Not Surprising, but Not Sure The Conclusion is Fully Warranted

So lots of people believing the rich are extra mobile and that they will leave if their [local] taxes are raised doesn't apparently make it so.  At some level the argument that high taxes drive rich people away is, on its face, ridiculous.  Look at really highly taxed places in this country--NYC, San Francisco, NJ--and guess what, more rich people live in those places than live in the low taxed places in this country (both in terms of raw numbers, and, more relevantly, proportionally). So clearly low taxes aren't very useful for retaining rich people.

I would argue that the very things that high taxes can provide: better education, more/cleaner parks, better security...are reasons that all people would want to live in those places, but since many people want to live there, those places become expensive to live in and, over time, more wealthy people end up living in them than poorer people.

That said, it isn't necessarily the case that places considering a millionaire's tax shouldn't worry that their millionaires will leave.  It's more complex than just what we currently see.  If wealthy people living in low tax states are living there in part because they are more inclined to go to low tax areas, then they will move if their taxes go up.  In the case of Florida, while they could probably get away with it, it may also be that Arizona, New Mexico and Texas would start to see a larger share of the rich who do move.

If you pay the same taxes in Arkansas as you do in Manhattan, well, New York has lots more cultural opportunities, more diverse food/entertainment, better access to airports that will shuttle one to the far corners of the world, nearby ocean, mountains, rivers...also, it has more rich people already, and the wealthy do love rubbing elbows with each other.  Arkansas does have Petit Jean State Park, which is gorgeous, but probably isn't enough to compete.

So while there's a pretty good argument that, in general, high taxes on wealthy people are not going to lead to an exodus of those same people, it is probably quite dependent on what taxes are already, where the increase would put them, and the particulars of a state/region and the rich that choose to live there.

Improved Corporate Taxation

Good read on the different economies at work in the US at The American Prospect.  It seems like this could be fixed without directly changing the minimum wage (though that is probably easiest).  Since all wages are reported to the government for tax purposes it would be pretty easy to see where people work who receive aid (welfare, Medicaid, food stamps, EITC) and then send supplemental tax bills to those companies.  If Wal-Mart employees get $10 billion in tax benefits because they don't get paid enough, then Wal-Mart gets a $10 billion bill from government to cover it...after corportate taxes are paid (i.e. it does not reduce their corporate tax bill, while improved wages would).

Won't happen and would likely be a pain in the ass to implement, but a man can dream.  Really though: just raise the minimum wage.

Soda/Sin Taxes

Philly's new liberal mayor wants a soda tax, the proceeds of which go to fund (pre-K) education.  Sounds nice, but there's a problem: sin taxes are regressive.  In and of itself that isn't a reason not to do them. Sin taxes do serve dual purposes: more money and discouraging "bad" behavior.  They are particularly useful when the funding received from the sin tax is directed toward treatment or other programs that are related (say rehab for alcoholism, or medical treatment for type 2 diabetic patients).   When that funding is directed to a non-related program that will then rely on the bad behavior to be funded there is a bit of a problem.

It is much better to tax people differentially with higher taxes for wealthier individuals, however, in PA there's a bit of our constitution that prevents anyone in the state from doing progressive taxation.  It seems to me like it should also prevent regressive taxation, but either it doesn't or that's harder to "prove" legally.  So all our taxes are flat: income (actually wage), sales, property...

I think Gov. Wolf had a plan to make our state taxes more progressive with a bit of a work around (everyone is taxed at a higher rate, but then everyone gets an equal dollar value refund or credit or something).  I would like to see something like that done: up the rate to 7% then give everyone a $2k credit and so the first ~$29k of income is effectively untaxed.  Considering our current state tax rate pretty much anyone making less than $60k would get a bit of a tax break and people making more than that would pay more.

Still, not sure that the city could get away with doing something like that (the state seems to be able to stop Philly from doing pretty much anything the state legislators don't like...even if it has zero effect on them or their districts).  The soda tax is not the best option out there but it may be the best option available to the city.

IRS.gov

Being the liberal I am I generally think the IRS gets too much shit, especially since they don't actually write the tax code.  Back in the mid aughts I had a very specific beef with the IRS: I wanted to file taxes online (quicker, computer assist makes things easier) but the only options for such were 3rd party programs...which cost money (if your income is below a certain level and you are filing the 1040EZ then they are free).  There was no good reason for this.  Several states (including Illinois, where I was living at the time) had free online filing, and it seemed the only reason the fed did not was that tax prep groups (firms and software) were preventing it from being implemented.

Well, it's been available for several years now (can't remember when exactly).  It's not as good as it should be: forms should have more assistance like hover-over description or direct links to the relevant part of the instructions, and some things that should be automated are not (Why do I have to look up my tax from the tax table and input that?  Why doesn't it pull info from the W2's over to the relevant places automatically...and speaking of, why isn't entering W2's the first thing it asks you to do?).  Still, it is navigable, and I neither have to pay a preparer nor a software company to file electronically.  Overall I like it.

Taxes are still too complex, but that is not the IRS's fault, it's the fault of politicians and special interests.  And no politician, no matter what they say, is actually interested in simplifying it, because you can't simplify it without increasing taxes on some group (either special interest or fairly broad).

Just Raise the Damn Gas Tax!

Vehicle mileage taxes are stupid on many levels.  But they keep coming up.  You can read here a good (and less emotional) overview of why the VMT idea should die.

Helicopter Money

Simon Wren-Lewis has a good description of Helicopter money but I think he may be missing a couple things.

First is the perception of a "tax cut" vs. "free money".  At one level, if everyone gets $1000 it is the same either way.  If it is a tax cut, however, there is a perception that people who pay more in taxes are getting less out of the deal, and also, people who have little to no tax liability may receive nothing, and those are often the people most in need and most likely to spend.  Additionally, people seem to act differently about free money (read: they spend it) compared to earned money (which a tax cut is returning).

The second thing is the targeting/distribution aspect.  Tax cuts get money to all tax payers/filers.  Helicopter money can get money to everyone.  It could also target specific [debt] problems that may be holding back the economy (student loans, credit cards, mortgages).  True the latter is not exactly the same as helicopter money, but it isn't the same as the current QE strategy either, and everything else he said about it applies equally.

Personally the way I would like to see "helicopter money" distributed is via debt reduction to real people.  I am particularly fond of the fed buying and torching student loan debt, but I could also get behind credit card debt (which I don't really have) or mortgages, though with that last one I think I'd prefer a partial rather than complete buyout (up to maybe $50k per primary mortgage).

There is a lot of fear and uncertainty remaining in the US, and having lots of debt is a real issue for it.  People don't feel as free to spend money if they have these huge responsibilities hanging over them.  Even a fairly generous helicopter drop (via tax cut) isn't directly addressing the debt issue, and probably won't do enough to boost the economy.

Information Everyone Should Know

Considering that everyone (i.e. all the very serious people) know that high taxes hurt job growth...it should come as no surprise that they are wrong and high taxes don't hurt job growth.  They may actually help create more jobs as is now being seen in CA.  A couple paragraphs I like (in part because I've made similar points here 4 years ago):

Neumark said he asks his students, “Does raising income tax rates reduce hiring?”

“The answer is no. What firms care about when deciding how many workers to hire is the marginal product of workers and the marginal cost of those workers. So if you are an employer and your personal income tax rate is increased, that does not raise the marginal cost of your workers, but it may encourage you to work a little less hard,” Neumark noted, applying standard economic theory.

continuing:

Some research into tax rates indicates that high rates have the opposite effect: People may work harder, trying to make more money to achieve a desired after-tax income and may slough off if tax rates are lowered.

Hmm...On the one hand I'd like to gloat about being right.  On the other it is so frustrating that the people who are constantly and so badly wrong have so much influence, that I can't really feel good about it.

Also in that article and following a recent discussion regarding high taxes driving people away and low taxes attracting them:

The empirical evidence also shows that the best-paying jobs tend to be clustered in states (and countries) with high taxes. The same tends to be true of wealth creators, including the most money-motivated among scientists, and existing wealth holders not actively engaged in business.

Manhattan, home to the highest taxes in America, is also home to many centimillionaires and billionaires drawn by the proximity of other dealmakers, as well as taxpayer-supported amenities such as museums and performing arts halls. [emphasis mine]

If you want to live in a really nice place that place being really nice costs something and that something is tax dollars.  So nicer places to live have to be higher taxed. Looking back on the first thing I bolded, you see this seems to be true even among people who have the freedom to live wherever they want: "those not actively engaged in business"--i.e. the retired and/or people who have inherited their wealth--should be most tax sensitive...they choose to live in high tax areas.

I understand that in government there is waste (less than people think) and abuse (ditto) and money spent on "things you don't like" (say, the military), but tough.  In the end, if you vote for and/or support tax cuts you are championing a shittier country/state/municipality than you currently live in.

It's Not the Brackets, It's the Breaks

First, what Atrios said:

Getting rid of tax brackets does not make the system "dramatically simpler."

Taxes are actually pretty simple for lots of people: anyone who files the 1040 EZ or just takes the standard deduction, and don't have dependents or mortgage or other deductions and credits to put in there.  Even for people with common deductions, tax filing isn't all that complex.

The main reason that taxes get complex is that we spend hours trying not to pay them, and politicians have put in hundreds of breaks that are available to different people and businesses in different cases.  Anyone who wants to simplify the tax code actually has a pretty simple job: eliminate all deductions and credits.  You would probably want to adjust rates (and brackets) along with that, but that's really it.  You made $85k?  go to table, pull up your tax number, that's what you owe.

Right now someone who makes $85k likely pays taxes as though they made $70k, and may get credit for non-tax activity toward that.  That's why taxes are complex.  Between tables and computers, no one actually calculates their taxes.  The calculations are all done on deductions and credits.  We could have 100 brackets, or even a continuum and it would not make anything more complex.

Good Analogies

I really wish more people saw things in this way.  One thing I noticed reading the article that I'm surprised wasn't mentioned explicitly was poverty reduction as a benefit to the wealthy.  It is actually hinted at when he writes:

Taxation is a legal construction in exactly the same way as personal property rights are, and they are enforced using the same legal system that protects personal property rights. It is not reasonable to refuse to pay the membership fee for the country where you choose to live, while expecting the legal system of that country to protect your property from the desire of others to take it from you.

He could have easily pointed out at this point that taking care of the needs of the poor is a service to the rich expressly because it prevents them from becoming so destitute that stealing is a rational economic choice.  This directly throws a wrench in the argument that the rich get out less than they put in, because things like poverty reduction, crime prevention, and incarceration can actually be seen to benefit wealthy people much more than poor or middle class (they have more "stuff" to take).  

Ok, I Don't Get It

Maybe I'm misunderstanding the minimum guaranteed income, but I don't get Tyler Cowen's "problems" at all.  All of them stem from:

Must a guaranteed income truly be unconditional?  Might there be circumstances when we would want to pay some individuals more than others?

and my answers are simple: "yes" and "no".  My understanding is that the minimum income is just paid out to everyone [who files a tax return].  So everyone gets, say $1000/month check to do with as they please, and that doesn't go down if they happen to work so work = more money!  Depending on the level it was set at it may be able to replace food stamps and/or cash welfare and/or housing assistance but there is no good reason to drop medicare/medicaid/social security, as those are highly efficient, targeted programs that both do good and are very popular.

(Yes, I suspect that "getting Republicans to go along with this" would probably mean cutting or eliminating those programs, but that certainly shouldn't be considered a problem with min income itself, rather a politics problem.)

I would think a bigger issue is that it would likely push up inflation at the bottom end of things (particularly low end rents and eating out would be likely to go up), though that means an even greater incentive to work for low income individuals.  In the middle it would serve as extra savings or allow a bit of extra extravagance, and at the top it would be pretty much useless, particularly as it would be way more than offset with the higher taxes required to afford it.

Things That Aren't the Same

People who don't like Obama care are not the same as people who want the GOP to defund it.  That should be obvious, and it should be pointed out far more often (pretty much any time any GOPer uses the poor polling of Obamacare to justify their ongoing attempt to kill it).

Take, for instance, me.  I don't like Obamacare: it's the right wing version of universal coverage and serves as a give away to insurance industry and the broader health care industry.  I would love to see single payer (Medicare for everyone) funded directly through broad base tax increase (combination of raising the medicare tax rate, applying it to all income--including cap gains--and eliminating the tax breaks for employer provided health care).  Still, Obamacare is better than what we had, and so I'm pretty strongly opposed to any effort to repeal it that doesn't replace it with something better (since it is the best idea for universal coverage the GOP has ever had, they aren't likely to have that "something better" but if ever they manage, then that'd be ok).

The Weird Marriage and Taxes Thing

Good rulings by SCOTUS on gay marriage bills brings up tax issues again.  I understand the desire to modify taxes based on single/married mostly for political purposes, but in the end I really don't think it makes sense.

We should have only one category--the equivalent of single--and everyone would file.  So if a married couple only has one working person, the other person could file a return with zero income.  Yes, this would mean that a rich couple with one person pulling in a couple million $ could have the other spouse collecting a few thousand in tax rebates, and they may pay less than now, but that couple would be paying more than a couple with both people working and each bringing in half (same total income).  So long as the change is paired with rate increases I have no problem with this.  (Note: as an alternative wealthy couples could probably reduce tax burden by having the working spouse "pay" the non-working spouse some fraction of their income.)

I'm Not Actually Against It

When I was talking about the boondoggle of private investment in public infrastructure I wasn't really clear that I was particularly against the banks and these other stupid schemes to skim more government money off to a handful of well connected individuals and businesses.

Private enterprise does, often and without problem, invest in public goods, including infrastructure.  The mechanism for this has been and should be bonds.  Those bonds can be targeted to a specific thing, and some dedicated revenue stream (taxes, tolls, ...) can be set up to be used only for payment on those bonds, but that is how "investment in infrastructure" has and should work.

Private Public Infrastructrure Boondoggle

I am also mystified by these "banks" but I'm even more perplexed by the entire notion of private investment in infrastructure. 

When the government builds infrastructure that is an investment because that infrastructure will contribute to higher GDP (increased/improved traffic or information tech leads to increased commerce and higher sales/incomes/business revenues) which results in greater tax revenues.  Private industry doesn't tax, however, so for them to build infrastructure as an investment they need to find some other way to extract money.  And because most private industry operates on much shorter time scales than the government, they need to do that fast, which generally means much larger rents than the market would support.

Imagine a road if it is funded by tax revenue then it is "free" to drive on, which means any business that wants to start up there has an advantage in that its employees and customers don't need to pay to get to them.  That is good, and it means that business is more likely to start there.  It may be 5 years before that business turns a profit and pays taxes (though it will likely pay employees which means some payroll/income taxes, but those may just be displaced from elsewhere).

Now imagine that same road funded by a company that wants to profit.  Either they are going to make it a toll road or there will be lots of parking fees, or they will charge any business/resident some fee for access points.  Any of those things will make starting a business (or building houses, or anything) on that road less desirable than the above, and so the build up would be even slower.  Slower buildup means that the company will need to charge more to see any return on its investment and we have a downward spiral.

This is a bad idea in every way imaginable, and yet it is one that is increasingly common as stupid, short sighted, or just rotten politicians try and make a quick buck at the expense of future revenues. 

Marriage makes you less poor?

I understand the numbers and they are real, but something that should be pointed out in MattY's example is that his theoretical couple would likely be better off cohabiting while unmarried. Two impoverished cohabiting "single" parents would likely qualify for more benefits and breaks than one not-impoverished married couple with two children. 

It's not universal, but the way that we treat income with respect to marriage means that it is often better financially for dual income households to not marry than it is to marry (there are other benefits to marriage, mind you).  I think the simplest solution is to drop the entire section of the tax code.  Everyone who files is the same (so no single/married/married filing jointly/head of household crap).  Pick numbers in the middle and leave it at that.

Now that does seem to penalize single income families, but in reality it doesn't: you can have the traditionally working spouse pay the not-traditionally-working spouse half the income, and so split the pie lowering taxes all around...yes, I know that can be complicated, but since my fantasy tax filing would also drop lots of other crap, this would actually be pretty easy.

Rich Moochers

I think this point needs to be made more often and forcefully: a large swath of the wealthy in this country (particularly the anti-tax assholes) are, in reality, our Moocher Class.  Working poor who pay lots of taxes in the form of sales, payroll, state and local contribute a larger share of their income to government than do people like Mitt Romney.

Buffett Repeating Himself

The only issue I want to raise with this is where Warren says: "However, I prefer a cutoff point somewhat above $250,000 — maybe $500,000 or so."  There was something in the Fiscal Times furthering this by pointing out that $250k in 1993 is about the same as $400k today. 

Here's the thing: $250k is a crap-load of money.  It is infuriating each and every time anyone (though particularly very rich people) try and argue that it isn't.  The median income in this country is one fifth of that, and well over 90% of families must make do on less than half.  Even very wealthy Manhattan's median income is less than $100k.  People (individuals and families) just don't make nearly as much money as [rich] people think we make, and it makes a huge difference in terms of how we discuss things, like, say retirement.

If we think that lots of families are pulling in $200k/year then it's pretty easy to say that people are irresponsible who don't save enough for retirement, and it's therefore easy to argue that making SS less generous is not that bad: people just need to save a little more.  But families are not pulling in that kind of money.  Most families are living on $66k/year, and after taxes and necessities there isn't a whole lot left over.  If they are forced to save more, then it means a real drop in their standard of living.

Any family getting $250k/year is very well off, at the very least.

Deductions are Insane

Yes, I will take advantage of as many deductions as I can (easily) manage.  No, that is not hypocritical. 

Our tax code is artificially complex and inordinately stupid.  Deductions are very, very unfair for multiple reasons, but the biggest are that wealthy people get more breaks, and they encourage bad behavior (e.g. bigger houses with little down).

The regressive side probably bothers me most.  Someone with $27k in income (MAGI minus standard deduction) only gets $0.15 back for every extra dollar of deductions.  Someone with $102k in income gets $0.28 back for each extra dollar.  On top of that, higher income individuals can afford more house and more children (and pay more in state/local taxes), which means the size of their deductions are often much larger.

If we want people with kids to get something from the government, we should do that: pay everyone $2500/year/kid.  That way income doesn't matter, and we now have a big spending program that Republicans can go after.  Same with housing.  If we want people to buy a house, rather than rent (for whatever reason) we should just have the government send every homeowner a $4k check each year and lose the mortgage, PMI, and real estate tax credits.

I'm actually kind of surprised that the state/local income tax thing doesn't come under more fire from red state (Republican) politicians.  Basically if you live in a low tax state you are subsidizing people in CA and NJ.  Why is that remotely fair?  (Yes, I know, red states tend to get far more back in federal outlays than they put in, unlike high tax blue states, but this still seems like an easy break for them to target, especially since the entire GOP tax ideology is illogical.)

Holy Bad Idea, Batman!

The frequency with which vehicle miles tax (VMT) pops up is insane.  It is a very, very bad idea (in our current situation, and maybe in any situation).  A higher gas tax in superior in almost every way imaginable...

1) We already have a gas tax, so increasing it incurs ~$0 in terms of collection costs.
2) There is no "government tracking" issue to deal with.
3) There is nearly zero fraud potential to deal with.
4) It appropriately encourages people to shift to higher mileage vehicles which:
   a) provides additional benefits in terms of lower carbon emissions and
   b) are generally lighter and do less damage to the roads than heavier vehicles.
5) Congestion pricing is built in, albeit very small by comparison.

There are maybe a couple downsides to a gas tax over a VMT.  One is that that congestion pricing is not really very good, but the VMT would almost have to be the [much more unpopular] GPS type to account for this.  The other really doesn't come up until we live in a more utopic society: basically if a very large fraction of cars don't use gas, then there will be less revenue from the gas tax, but we will still have road damage.  While I see this "problem" as a huge benefit, and one I think we should look forward to having to deal with, it is a long, long, long way off (and when it ever arrives some form of weight-adjusted VMT may be an appropriate solution).

Oh, and as for increasing the gas tax being politically difficult: I can't even begin to comprehend how it is that people think that the VMT will be [comparatively] popular.

Odd, Liberal Policy Makes the Deficit Smaller

Oh, and the economy bigger...

I only selected the most liberal positions [available] and got a huge boost in the economy and a budget surplus in 3 years.  Weird.  Hell, even if I keep the defense spending where it is I get surpluses. 

Yes, there are conservative positions in there too, but they don't boost the economy or cut the deficit by as much, and they hurt the poor while benefiting the rich (including defense contractors).

Note: letting all the Bush tax cuts expire--though keeping the wage tax cut and all the stimulus spending, incl. tax cuts--has a large effect.  I also got rid of all the allowed tax deductions, raised the gas tax, implemented carbon tax, added a public option, sped up the health care excise tax, and raised the SS taxes as much as it allowed.  I ignored the 15% tax expenditure thing, mostly because I ended the other deductions, and want to encourage the rich to donate to charity at higher levels.

On the other hand, if you select all the conservative options, the economy recovers more slowly, and you are still running deficits at the end of the timeline (2021). 

The biggest "conservative" item is probably the VAT, which is only conservative, in that it is a regressive tax.  Some liberals kind of like VATs because they are more behind the scenes and people have notions (delusions) that they can be increased and made more progressive more simply than income taxes.  Without the VAT, however, the "conservative" options lead to higher deficits than current law (which is something that all smart people already know).