Friday, July 30, 2010

How to Tax

The government needs revenue. It must acquire that somehow. That somehow is taxes. What would be the most "fair" method to tax by? I have my opinion, but here is my overview...

1. Income taxes: taxes on all income.

2. Wage taxes: taxes only on income earned by working.

3. Consumption taxes: value added taxes (VAT) and sales taxes.

4. Corporate taxes: taxing business (profit).

5. Tariffs: taxes on import/export of trade goods.

6. Property taxes: taxing ownership of somethings.

7. Estate taxes: taxing transfer by deed.

Numbers 2 and 3 are inherently regressive taxes. The rest can be progressive, flat or regressive depending on how they are set up. In many states property taxes are flat. Income taxes are generally set up to be progressive. The Estate tax is very progressive (though becomming less meaningful every alteration). It's hard to gauge the exact nature of corporate taxes and tariffs, and it isn't going to get you a good answer to ask. Still my ranking of like to dislike...

1. Estate tax. This is a great tax, that shouldn't really bug conservatives (though it does). It lets someone who has worked hard to build up a fortune keep it. But once they die their mostly good for nothing offspring (see: Walton family) have to pay a pretty hefty tax on what they are deeded. Progressive, decent revenue source, truly does not hurt anyone (the farmer issue is b.s.).

2. I like income tax. A lot. I would particularly like income tax to treat capital gains as normal income rather than in the bizarre way that it does in the US. Easy to make progressive. Generally pretty fair: everyone gets taxed according to their means (well not really, at present low to mid-income people are overtaxed, but ideally--with a good progressive tax scheme--it could be that way). Mostly it produces a lot of money in a relatively simple fashion. It's still way too damned complex, but so long as we have an elected government that won't change.

3. Corporate taxes. This is the first one that I am a bit ambivalent about. I think that it is a good way to get to a lot of revenue, some of which would otherwise be tax sheltered by people who have enough money to do that. I also think that it can stifle growth some. This is a tax I think needs lots of work to be really good, but that it can be really good. As it is too many big companies pay too little, while many smaller companies end up paying too much.

4. Consumption taxes I'm pretty ok with. I think VAT would be best, but even a simple sales tax is not a bad thing. Particularly one that does not apply to certain necessities (like non-junk food). While it does hit poor people harder, exempting food is a good way to minimize that. Specifying food that does and doesn't count, and having lots of other goods producers lobbying to be considered a necessity complicates things. VAT helps somewhat by having more tax on higher margin items...also by burying the tax to most people, it becomes easier to raise by 0.1% points every now and again. Most people wouldn't even notice. Of course, that is also a reason not to like it. Note: gas taxes are a special consumption tax.

5. Tariffs, I see, as more an international, economic negotiation tool than one for generating revenue. It could be simply because that is really how we use them. Kind of neutral except I don't think that protectionist taxes are a particularly good idea as they can (and do) end up hurting export oriented domestic business.

6. I generally don't like property taxes. Odd, as they have a possibility of being progressive to an extent nothing else on this list does (cap gains income is easier to shelter even with an ideal progressive income tax scheme). An ideal property tax system probably would be the most progressive system we could have, but I don't see it as a remotely real possibility. In the mean time, I do feel like if I purchase something, it is mine. I don't mind a small amount of property taxes to fund certain infrastructure issues (power, sewer, trash, roads), but I am strongly opposed to their, in some places dominant, use to fund schools. The quality of public schools should not be tied to the value of the neighborhoods that surround them. It's possible that I would like these better if they were state levied and redistributed according to need.

7. I detest wage taxes. Working people pay wage taxes. Rich people living off of interest and dividends and other capital gains do not pay any wage tax. Federal wage taxes are even worse since they have a dollar cut off and therefore wage earners are taxed in a regressive style. PA's state "income" tax is in fact a wage tax. As are the city taxes around here. Working people have to pay more than trust fund babies. Not fair, and morally reprehensible.

Tuesday, July 27, 2010

Conventional Idiocy

The Democrats are likely to lose seats this election. They are also likely to retain control of both houses of Congress. After the elections we will probably hear plenty (if we watch/read the news) about how Republicans have won. But Republicans are not likely to win this election. They are very likely to lose by less than they did in the past couple.

The Senate is messed up, so I'll ignore that.

The US House of Representatives completely turns over every two years. That means that the House is a good gauge of who the American people want governing them (kind of, gerrymandered districts actually mean that the US is more Democratic than the House, but eh?). If Democrats hold the House in the fall then it is the Democrats who have "won" the election. It is Democrats who have the support of the American people.

No matter how many seats the GOP picks up in November, if it is not enough to give them the majority in the House then the American people will have said: "We want Democrats in control."

It is possible the House turns over. Unfortunately, even if it doesn't we are likely to hear about what a big night it will have been for the GOP. And next to no one will admit the truth: Americans prefer to be governed by the Majority holder of the US House of Representatives.

Monday, July 26, 2010

Curiouser and Curiouser

There seem to be some trains of thought on a collision course on the political left right now.

Train 1 left Boston about 15 years back traveling at near light speed toward the center of the country. It passed that about two years back and has slowed a bit but but really isn't looking back at the carnage left behind.

Train 2 tends to meander aimlessly at something between 20 and -40 mph. Currently it resides somewhere left of center, maybe, but probably not.

Train 1 is run by the heads of the Democratic party. Clinton, ran it for a bit. Now it is the Obama administration. Same train though. Lots of the "liberal" bloggers used to criticize this train as not being useful and causing more harm than good and not representing the people. They got tickets these past few years, however, and despite the fact that the train hasn't really changed direction or really even slowed much, they tend now to label the people who continue to criticize as not helping out.

Train 2 isn't really run by anyone, which explains why it meanders and changes velocity. This train formerly held most of the liberal/progressive blogosphere. There are still a few on board. It does have lots of independents. People who just want a government that functions (whether big or small) and for it mostly to not interfere with their personal lives. There are no tea baggers on board.

These holdover progressives and "independents" are not exactly tickled with the present administration (and those that pay attention are near apoplectic with Congress) but are largely being told that this administration is as good as we can hope for right now and so we should help out and keep working to get more (and better) Democrats elected.

But why? So that a Republican "Health Care" bill can be hailed as a progressive victory? So that we can continue to pour resources into creating death in Afghanistan? So that our (and others') civil liberties can continue to be trampled on? If this is the best that we can get with Democrats controlling everything, then what's the point in helping them?

We are living in a time that requires serious people in office. We do not have them. Even our president, who seemed as though he would be, is not. He is either weak and ineffective or he is obsessed with stupid things like the news cycle and that odd notion of perception (as opposed to reality) just like every other politician. Either way, he isn't likely to get my vote right now. Even if he ends up running against Sarah Palin (the embodiment of "moran").

I'll vote case by case and person by person. My congress critter hasn't been winning me over recently (took down his online contact page). My Senator has lost in the primary so I'll likely throw the new guy a bone there.

It isn't that I think Republicans would be better. I think they would be significantly worse. I don't think that things will get better if Democrats are taught a lesson by my not voting for them. But things are not actually getting better now. I'm just nearing the point that I'm willing to toss in the towel and let the country go to hell. I don't think I can bring myself to care enough. If the people in this country show up to vote Republicans back in power then our nation will get exactly what it deserves. It is the fault of Democrats--chiefly the current administration--if that happens.

When the hopes and dreams of the people who voted for you get tossed aside so thoughtlessly, then you don't deserve the support of those people any more. Shame on this administration and this Congress. And shame on anyone who works to defend their foolishness.

Sunday, July 25, 2010


UK slashing funding for science research. I wonder what all these science hating conservatives are going to do when China surpasses us in science research and development. I'm guessing start a war, but that's only because that's where the evidence points.

Ok, I want one...

Well, really I just want enough other people to want one, but I think that it will take a bit more than pure performance for any but the biggest gearheads. I think that, at some point, if they want to create mass appeal/desire, they should do this with something a bit sexier than a 1972 Datsun.

I kinda like the look, and I've always been keen on cars that don't look like much but that can blow your doors off, but I'm certainly odd in that regard. Most people want cars that look fast, even if they aren't so much.

Sunday, July 18, 2010


...not surprising, but frustrating never the less. Toyota/Tesla partnership is serious because they are going to make an Electric SUV!!

The single biggest problem with transportation efficiency in this country is the size and weight of the vehicles that travel our streets. A bus or a truck that transports goods mitigates the efficiency issue with quantity (though rail is still more efficient...for both). If we could get 1700 lb cars with modern engines we could be seeing 50-70 mpg. Do the same thing with electric and you can 1) reduce the weight further, and 2) make the total efficiency equation even better.

The fact that people in this country still demand SUV's is very frustrating to me. I would love to see a vehicle weight tax. $2/lb over, say 3000 lbs. There is no good reason to have a vehicle that weighs more for 99.9% of this country. Not one.

Wednesday, July 14, 2010

When Winners Sulk

The losers win. This piece by Digby is an astoundingly good description of the way most of us Americans perceive winning and what that means.

The Democrats won big in 2006 and bigger in 2008. Victories giving them control of both houses of congress (and super large majorities in both) as well as the presidency. Any and all failures to accomplish things are theirs. Not Republicans. No matter how much it is the truth that bizzare rules and reprehensible behavior among the opposition is, in fact, to blame for the lack of accomplishment, that is not the way we collectively perceive things.

Democrats have control of pretty much everything (and to a much greater extent than Republicans ever have) and have accomplished next to nothing. Republicans are clearly winning, and Democrats are clearly useless, and in a country that values winning over losing more than it does right over wrong, votes are likely to go to the winners, i.e. Republicans.

Along those lines, any time I read (or hear) some "liberal" pundit crow about how the health care--actually health insurance--legislation as some major accomplishment I want to claw my eyes (or ears) out. That any Democrat would want to claim that the Republican legislation which passed was a win is not just a shame, it's a concession that only Republicans can win. Even when they all oppose and fight against it, Republicans still got their legislation passed. Democrats are pathetic losers, even when they "win".

Thursday, July 08, 2010

Credit Unions

I like credit unions (not for profit financial institutions). They tend to have less troublesome--i.e. evil--practices. The benefits of being not for profit are: no taxes, better rates (deposit and lending).

It's pretty easy to figure. Imagine a bank and a credit union with the same depositor base. Both set a rate for a new car loan for a specific person at 6.25%. Both institutions have employees to pay, and insurance to buy, and other expenses (building, electronic transactions, etc.). To simplify let's just say that those expenses are the same for both, which is reasonable since we are trying to compare to similar sized institutions. Exactly what that will take away is hard to say, but as it doesn't really matter, let's say the leftovers on the loan is 2.5%. With a credit union all of that will go to the depositors as interest. The goal of the bank, however, is profit.

So for the bank, some of those leftovers are going to be profit. Since a bank is for profit, those profits are taxed, so those taxes also come out of that extra (technically they come out of the profits, but the profits are set greater to accommodate the tax burden). If depositors at a bank are lucky, then they get about a quarter to the dollar of a good credit union.

Now credit unions can also lower lending rates, which would reduce deposit interest, but would benefit customers in a different way. The result is the same: banks absolutely, positively, cannot compete in a rational market.

So banks try and make the market as irrational as possible. Laws are written so that credit union charters are granted very narrowly so that credit unions cannot grow or spread too much. Credit unions are made to have restrictions on who can join. Credit unions are not allowed access to the fed for their money but must often go to banks for their short term loans.

As such I love to see banks fail when going up against credit unions. More, I can't stand the dumb ass tax argument. Credit unions are tax free because of their not for profit status, not because banks have been relatively successful--to date--in pinning them to small isolated customer bases. So long as a credit union remains not for profit, they will retain their tax free status and should be allowed to grow as large as the market will bear. Right?

Saturday, July 03, 2010

Functional Banks

Banking serves an important role in the economy: it distributes money efficiently (when it works). People who have extra money put it into a bank, and that bank loans it out to others who need money (for things like cars, houses, ginormous tv's...). People who borrow money pay interest and the people who deposit (lend) money receive some portion of that interest. The difference goes to the bank, which uses it to pay employees, maintain infrastructure, et cetera.

When working well there isn't much extra past that because if there were, then some other bank would pay better rates to depositors and depositors would take their money and put it there. Banking should not be a very profitable industry, and it isn't. That's where investment banking comes in.

Investment banking supposedly does something similar (for our economy) to what regular banks do, but borrowers (and "depositors") are bigger and sometimes so are their risks. Investment banks sell securities to investors. Those securities are essentially loans to others. Investment banks are serving as intermediaries (like regular banks) but with no risk. If a loan (security) fails to pay out or plummets in value, it is the investor that is out the money. Investment banks do not make money off interest, but rather fees.

If a loan fails, the bank is out $, which motivates it to determine that the borrower is not likely to run out and that the collateral is sound.

For an investment bank, there is no such motivation. There is, however, a duty to give accurate and complete information to their clients (investors). But the motivation is to make that information as complicated and difficult to understand as possible so that they can sell any investment (good, bad, or otherwise), and so that they can hide true costs and pocket larger fees through the sales.

Pretty much all of the failures that occurred with respect to the financial crisis are due to investment banking. It is true that conventional banks were part of that, but that was simply a function of this murky securities market, and the wall separating the two (part of Glass-Steagall) being eliminated.

Since Glass-Steagall is not being restored, I fully expect this to repeat itself.