Sunday, May 1, 2022
Monday, February 3, 2020
Thursday, June 1, 2017
Ranked Choice Voting
The ballot instruction is to "vote for only one candidate". A single vote system means single round elections. Since there's a group of voters, 3rd candidates could create a possible spoiler scenario, so the field usually has to be reduced to just 2. The media compound the division by going negative against the sole opposition party rather than educate the voter, resulting in reps that bring about bad policies. 3 candidates would usually require 2 rounds. In an elimination round contest, you would "rank your candidates in order of preference". 5 rounds for up to 5 designations would safely allow 6 candidates.
Taking it a step further, the ballot wouldn't have any names. The 6 slots would usually go to the better funded. The candidates can still be gamed by the media. Voters should not have their freedom restricted to choose from a list. Primary voting occurs way too early and is irreversible. An open even playing field will capture voter's true intentions more accurately. The primaries and parties that partially form around them wouldn't be needed if the general election were truly open. Shorter election seasons might make the voters more interested in shorter office terms, 3 years for senate, 2 for the president and others, federal and state.
A recall process should still be available. Signature gathering is unscientific and too expensive. A compendium of ranked choice polls would better ascertain whether a different person is preferred and a superior qualifying process to trigger an election.
The states currently make the rules for the national elections and voters can choose statehouse representatives who support change.
Wikipedia has a good page on another term, Instant Runoff, but only one candidate would be eliminated each round and 5-7 rounds minimum will likely allow at least one broadly appreciated person with unifying policies.
Even if there were more choices, uneducated voters could enter all the wrong names and incorrect choices are made within the current system, so it's equally important to address the huge deficit in policy knowledge.
Wednesday, May 31, 2017
$2 Trillion Wasted Annually
For 2017, there was $6.1 trillion of total government spending (OMB historical table 14.2) and around $3 trillion for regulations and other indirect costs by government (referenced below), totaling $9.1 trillion of government created costs. Out of roughly $17.5 trillion total income (Tax Foundation), that was 53%. There's a higher spending estimate from the BEA of $6.6 trillion (BEA table 3.1), which would raise it to 56%. The personal impact averages 2.5 to almost 3 of every 5 of the nation's workdays.
The spending was about 35% ('Spending Freedom Day' of May 7). That's on individual or business income, including manufacturers. So we'd have to be taxing at 35% to pay for all the spending. The indirect costs were about 20%. Taxes were 31% (Tax Freedom Day of April 23), but we borrowed 4% for the federal deficit, so around 50% total was paid, but 54% was closer to the real impact. The taxation is 20% federal (CBO) and 11% state and local (OMB).
Contrary to the rhetoric, the top 2% earners almost always paid at higher rates. CBO, April 2009: "The overall federal tax system is progressive- that is, effective rates generally rise with income." On average, 28% was paid over $200k, 16% below ('CBO distribution of taxes'). The rich who only paid a 15% investment tax were anomalies. A corporate tax sometimes precedes it and most income is taxed as ordinary income, which is steeply effectively progressive. Anyone paying just 15% was offset by others earning over $200k, not the middle class. The investment tax was raised to 23% in 2013. The top ordinary rate should've been lowered or at least kept the same at 35%, but was raised to 39.6% because that's where the money is. Warren Buffet and the media mentioned his investment tax, but excluded his corporate tax, which likely brought him closer to 34% (Cato blog) and his secretary either paid less than "33%" on $60k or she was paying above average. Including indirect costs, about 57% total was paid above $200k on average: 28% federal, 6% state and local (ITEP) and maybe 23% indirect. With borrowing, it'll be closer to 62% and the 2013 tax increase adds another 2% effective over $250k and 4% over $400k (CBO). Median $50k households/businesses pay about 35% and will incur maybe 40% with interest.
The government related costs cause the trade deficit with China. Even with some auto union labor reaching $70 per hour, the National Association of Manufacturers cited Census data that production level compensation in the mfg sector averages only 12% of total costs and there's almost nothing on labor costs on NAM's policy agenda. (BEA lists all manufacturing compensation at $1 trillion and government compensation at $1.8 trillion (table 6.2D). In 1956, employment totals were two to one, mfg vs. government (BLS). There were no “tax breaks for shipping jobs overseas”, only higher domestic rates. China's currency rose 20-30% against the dollar over 2008-2015 (M. Pettis, Carnegie), but the trade deficits kept growing at the same pace. It's easier to lower our government related costs, which almost equal their entire economy of $10 trillion (Vice Minister of Finance). The price discount on their side is mostly due to lower medical costs and 30% average subsidies (Usha and George Haley) in major industries which have helped run up their combined public/private debt to our levels in percentage terms (McKinsey Institute).
It's likely 25% or $2.3 trillion of the $9.1 trillion is wasted each year. That's more than the accumulated wealth of the bottom 50% of the population (Federal Reserve- Ponds and Streams). It equals 40 million jobs at $50k or $17k per household and it's a whole lot of environmental waste. $6.8 trillion would be about 40% of business/personal income.
We can easily save 16% of the spending within 3 years, which is about $650 billion federal and $350 billion state and local, reducing it to about 28% of income. From 1900 to the present, average taxation was 23% and spending was 26% (Tax Foundation). Citizens Against Government Waste lists $430 billion of available federal savings (Prime Cuts). The Government Accountability Office identifies $200-250 billion of pure waste and there's also increased needs-testing, using voucher options, loans before grants including for direct health care, using non-M.D.s first when possible, work requirements if able, local control and government/private compensation equity.
$1.3 trillion of the indirect costs can be saved, reducing them to about 12% of income. The tax code itself was $300 billion (Tax Foundation) to $430 billion (A. Laffer) for compliance in time and money before the recent tax reform, but there are other costs. One example is inflation from the medical insurance tax deduction. The GAO looked at outside estimates of all external (besides taxes) costs in an August 2005 report and the median estimate totaled around $750 billion in today's dollars before the reform ('GAO tax policy summary'). The 2008 Tort (injury) Liability Index cited “excessive” costs of $589 billion for just that aspect of the state's legal systems. Federal regulatory costs, which included $150 billion of tax compliance at the time, were $1.75 trillion in 2008 (SBA). It's likely at least $400 billion is wasted.
Less government borrowing would increase credit for small businesses, help stabilize the money supply and the government credit rating.
Honest change requires 51/60 senators, 218 in the House and a president who believe in economic freedom, as do 70% in Gallup polling on policy rather than party. From 2000-06, there were only about 44 in the Senate who rated at least 70% on NTU Rates, the most comprehensive rating on spending, tax/reform and regulation votes. All were Republicans, who had a majority with an average 52 seats, but still short of "complete control" as the media often called it. Currently, there are maybe 50 of the 53 Rs and the House is in D control. The R's House/Senate average score was 78% and the D's 15%. Anyone can enter their own House and Senate members to check their scores. Biden rated 15% in his Senate career. Warren rates 13%, Booker 15%, H. Clinton rated 10%, Sanders and Obama 9%. The Ds had complete control in 2009, passing the 2,300 page medical bill, now with 20,000 pages of regulations, instead of tax reform, etc. and 3 other times in the last 80 years (67% of Senate needed before 1975) or they've been able to block change (Composition of Congress). Prior to ranked choice voting, some D and independent voters might reconsider their support and at least stay home.
The debt is near $22 trillion or $350k average per household since only about 60 of the 125 million households save anything annually (Federal Reserve Bulletin, June 2012). That's maybe $700k with interest. Spending, tax, regulatory and legal reform would allow 80 million households to pay the debt and reduce the bill to $524k.
The annual trade deficit with China of $300 billion (Commerce Dept.), about $30 billion of interest and Europe's $200 billion deficit (Eurostat) are funding China's military buildup. There's a roughly 15% cost difference between a typical landed import from China and what we can make it for, according to Outsourcing Cost Index (2010). The NAM has a similar estimate. Perhaps targeting at least manufacturing with a 15% tax reduction might get enough bipartisan support. Whichever party gets the credit probably won't matter that much since the 2 party system is replaceable.
The spending was about 35% ('Spending Freedom Day' of May 7). That's on individual or business income, including manufacturers. So we'd have to be taxing at 35% to pay for all the spending. The indirect costs were about 20%. Taxes were 31% (Tax Freedom Day of April 23), but we borrowed 4% for the federal deficit, so around 50% total was paid, but 54% was closer to the real impact. The taxation is 20% federal (CBO) and 11% state and local (OMB).
Contrary to the rhetoric, the top 2% earners almost always paid at higher rates. CBO, April 2009: "The overall federal tax system is progressive- that is, effective rates generally rise with income." On average, 28% was paid over $200k, 16% below ('CBO distribution of taxes'). The rich who only paid a 15% investment tax were anomalies. A corporate tax sometimes precedes it and most income is taxed as ordinary income, which is steeply effectively progressive. Anyone paying just 15% was offset by others earning over $200k, not the middle class. The investment tax was raised to 23% in 2013. The top ordinary rate should've been lowered or at least kept the same at 35%, but was raised to 39.6% because that's where the money is. Warren Buffet and the media mentioned his investment tax, but excluded his corporate tax, which likely brought him closer to 34% (Cato blog) and his secretary either paid less than "33%" on $60k or she was paying above average. Including indirect costs, about 57% total was paid above $200k on average: 28% federal, 6% state and local (ITEP) and maybe 23% indirect. With borrowing, it'll be closer to 62% and the 2013 tax increase adds another 2% effective over $250k and 4% over $400k (CBO). Median $50k households/businesses pay about 35% and will incur maybe 40% with interest.
The government related costs cause the trade deficit with China. Even with some auto union labor reaching $70 per hour, the National Association of Manufacturers cited Census data that production level compensation in the mfg sector averages only 12% of total costs and there's almost nothing on labor costs on NAM's policy agenda. (BEA lists all manufacturing compensation at $1 trillion and government compensation at $1.8 trillion (table 6.2D). In 1956, employment totals were two to one, mfg vs. government (BLS). There were no “tax breaks for shipping jobs overseas”, only higher domestic rates. China's currency rose 20-30% against the dollar over 2008-2015 (M. Pettis, Carnegie), but the trade deficits kept growing at the same pace. It's easier to lower our government related costs, which almost equal their entire economy of $10 trillion (Vice Minister of Finance). The price discount on their side is mostly due to lower medical costs and 30% average subsidies (Usha and George Haley) in major industries which have helped run up their combined public/private debt to our levels in percentage terms (McKinsey Institute).
It's likely 25% or $2.3 trillion of the $9.1 trillion is wasted each year. That's more than the accumulated wealth of the bottom 50% of the population (Federal Reserve- Ponds and Streams). It equals 40 million jobs at $50k or $17k per household and it's a whole lot of environmental waste. $6.8 trillion would be about 40% of business/personal income.
We can easily save 16% of the spending within 3 years, which is about $650 billion federal and $350 billion state and local, reducing it to about 28% of income. From 1900 to the present, average taxation was 23% and spending was 26% (Tax Foundation). Citizens Against Government Waste lists $430 billion of available federal savings (Prime Cuts). The Government Accountability Office identifies $200-250 billion of pure waste and there's also increased needs-testing, using voucher options, loans before grants including for direct health care, using non-M.D.s first when possible, work requirements if able, local control and government/private compensation equity.
$1.3 trillion of the indirect costs can be saved, reducing them to about 12% of income. The tax code itself was $300 billion (Tax Foundation) to $430 billion (A. Laffer) for compliance in time and money before the recent tax reform, but there are other costs. One example is inflation from the medical insurance tax deduction. The GAO looked at outside estimates of all external (besides taxes) costs in an August 2005 report and the median estimate totaled around $750 billion in today's dollars before the reform ('GAO tax policy summary'). The 2008 Tort (injury) Liability Index cited “excessive” costs of $589 billion for just that aspect of the state's legal systems. Federal regulatory costs, which included $150 billion of tax compliance at the time, were $1.75 trillion in 2008 (SBA). It's likely at least $400 billion is wasted.
Less government borrowing would increase credit for small businesses, help stabilize the money supply and the government credit rating.
Honest change requires 51/60 senators, 218 in the House and a president who believe in economic freedom, as do 70% in Gallup polling on policy rather than party. From 2000-06, there were only about 44 in the Senate who rated at least 70% on NTU Rates, the most comprehensive rating on spending, tax/reform and regulation votes. All were Republicans, who had a majority with an average 52 seats, but still short of "complete control" as the media often called it. Currently, there are maybe 50 of the 53 Rs and the House is in D control. The R's House/Senate average score was 78% and the D's 15%. Anyone can enter their own House and Senate members to check their scores. Biden rated 15% in his Senate career. Warren rates 13%, Booker 15%, H. Clinton rated 10%, Sanders and Obama 9%. The Ds had complete control in 2009, passing the 2,300 page medical bill, now with 20,000 pages of regulations, instead of tax reform, etc. and 3 other times in the last 80 years (67% of Senate needed before 1975) or they've been able to block change (Composition of Congress). Prior to ranked choice voting, some D and independent voters might reconsider their support and at least stay home.
The debt is near $22 trillion or $350k average per household since only about 60 of the 125 million households save anything annually (Federal Reserve Bulletin, June 2012). That's maybe $700k with interest. Spending, tax, regulatory and legal reform would allow 80 million households to pay the debt and reduce the bill to $524k.
The annual trade deficit with China of $300 billion (Commerce Dept.), about $30 billion of interest and Europe's $200 billion deficit (Eurostat) are funding China's military buildup. There's a roughly 15% cost difference between a typical landed import from China and what we can make it for, according to Outsourcing Cost Index (2010). The NAM has a similar estimate. Perhaps targeting at least manufacturing with a 15% tax reduction might get enough bipartisan support. Whichever party gets the credit probably won't matter that much since the 2 party system is replaceable.
Tuesday, May 30, 2017
Additional Points
$1 trillion annual interest cost at 5% average rates, $11k per household. (with optimistic 80 mil. households)
BEA's deficit figures- routinely near $1 trillion (table 3.1).
Deficits over next 30 years- $109 trillion. -Senator Ron Johnson. $800k per household. For Medicare, Social Security, pensions/benefits, interest, etc.
For every $1 paid in Medicare and Social Security taxes, $2.40-$7.80 is returned. -Politifact
OECD's U.S. spending estimate was 38% or $7.8 trillion.
Total current gov and private debt is 280% of 1 year's GDP or $47 trillion. (China- 282%) -McKinsey
In the Depression, 25% of all mortgages were guaranteed by the taxpayers. Today, 80%. -Pinto, AEI
Federal Reserve increased their "purchases" of Treasury debt from $1 trillion in 2008 to $4 trillion today.
For every $1 paid in Medicare and Social Security taxes, $2.40-$7.80 is returned. -Politifact
OECD's U.S. spending estimate was 38% or $7.8 trillion.
Total current gov and private debt is 280% of 1 year's GDP or $47 trillion. (China- 282%) -McKinsey
In the Depression, 25% of all mortgages were guaranteed by the taxpayers. Today, 80%. -Pinto, AEI
Federal Reserve increased their "purchases" of Treasury debt from $1 trillion in 2008 to $4 trillion today.
Dollar has lost 85% of it's value since 1971. -Lewis Lehrman
Private debt annual interest will increase $300-500 billion if rates rise by 3%. -Richard Vague
August 2011 debt deal- $2 trillion of more borrowing authority in exchange for $100 billion of savings in the same time period- a 20 for 1, not a "1 for 1".
2001 and 2003 tax cuts: a) portions on over $200k, the 2003 drug bill and the Iraq war were about $150 billion out of $1.3 trillion deficits (CBO). Ds wanted more drug bill $.
Private debt annual interest will increase $300-500 billion if rates rise by 3%. -Richard Vague
August 2011 debt deal- $2 trillion of more borrowing authority in exchange for $100 billion of savings in the same time period- a 20 for 1, not a "1 for 1".
2001 and 2003 tax cuts: a) portions on over $200k, the 2003 drug bill and the Iraq war were about $150 billion out of $1.3 trillion deficits (CBO). Ds wanted more drug bill $.
b) total dollars were 3-4 times
higher for the under $200k incomes, as is income. -JCT, CBO
c) projected to cost $650 billion over 10 years, then revised to $130 billion. -JCT, CBO
Little increase in inequality on after tax income, including benefits, over past 20 years. -Reynolds, Cato
Top 1% grew most during Clinton period. -CBO
Top .3% pay less than the top 2% and some of those below due to exotic tax vehicles. -Perfectly Legal, David Cay Johnston
"People who say just tax the rich aren't paying attention." -E. Bowles, Obama's fiscal commission appointee
Oil industry pays 45% of income for all taxes and fees (in addition to the per gallon tax on the driver). -API
"There is no special tax break for outsourcing." -Politifact
Many of the rich benefit from government related costs reducing competition, low interest rates by the Fed and government cronyism.
Ds capping of deductions essentially raised the 35% top statutory income rate beyond 39.6% to 44.6%. Additional proposed increases would result in 50%. -Paul Ryan
Little increase in inequality on after tax income, including benefits, over past 20 years. -Reynolds, Cato
Top 1% grew most during Clinton period. -CBO
Top .3% pay less than the top 2% and some of those below due to exotic tax vehicles. -Perfectly Legal, David Cay Johnston
"People who say just tax the rich aren't paying attention." -E. Bowles, Obama's fiscal commission appointee
Oil industry pays 45% of income for all taxes and fees (in addition to the per gallon tax on the driver). -API
"There is no special tax break for outsourcing." -Politifact
Many of the rich benefit from government related costs reducing competition, low interest rates by the Fed and government cronyism.
Ds capping of deductions essentially raised the 35% top statutory income rate beyond 39.6% to 44.6%. Additional proposed increases would result in 50%. -Paul Ryan
R primary candidates didn't oppose 10 for 1 savings to revenues deal. They opposed statutory rate increases.
China spends 6% of GDP on medical (Rand, WHO), U.S.-18% (CMS). Their out of pocket- 56% (Rand), ours- 12%.
China spends 6% of GDP on medical (Rand, WHO), U.S.-18% (CMS). Their out of pocket- 56% (Rand), ours- 12%.
Top effective total tax rate on small
businesses was 35% in U.S. before tax reform, 16% in China. -NAM
74% don't want more than 20% average effective
total taxation. -Rasmussen poll
Less than 20% of all spending is needs-tested (Cato), about $1 trillion.
Less than 20% of all spending is needs-tested (Cato), about $1 trillion.
K-12 current per
student annual spending of $14k has not fallen, but risen by 20% over last 10 years, inflation adjusted and 280% since 1970, mostly for out of class. -Digest Ed. Stats
College taxpayer costs have risen 20-30% since 2009 -FinAid
Military spending is about $700 billion total, about 12% of all spending, not the 40-50% expressed in polls.
College taxpayer costs have risen 20-30% since 2009 -FinAid
Military spending is about $700 billion total, about 12% of all spending, not the 40-50% expressed in polls.
Defense dept spending of about $600 billion total is around 3.3% of GDP, below the 3.7% avg since 1970 (OMB 3.1).
Defense cuts “potentially disastrous”, could threaten “our freedom and way of life”. -Former Pacific Commander, Lyons
Ds regularly propose less than 1% savings in non-defense.
Stimulus spending cost $270k per job. -Administration's economic adviser's 7th quarterly report
Defense cuts “potentially disastrous”, could threaten “our freedom and way of life”. -Former Pacific Commander, Lyons
Ds regularly propose less than 1% savings in non-defense.
Stimulus spending cost $270k per job. -Administration's economic adviser's 7th quarterly report
The medical
bill would have likely added 1-2% to total
costs of 53-55%.
Drug industry supported it.
Drug industry supported it.
Obama pledged “negotiations on
C-SPAN”, which never happened, “to see who is making arguments on
behalf of the drug companies”.
$3,380 average increase per child "able to
stay on their parent's plan". -2009 HHS estimate
14 million who liked it couldn't keep it can't -
will be moved to government exchange insurance. -Medicare Actuary
31 million will remained uninsured. -CBO
24 of the 31 million subprime/weak mortgages out of 55 million total in 2008 were created by government. -Wallison, AEI
50% of Rs and 74% of Ds voted for bailout- TARP loans to banks.
The bank regulation bill, Dodd-Frank, will cost 1.5 million jobs over 5 years (CBO), has 8k pages of final regulations and 6k more proposed. (Financial Services committee)
50% of Rs and 74% of Ds voted for bailout- TARP loans to banks.
The bank regulation bill, Dodd-Frank, will cost 1.5 million jobs over 5 years (CBO), has 8k pages of final regulations and 6k more proposed. (Financial Services committee)
It increased consolidation
of "too big to fail" banks. -Democrat Neil Barofsky, head of TARP
Half of corporate contributions in
2010(?), 54% of Wall St. contributions and 54% of drug industry
contributions went to Ds. -CRP
For every $97 of business affiliated
PAC money going to Rs in 2010, $110 went to Ds. -Open Secrets
Women earn 95 cents for every dollar men earn within same occupation and experience, not 70 or 77 cents. -Diane Furchgott Roth, Manhattan Institute
Almost all states and cities in serious financial trouble, past and present, under D control.
Women earn 95 cents for every dollar men earn within same occupation and experience, not 70 or 77 cents. -Diane Furchgott Roth, Manhattan Institute
Almost all states and cities in serious financial trouble, past and present, under D control.
Each additional 1 million barrels of
oil production = about 1 million jobs. -Hoffmeister, Shell ex-CEO
Typed in NTU Rates yet?
Monday, May 29, 2017
Tax Code Choice and Conservation
Energy waste is significantly based in the tax code. Tax deductions for travel, vehicle purchase, industrial and commercial use can increase waste, just as deductions for medical insurance often overstimulate 3rd party financing of health care. The loss of revenues from these and other tax preferences also result in higher business and personal tax rates.
Two discussed reforms- a "flat" single rate tax on income (Hall, Rabushka of Hoover) or a national sales tax (Fair Tax) would be improvements, but it's highly unlikely either will have the required 218 House and 60 Senate votes any time in the near future. Steven Moore of the Wall Street Journal proposed leaving the current system in place to avoid the defensive lobbying and complexity of unraveling each section one by one by letting people/businesses file under an optional flat tax. It would minimize personal side deductions, but retain many on the business side.
The single rate has little or no chance of passing even as an optional code because the current code is progressive (CBO). Even with a larger personal exemption, it'll be difficult to match the effect of the main code. An optional code with slightly progressive rates of 5-25% or 7-27% can maintain the current "distributional burden". Paul Ryan proposed the first such code. It's for individuals and smaller companies and the rate is 10% up to $65k of income and 25% over that, with the first $15k exempt.. but some business "expensing" remains. Former senator Brownback then proposed an optional code that would minimize most if not all of the business-side preferences, replacing them with rates of 10% up to $102k and 25% over that. These latter types of approaches could help us avoid the endless, droning, diversionary class debate so we can deal with the bigger problem of the preferences.
The worst feature of the current code is not the 6 rate brackets, but the allowance of most business and some personal expenses to be subtracted/deducted from gross income prior to applying the tax rate. They create $300 billion of compliance costs annually (Tax Foundation), $500 billion of other external costs plus market discounted energy prices. The GAO's Summary of Estimates of Costs of the Federal Tax System cited studies that put these costs other than compliance at 2-5% of GDP. 3.5% of $21 trillion would be over $750 billion. Robert Carroll, formerly of Treasury's Tax Analysis division, testified on April 15, 2008 at the Finance committee that the code could cost an overall "$1.3 trillion in economic output" annually.
In December of 2006 at the American Enterprise Institute, the House tax-writing (Ways and Means) committee former chairman Bill Thomas said "most of the business preferences can also be replaced with lower rates". By allowing less deductions, credits and exemptions, a greater amount of income is taxed. The rates could then be lowered for revenue neutrality, but more revenue can be generated from increased growth. Assuming all expenses must be deductible to avoid "double taxation" creates a consumption encouragement system. The preferences ultimately misallocate resources.
For example, a single filer being able to deduct $100k of purchased insurance from $413k of business income prevents the $100k from being taxed at a 40% rate (sole proprietor, over $313k bracket), so the purchase winds up getting discounted by $40k. This incentive to pre-pay into a 3rd party pool of funds reduces price sensitivity causing inflation which reduces access for others. Other problems include disproportionate tax benefits to upper-income earners and iatrogenic illness.
Most energy costs are also deductible and businesses use at least half of all the oil- around 10 million barrels per day out of 19 MBD total: 5 MBD for industrial (4 for utilities, 1 for raw materials), 1/2 MBD for commercial (stores, offices) and about 5 MBD for travel. 1/3 of airline travel is business use and all 1.5 MBD of the fuel purchase is deductible. (EIA, FHWA, BTS). Shipping fuel is a small, but growing category.
A vehicle owner paying $3 per gallon, traveling on business, can deduct that from income before it gets taxed at, for example, a 25% rate (sole proprietor, $37k-90k bracket). Every $3 reduction of taxable income saves 75 cents. The market price is, or at least seen as discounted, thereby tending to discourage conservation. Even worse, the standard mileage rate option, currently at 50 cents per mile, multiplied by 20 miles traveled, allows a $10 deduction, which saves $2.50. At these savings, vehicle MPG is less important, used less efficiently and of course often used for personal reasons, but claimed as a business expense.
Purchasing a vehicle over 6k lbs. allows a first year deduction of $25k (IRS section 179), about $10k of regular depreciation and some "bonus" depreciation. For 6k lbs. and under, it's only the $10k. The over 6k lb. allowance was raised to $100k in 2004 and lasted for 18 months before the media temporarily woke up, which woke up Congress, lowering the total back to about $35k- still a strong incentive to buy a heavier vehicle. With either category, a buyer can justify the extra gas cost with the tax savings.
With utilities deductions, there's the added problem of many office and some factory and store leases having utilities included in the rental price since the owner of the property can subtract these costs as operating expenses. The tenant is not paying for the heat, A/C, etc. directly and so is even less likely to conserve.
Former Department of Energy policy advisor Karen Harbert, stated on May 16, 2006 at the House Government Reform Committee "Countries that provide reduced priced product.. encourage an unhealthy reliance on non-market priced oil, which is not sustainable." Her statement probably referred to nations such as China, which used to heavily subsidize oil use, but can also apply to the U.S.
A 1999 study by the International Energy Agency 'Looking at Energy Subsidies: Getting The Price Right', found in the 6 countries studied (not U.S.), eliminating the existing 20% government price discounts could reduce demand 13%.
We still use almost twice as much oil as China and therefore have the largest effect on the international price.
The National Association of Manufacturers believes lowering tax rates is a higher priority for international competitiveness than labor costs. Frank Vargo on 2/15/07 at the Ways and Means subcommittee on Trade said production labor averages just 11% of costs. For the corporate rate, the Treasury Department suggested a list of preferences to replace, in its Background Paper on Business Taxation and Global Competitiveness, that alone could bring the highest rate down to 27%, revenue neutral. Replacing more could reduce the lower brackets further so more small businesses could get off the ground.
Making more things here would not only lessen our funding of China's military. It would slow their own increasing oil appetite, including Beijing to L.A. container ships that could use 200k gallons one way. Their factory growth also contributes to up to hundreds of thousands of Chinese dying annually from air and water pollution (World Bank).
The non-energy tax preferences and other government related waste also uses energy. How much oil is used within the $750 billion of tax system inefficiencies? the $600 billion of excessive legal costs? the $400 billion of needless regulations? the $900 billion of spending waste? How much is wasted just within the 30% or $1 trillion of government and private "ineffective medical costs" (IOM, Dartmouth/Atlas) out of $3.6 trillion (CMS)? How about all those commuter miles for government workers and contractors?
Price is the most efficient rationing mechanism with the fewest negative secondary effects. The mid 2008 demand drop from 20.7 MBD to 19.5 MBD was mostly due to the $4 price and many businesses weren't even effectively paying that. We could get to 18 from 19 today without hurting the economy. Any additional desired conservation could come from an above market, revenue neutral tax restoring the $4 price. Increasing domestic production by opening more federal land might be more politically achievable if a real conservation plan were offered.
Allowing individuals and companies the option of lower rates in exchange for paying market prices can decrease oil use now, as opposed to a promise for 5 or 10 years from now. It can also reduce pollution, inflation, including international food prices and dependency on other imports. Increased disposable incomes would expand the ability to pay for the basics like housing, food, health care and education.
Two discussed reforms- a "flat" single rate tax on income (Hall, Rabushka of Hoover) or a national sales tax (Fair Tax) would be improvements, but it's highly unlikely either will have the required 218 House and 60 Senate votes any time in the near future. Steven Moore of the Wall Street Journal proposed leaving the current system in place to avoid the defensive lobbying and complexity of unraveling each section one by one by letting people/businesses file under an optional flat tax. It would minimize personal side deductions, but retain many on the business side.
The single rate has little or no chance of passing even as an optional code because the current code is progressive (CBO). Even with a larger personal exemption, it'll be difficult to match the effect of the main code. An optional code with slightly progressive rates of 5-25% or 7-27% can maintain the current "distributional burden". Paul Ryan proposed the first such code. It's for individuals and smaller companies and the rate is 10% up to $65k of income and 25% over that, with the first $15k exempt.. but some business "expensing" remains. Former senator Brownback then proposed an optional code that would minimize most if not all of the business-side preferences, replacing them with rates of 10% up to $102k and 25% over that. These latter types of approaches could help us avoid the endless, droning, diversionary class debate so we can deal with the bigger problem of the preferences.
The worst feature of the current code is not the 6 rate brackets, but the allowance of most business and some personal expenses to be subtracted/deducted from gross income prior to applying the tax rate. They create $300 billion of compliance costs annually (Tax Foundation), $500 billion of other external costs plus market discounted energy prices. The GAO's Summary of Estimates of Costs of the Federal Tax System cited studies that put these costs other than compliance at 2-5% of GDP. 3.5% of $21 trillion would be over $750 billion. Robert Carroll, formerly of Treasury's Tax Analysis division, testified on April 15, 2008 at the Finance committee that the code could cost an overall "$1.3 trillion in economic output" annually.
In December of 2006 at the American Enterprise Institute, the House tax-writing (Ways and Means) committee former chairman Bill Thomas said "most of the business preferences can also be replaced with lower rates". By allowing less deductions, credits and exemptions, a greater amount of income is taxed. The rates could then be lowered for revenue neutrality, but more revenue can be generated from increased growth. Assuming all expenses must be deductible to avoid "double taxation" creates a consumption encouragement system. The preferences ultimately misallocate resources.
For example, a single filer being able to deduct $100k of purchased insurance from $413k of business income prevents the $100k from being taxed at a 40% rate (sole proprietor, over $313k bracket), so the purchase winds up getting discounted by $40k. This incentive to pre-pay into a 3rd party pool of funds reduces price sensitivity causing inflation which reduces access for others. Other problems include disproportionate tax benefits to upper-income earners and iatrogenic illness.
Most energy costs are also deductible and businesses use at least half of all the oil- around 10 million barrels per day out of 19 MBD total: 5 MBD for industrial (4 for utilities, 1 for raw materials), 1/2 MBD for commercial (stores, offices) and about 5 MBD for travel. 1/3 of airline travel is business use and all 1.5 MBD of the fuel purchase is deductible. (EIA, FHWA, BTS). Shipping fuel is a small, but growing category.
A vehicle owner paying $3 per gallon, traveling on business, can deduct that from income before it gets taxed at, for example, a 25% rate (sole proprietor, $37k-90k bracket). Every $3 reduction of taxable income saves 75 cents. The market price is, or at least seen as discounted, thereby tending to discourage conservation. Even worse, the standard mileage rate option, currently at 50 cents per mile, multiplied by 20 miles traveled, allows a $10 deduction, which saves $2.50. At these savings, vehicle MPG is less important, used less efficiently and of course often used for personal reasons, but claimed as a business expense.
Purchasing a vehicle over 6k lbs. allows a first year deduction of $25k (IRS section 179), about $10k of regular depreciation and some "bonus" depreciation. For 6k lbs. and under, it's only the $10k. The over 6k lb. allowance was raised to $100k in 2004 and lasted for 18 months before the media temporarily woke up, which woke up Congress, lowering the total back to about $35k- still a strong incentive to buy a heavier vehicle. With either category, a buyer can justify the extra gas cost with the tax savings.
With utilities deductions, there's the added problem of many office and some factory and store leases having utilities included in the rental price since the owner of the property can subtract these costs as operating expenses. The tenant is not paying for the heat, A/C, etc. directly and so is even less likely to conserve.
Former Department of Energy policy advisor Karen Harbert, stated on May 16, 2006 at the House Government Reform Committee "Countries that provide reduced priced product.. encourage an unhealthy reliance on non-market priced oil, which is not sustainable." Her statement probably referred to nations such as China, which used to heavily subsidize oil use, but can also apply to the U.S.
A 1999 study by the International Energy Agency 'Looking at Energy Subsidies: Getting The Price Right', found in the 6 countries studied (not U.S.), eliminating the existing 20% government price discounts could reduce demand 13%.
We still use almost twice as much oil as China and therefore have the largest effect on the international price.
The National Association of Manufacturers believes lowering tax rates is a higher priority for international competitiveness than labor costs. Frank Vargo on 2/15/07 at the Ways and Means subcommittee on Trade said production labor averages just 11% of costs. For the corporate rate, the Treasury Department suggested a list of preferences to replace, in its Background Paper on Business Taxation and Global Competitiveness, that alone could bring the highest rate down to 27%, revenue neutral. Replacing more could reduce the lower brackets further so more small businesses could get off the ground.
Making more things here would not only lessen our funding of China's military. It would slow their own increasing oil appetite, including Beijing to L.A. container ships that could use 200k gallons one way. Their factory growth also contributes to up to hundreds of thousands of Chinese dying annually from air and water pollution (World Bank).
The non-energy tax preferences and other government related waste also uses energy. How much oil is used within the $750 billion of tax system inefficiencies? the $600 billion of excessive legal costs? the $400 billion of needless regulations? the $900 billion of spending waste? How much is wasted just within the 30% or $1 trillion of government and private "ineffective medical costs" (IOM, Dartmouth/Atlas) out of $3.6 trillion (CMS)? How about all those commuter miles for government workers and contractors?
Price is the most efficient rationing mechanism with the fewest negative secondary effects. The mid 2008 demand drop from 20.7 MBD to 19.5 MBD was mostly due to the $4 price and many businesses weren't even effectively paying that. We could get to 18 from 19 today without hurting the economy. Any additional desired conservation could come from an above market, revenue neutral tax restoring the $4 price. Increasing domestic production by opening more federal land might be more politically achievable if a real conservation plan were offered.
Allowing individuals and companies the option of lower rates in exchange for paying market prices can decrease oil use now, as opposed to a promise for 5 or 10 years from now. It can also reduce pollution, inflation, including international food prices and dependency on other imports. Increased disposable incomes would expand the ability to pay for the basics like housing, food, health care and education.
Sunday, May 28, 2017
"..but what can just 1 person do?"
Although a properly crafted optional code and other policies might attract some additional votes in Congress, we need to craft the Congress by identifying the right candidates. The system is often top-down. The 3,000 or so primary candidates position themselves and the voters are often unaware of the intentions. Voters need honest, complete, concise information on policy options, then establish their own preferences and compare candidates to this sort of template. This could also entice better candidates to jump in.
Polls consistently show the typical voter as conservative/moderate on fiscal issues and moderate on social issues, in general. Although some campaign $$ is critical, the vote is still the deciding factor, but there's little or no coverage of many important fiscal issues, so many voters aren't educated enough to know which candidates are serious about necessary reform. A pro freedom, compassionate, tri-partisan or non-partisan plan might include:
- ranked choice voting
- 28% spending and taxation on income within 3 years, including defense at 3.5-4%
- 15% manufacturing tax cut until another round of tax reform
- tax reform
- optional, needs tested, locally run supplemental loans for direct care and/or high deductible insurance, also covering dental and psychological, untethered from businesses
- freedom of practitioner choice- reduce licensing, scope of practice, certificate of need rules limiting naturopaths, advanced nurses, physician assistants, DIFM dieticians, etc. Will lower defensive medicine and legal costs, too.
- interstate insurance choice- 76% support in Rasmussen poll, could save 50% on price (Galen Institute, Council Affordable Health Insurance) or coverage mandate lite plans within each state
- district control, charters, homeschooling, $8k average annual tax credit/voucher with up to $600 broadband for K-12, up to $10k needs tested college loans
- revenue-neutral tax on oil (preferred conservation method by most economists), exempt the poorest by starting payroll taxes after $8k of income
- drill on the flat, treeless, frozen Alaska coastal plain and other federal lands where safe.
- legal reform- simplified, faster, at least preliminary decisions
- supplemental housing loans for renters or owners instead of taxpayer backed mortgages, rent "control", etc.
- private accounts option for Social Security
- private insurance option for Medicare
- block grant Medicaid and all needs tested program to states
lower the top C corporate rate to 27% and replace most preferences so the usual 2% of GDP is raised, same progressivity, or lower to 30% on over $1 billion, 25% on over $100 million and 20% down to $1 million (S corporate, partnership, sole owner and personal income are taxed only once.)
- limits on Federal Reserve powers
- consider value added tax for int'l trade which has advantages under the WTO agreement (Paul Ryan) to balance China's higher border tax
- calculate value of China's intellectual property theft, inadequate environmental and worker safety and 30% subsidies (Usha Haley), etc.
- let states decide on cannabis, low potency coca, abortion
- recall ability after 2 years, based on ranked choice polling or
- amendment for 3 year Senate, 2 year presidential terms
- Federal Elections Commission reform/repeal
- increase direct issue voting in the states
- increase spending on world hunger
There are many interest group ratings of officeholder's positions on various issues, but some important details aren't covered, there's less overall info on new challengers and even less at the primary and then statehouse levels. We're still significantly in the dark ages. No wonder why voter turnout for non presidential primaries, statehouse generals and primaries range from 50% down to 20%. Once the primaries are over you could have 2 general election contenders who don't fully understand which reforms are actually needed.
Polls consistently show the typical voter as conservative/moderate on fiscal issues and moderate on social issues, in general. Although some campaign $$ is critical, the vote is still the deciding factor, but there's little or no coverage of many important fiscal issues, so many voters aren't educated enough to know which candidates are serious about necessary reform. A pro freedom, compassionate, tri-partisan or non-partisan plan might include:
- ranked choice voting
- 28% spending and taxation on income within 3 years, including defense at 3.5-4%
- 15% manufacturing tax cut until another round of tax reform
- tax reform
- optional, needs tested, locally run supplemental loans for direct care and/or high deductible insurance, also covering dental and psychological, untethered from businesses
- freedom of practitioner choice- reduce licensing, scope of practice, certificate of need rules limiting naturopaths, advanced nurses, physician assistants, DIFM dieticians, etc. Will lower defensive medicine and legal costs, too.
- interstate insurance choice- 76% support in Rasmussen poll, could save 50% on price (Galen Institute, Council Affordable Health Insurance) or coverage mandate lite plans within each state
- district control, charters, homeschooling, $8k average annual tax credit/voucher with up to $600 broadband for K-12, up to $10k needs tested college loans
- revenue-neutral tax on oil (preferred conservation method by most economists), exempt the poorest by starting payroll taxes after $8k of income
- drill on the flat, treeless, frozen Alaska coastal plain and other federal lands where safe.
- legal reform- simplified, faster, at least preliminary decisions
- supplemental housing loans for renters or owners instead of taxpayer backed mortgages, rent "control", etc.
- private accounts option for Social Security
- private insurance option for Medicare
- block grant Medicaid and all needs tested program to states
lower the top C corporate rate to 27% and replace most preferences so the usual 2% of GDP is raised, same progressivity, or lower to 30% on over $1 billion, 25% on over $100 million and 20% down to $1 million (S corporate, partnership, sole owner and personal income are taxed only once.)
- limits on Federal Reserve powers
- consider value added tax for int'l trade which has advantages under the WTO agreement (Paul Ryan) to balance China's higher border tax
- calculate value of China's intellectual property theft, inadequate environmental and worker safety and 30% subsidies (Usha Haley), etc.
- let states decide on cannabis, low potency coca, abortion
- recall ability after 2 years, based on ranked choice polling or
- amendment for 3 year Senate, 2 year presidential terms
- Federal Elections Commission reform/repeal
- increase direct issue voting in the states
- increase spending on world hunger
There are many interest group ratings of officeholder's positions on various issues, but some important details aren't covered, there's less overall info on new challengers and even less at the primary and then statehouse levels. We're still significantly in the dark ages. No wonder why voter turnout for non presidential primaries, statehouse generals and primaries range from 50% down to 20%. Once the primaries are over you could have 2 general election contenders who don't fully understand which reforms are actually needed.
Subscribe to:
Posts (Atom)