A friend and I agreed yesterday that The Greatest Nation on God’s Green Earth faces a choice between significant new taxes and financial collapse. Neither of us can imagine the public sitting still for new taxes (I blame the education system, which doesn’t teach financial literacy), but we don’t know how to prepare for collapse: will it take the form of hyperinflation (one should buy land, commodities, and stocks) or depression (sell everything and hold cash)?
Rather than dwelling on doom, though, I’m reading Turnier, Designing an Efficient Value Added Tax, 39 Tax L. Rev. 435 (1984) (not available online – sorry – but plenty of VAT material is googleable), because if we are to avoid collapse, a Value Added Tax ought to be on its way. In that happy eventuality, Congress would help out “politically favored businesses,” id. at 443. It’s instructive just now to watch the North Carolina Legislature sort through the claims of providers of services that it might tax.
For one thing, providers jump at the chance to say taxing them would be regressive, and here’s an example:
“’The bulk of our business is the blue collar worker,’ said Del Ratcliffe, president of the North Carolina Golf Course Owners Association.” http://politics.mync.com/2009/07/nc-tax-overhaul-still-alive-in-budget-talks/. Here’s the Association’s flyer, making the same point and referring to “’average’ people”: http://site.golfkeepsusgoing.com/uploads/Recreation_Tax_Bullet_Points.pdf.
Reasonable people may disagree about what to tax: as Professor Turnier says, "a pluralistic democratic society such as ours (with a governing process which places a premium on compromise) can be expected to produce a tax system replete with special treatments and exemptions." Id. at 470. I think taxing golf would hit the wealthy less than taxing legal services and more than taxing tatooing. But regressivity isn't the only issue. I would tax legal services because we could, like Japan, do well with fewer lawyers, and I would tax tatooing because I'm a square. Golf, I don't know, but there are those pesky pesticides. http://www.pesticide.org/golfcourses.pdf.
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I alerted a couple of friends to this beginning effort; they replied to me as follows:
ReplyDeleteFriend #1: ... [ellipsis in original] the Republican in P. Oglesby begins to emerge. Toss out the progressive tax system! In an egalitarian society the wealthy shouldn't be taxed more than the poor! Why tax the Wall Street financier who buys Chivas Regal more than the poor schmo who has to dig into his pocket to feed his family of four!?? C'mon Oglesby, you gotta be kidding. You should go back to idleness.
Friend #2:
Awright. I disagree with [friend #1]. First we don't have a progressive tax system. A VAT could be made at least as progressive as what we have. It would make our exports more competitive. Change in tax policy in form of VAT was one of two things I really hoped to see from Obama's administration. The other was a national transportation policy. I don't think we'll get either.
Yet another friend says:
ReplyDeleteFun stuff. Do you know that the Japanese have decided that they have too few lawyers and lawsuits? They used to have the gov't mediate most commercial disputes but have come to think that promotes inefficiencies. I kid you not that they think a more litigious society will be a more responsible and more efficient one. Not too surprising, Posner is an advocate of litigation. I presume the Japanese do not want to reach our level of litigation.