like gay marriage, serious career politicians won't touch with a 10 foot pole. Two many vested interests with the money and lawyers to bury their political careers.
If we want to really solve the deficit the public needs to lead the politicians into serious discussion about what we want our Military to do and who should pay for it.
Friday, November 30, 2012
Reforming Proposition 13
I voted for Proposition 13, the ballot measure in 1978 that completely restructured California's tax laws. In the decade + leading up to 1978 property values had been shooting up, so property taxes had also been rising rapidly threatening some peoples ability to continue to own their home, and the legislature had been frozen in partisan gridlock. Conservative Republicans alarmed over the growth of government had evolved toward a philosophy summarized in the phrase "starve the beast" and Prop 13 seems to have been developed with that philosophy.
Prop 13 was sold as saving peoples homes, but the people that drafted it had a much larger agenda. They inserted a little noticed clause that required a 2/3 vote to authorize almost any new tax, or increase an existing tax. That clause has crippled California's ability to finance needed infrastructure. The University system that was at that time widely considered the model for the world, the system that provided top quality, inexpensive education to the State residents, has morphed into a system that leaves students without well to do parents so indebted upon graduation they risk being financially crippled for life. Our roads, bridges and freeways have deteriorated to the point we lose billions of dollars a year in lost productivity, and damage to our vehicles.
Some are fighting to get the pendulum swinging back the other direction. To return to pre-Prop 13 days where governments have great freedom to tax as they see fit..
What if instead we stop the pendulum swing and develop a law that provides long term stability?
Prop 13 has two main impacts:
1. It limits the authority of taxing entities to increase the value of the property, so rather than being taxed at the actual current value, you are taxed at the value at which you bought the house, plus a maximum of 2% per year. This protects homeowners from increases in the expenses they build into their budgeting, but the corollary effect is if inflation exceeds 2% governments revenue is cut.
2: It requires a 2/3 vote to impose additional taxes.
These two limitations decimated local governments finances when they took effect, and so the State stepped in and started creating the horribly complex and disfunctional revenue system the state now endures.
How do we fix it without going back to the old system that undermined peoples ability to own a house?
1. We should keep the 2% per year limitation in place, but give government a lien on the house that entitles them to a piece of the sales pie to the extent housing market inflation has exceeded 2% per year.
2. We should repeal the 2/3 vote requirement and replace it with a limitation that the maximum vote that can be required to enact a tax cannot exceed the percentage of the vote that enacted the vote requirement.
Prop 13 was sold as saving peoples homes, but the people that drafted it had a much larger agenda. They inserted a little noticed clause that required a 2/3 vote to authorize almost any new tax, or increase an existing tax. That clause has crippled California's ability to finance needed infrastructure. The University system that was at that time widely considered the model for the world, the system that provided top quality, inexpensive education to the State residents, has morphed into a system that leaves students without well to do parents so indebted upon graduation they risk being financially crippled for life. Our roads, bridges and freeways have deteriorated to the point we lose billions of dollars a year in lost productivity, and damage to our vehicles.
Some are fighting to get the pendulum swinging back the other direction. To return to pre-Prop 13 days where governments have great freedom to tax as they see fit..
What if instead we stop the pendulum swing and develop a law that provides long term stability?
Prop 13 has two main impacts:
1. It limits the authority of taxing entities to increase the value of the property, so rather than being taxed at the actual current value, you are taxed at the value at which you bought the house, plus a maximum of 2% per year. This protects homeowners from increases in the expenses they build into their budgeting, but the corollary effect is if inflation exceeds 2% governments revenue is cut.
2: It requires a 2/3 vote to impose additional taxes.
These two limitations decimated local governments finances when they took effect, and so the State stepped in and started creating the horribly complex and disfunctional revenue system the state now endures.
How do we fix it without going back to the old system that undermined peoples ability to own a house?
1. We should keep the 2% per year limitation in place, but give government a lien on the house that entitles them to a piece of the sales pie to the extent housing market inflation has exceeded 2% per year.
2. We should repeal the 2/3 vote requirement and replace it with a limitation that the maximum vote that can be required to enact a tax cannot exceed the percentage of the vote that enacted the vote requirement.
Monday, November 12, 2012
Remarks regarding gun policy
We all recall the horrific shooting in Arizona that left former Representative Gabby Giffords with devastating long term injuries, and killed many other people. The following is an excerpt from the remarks of Gabby Giffords husband , astronaut Mark Kelly, made at the sentencing hearing of Jared Loughner in Tucson, Arizona Nov. 8, 2012.
“Your decision to commit cold-blooded mass murder also begs of us to look in the mirror. This horrific act warns us to hold our leaders and ourselves responsible for coming up short when we do, for not having the courage to act when it’s hard, even for possessing the wrong values.
“We are a people who can watch a young man like you spiral into murderous rampage without choosing to intervene before it is too late.
“We have a political class that is afraid to do something as simple as have a meaningful debate about our gun laws and how they are being enforced. We have representatives who look at gun violence, not as a problem to solve, but as the white elephant in the room to ignore. As a nation we have repeatedly passed up the opportunity to address this issue. After Columbine; after Virginia Tech; after Tucson and after Aurora we have done nothing.,,,,
“In this state we have elected officials so feckless in their leadership that they would say, as in the case of Governor Jan Brewer, “I don’t think it has anything to do with the size of the magazine or the caliber of the gun.” She went on and said, “Even if the shooter’s weapon had held fewer bullets, he’d have another gun, maybe. He could have three guns in his pocket” – she said this just one week after a high capacity magazine allowed you to kill six and wound 19 others, before being wrestled to the ground while attempting to reload. Or a state legislature that thought it appropriate to busy itself naming an official Arizona state gun just weeks after this tragedy occurred, instead of doing the work it was elected to do: encourage economic growth, help our returning veterans and fix our education system...."
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