When Every Practical Economic Idea Is Political Suicide, Something's Wrong With Politics

from the too-bad dept

Last week, Planet Money brought together five different economists, who represent a pretty broad spectrum of political ideologies in general, to see what policies there are that all of them (mostly) agree on -- and then noted why every single one of those policies is political suicide for a Presidential candidate. The list of economists is a fantastic one, including my Econ 101 Professor, Robert Frank (who I forever remember kindly for letting me take my first ever college final exam late, after I accidentally overslept, waking up in my dorm room an hour and a half after the exam began...). Also included is Russ Roberts, whose writings and thoughts on economics I follow closely. Then there's Dean Baker, whose work we've cited here a few times. Next up is Luigi Zignales, who I had the pleasure of meeting a couple months ago, and whose new book, A Capitalism for the People is on my shortlist of books I need to read this year. Finally, they have Katherine Baicker from Harvard, whose done really interesting work on health care economics -- a field that needs plenty of study.

So what policies did all five agree on? Here's the list (though you really should listen to the podcast to hear them all talk about the details)

One: Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger tax breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It's a kind of consumption tax, and can be structured to make sure it doesn't disproportionately harm lower-income Americans. More, it's taxing something that's bad, which gives people an incentive to stop polluting.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

So there you go. Six proposals from five economists who represent a very wide spectrum of political views, which they all agree on. And nearly every one of those is political suicide (though, to be fair, Libertarian candidate -- and former beloved New Mexico Governor -- Gary Johnson's platform actually does include many of these).

The show suggests they're going to explore in future episodes why so many proposals that a large number of economists think make sense are simply politically unfeasible, and I look forward to that. But, a lot of these are situations where old policies effectively locked us in, and making changes would upset an awful lot of existing infrastructure and jobs, not to mention beneficiaries of those policies. And that's one of the reasons why we're always a bit worried about government leaping in to regulate areas where they don't fully understand what's going on. Those regulations can (and often do) lock us into a situation that is not easy to get out of -- even if getting out of it makes a lot of sense...

What's really unfortunate, of course, is that we can't even have reasonable discussions about most of the proposals above. Bringing up nearly any of them is considered a political non-starter, even though if people really understood the overall impact of them, they might agree that all are at least worthy of discussion.

Filed Under: economics, politics, taxes

Dear Sweden: Will You Tax Hard Drives And Give Me A Cut Every Time Someone Visits Techdirt?

from the tax-and-spend dept

We've discussed in the past the ridiculousness of attempts by various countries to put a levy on blank media just in case you might copy something onto it that was covered by copyright. Apparently Sweden is now gearing up to go through this same fight, as the entertainment industry is demanding a blank media levy. As Rick Falkvinge points out at the link above, this is not (as some believe) a blanket license to infringe. The fee people pay is only supposed to cover legal copying. But, of course, if it's legal, then that probably means the work was already paid for. Why should the person who paid for it have to pay again? And, that doesn't even get into the fact that many people buy storage devices that are never used for such copying. But they still have to pay the tax.

The whole thing sounds like a joke, but I feel like I should demand my cut, just to point out the ridiculousness of it all. After all, every time someone in Sweden opens up a page on Techdirt, they're making a "legal copy" on their hard drive. So, where's my cut? According to Google Analytics, last month we had over 12,000 page views from Sweden. Clearly, I deserve a cut for each of those.

While my claim above is obviously silly, it's no less silly than the claims of others. Why should one particular set of content providers get to set up a system like this, and how is the distribution manged? How much do we think will actually go to content creators? And where does it stop? If music and movie companies get a cut, what about book publishers? And news organizations? And blogs? Where do you draw the line? The problem is that as soon as you draw any line in such a case, you're setting up a system that others will demand to be a part of. It's just a bad idea all around.

Filed Under: blank media, levies, sweden, taxes

Amazon Prepares For Showdown In California After Budget Includes Amazon Tax

from the how-will-this-help-california dept

Over the past couple of years, a variety of states have tried to implement "Amazon taxes," whereby they change the definition of what counts as "presence" in a state to include if a company has any affiliates. Frankly, this is ridiculous. An affiliate is really nothing more than an advertiser, and it defies common sense to claim that an advertiser counts as a direct employee of a company. Amazon has been fighting these efforts in a variety of states, but it's about to take on a big fight. Apparently, the new California budget includes a version of this Amazon Tax, and the company wasted little time sending out an email to all California Amazon associates (such as us) to let us know that it would be "terminating" the contract unless California changed its mind.

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective.

As we've noted before, this is an incredibly short-sighted move by the state. They think it will bring in tax revenue, when all it actually does is kill off affiliates and drives that money elsewhere, to other states. For a state that should be friendly to the internet, considering the whole "Silicon Valley" thing, you'd think the local politicians would know better.

Filed Under: affiliates, california, taxes
Companies: amazon

While Texas Politicians Claim $600 Million 'Lost' In Uncollected Online Sales Tax... It Means $600 Million Texans Saved

from the that-money-doesn't-disappear dept

We've already covered the ongoing dispute between Amazon and the state of Texas over uncollected sales tax for residents there. Apparently, a state politician complained about how the state loses $600 million a year because out-of-state online retailers don't have to collect sales tax. However, as Jim Harper correctly points out, shouldn't people be pointing out that this actually means that Texans saved $600 million per year because of the government's inability to tax them on it?

What happens with the $600 million depends on what you mean by "Texas." If you mean the government of the state of Texas in Austin, why, yes, the government appears not to collect that amount, which it wants to. If by "Texas" you mean the people who live, work, and raise their families throughout the state--Texans--they actually save $600 million a year. They get to do what they want with it. After all, it's their money.

The Texas tax collector is complaining because the last thing state taxing agents want to do is collect money on in the form of use taxes, which means something like going door to door to collect money from voters based on what they bought from out-of-state. Revenuers intensely prefer to hide the process, collecting their residents' money from out-of-state companies.

A good thing to remember in these discussions.

Filed Under: taxes, texas
Companies: amazon

Amazon Announces It's Leaving Texas In Tax Dispute; Governor Blames Comptroller, Says He'll Fix

from the politics-is-about-power dept

You may recall late last year that the state of Texas sent Amazon a tax bill for $269 million. The issue, as always, is the question of whether or not Amazon has to collect sales tax. Technically, e-commerce companies have always said they don't have to collect sales tax in states where they have no physical presence. Of course, Amazon actually has a giant distribution facility in Texas, and also bought Woot (based in Texas) last summer. It's still tried to avoid the tax issue by claiming those are subsidiaries, not Amazon.com itself.

Apparently, that strategy wasn't working, so last week Amazon announced that it was leaving Texas over the issue, making sure to announce that it had planned to hire 1,000 additional workers at the facility. Hearing a major employer leaving the state is generally a pretty bad thing for state politicians and Governor Rick Perry realized that, because it took all of one day for him to throw the state comptroller under the bus and claim that the whole thing was a mistake by the comptroller:

"That is a problem and I would suggest to you that we need to look at that decision that our comptroller made," he said. "The comptroller made that decision independently. I would tell you from my perspective that's not the decision I would have made."

In fact, Perry publicly began to explain why Amazon shouldn't have to pay sales tax on items shipped in Texas:

"You couldn't go in and buy anything out of that store, and that, historically, has been the way we defined whether you pay taxes or not -- if you had a storefront. This obviously didn't have a store front. It was specifically there to manage products that need to be shipped out."

Perry then asked the state legislature to make sure that it crafts some new rules that keep Amazon from leaving. Looks like Amazon just successfully called Texas' bluff.

Filed Under: taxes, texas
Companies: amazon

Colorado Not Allowed To Demand All Purchase Info From Companies

from the consumer-privacy dept

Remember how North Carolina was demanding that Amazon hand over pretty much all purchase info on every citizen who had ordered anything from the site? Thankfully, Amazon won that lawsuit, and was allowed to protect purchaser privacy. However, other states apparently didn't get the message. Michael Scott points us to the news that the state of Colorado, which had put in place a similar law, just got a preliminary injunction barring it from enforcing the law. While it's not a final ruling, it does mean that the companies protesting this law have established a "substantial likelihood" of prevailing. The ruling focuses on how the law violates the Commerce Clause in regulating interstate commerce (which state governments are not allowed to do). It doesn't directly discuss the privacy issues, other than indirectly to note that weighing the balance of potential "harms" it makes sense to block this law. If the law is later found to be legal, then the state can still get that info and collect taxes, but if the law is allowed to be enforced, it could violate people's privacy and other rights.

Filed Under: colorado, privacy, purchases, taxes

NASA Once Again Auctioning Off Patents Your Tax Dollars Paid For

from the why-the-exclusivity dept

One of the few good things in the US concerning copyright law was the decision to make sure that all federal government documents, that are released, are released into the public domain rather than covered by any sort of government copyright (such as crown copyright found in other countries). However, for some reason, the government has not done the same thing when it comes to federally funded research that is turned into patents. A couple of years ago, we questioned why NASA was auctioning off patents that were taxpayer funded. It appears that NASA doesn't care.Ben points us to the news that NASA is about to auction off a bunch of other patents as well, including five patents around "automated software generation." There's simply no reason not to put this research into the public domain where it can actually be used to benefit both commercial and non-commercial projects. By auctioning off a patent monopoly, it will almost certainly be using taxpayer-funded research to stifle innovation.

Filed Under: auction, federal government, nasa, patents, taxes

Indonesia Proposes Law To Review & Tax Every Internet Application

from the that's-not-how-innovation-works dept

As has been discussed multiple times, one of the reasons why the internet has thrived (or even why the software industry has thrived) is that the barriers to entry are low. You don't need to build a factory or get all kinds of approvals. You can just create something and go. But, perhaps not in Indonesia any more. Glyn Moody points us to a report on a proposed law in Indonesia that would first seek to tax all technology/software firms above and beyond existing taxes and (even more worrying) require anyone creating an application to get permission from the government before any application can be released. Apparently, this will apply to any application "which uses the internet to transmit voice, images, data, content based services, e-commerce, as well as other services provided through applications." Yeah, pretty broad.

Developers in Indonesia are reasonably up in arms over this, claiming that it will devastate the industry if they have to get government permission for every app or web service they put up. The government's defense of the law in the face of such criticism is hardly convincing:

Ministry spokesman Gatot Dewa Broto defended the proposed law in public statements, claiming it is there to ensure the laws aren't going to be left behind once the industry takes off.

Well, yes, I guess if you put in place laws that pretty much guarantee that the industry will never take off, then, the laws won't get left behind. But that hardly seems like a practical solution.

Filed Under: indonesia, innovation, taxes, technology

Intuit Still Lobbying Hard To Stop Governments From Making It Easy To File Taxes

from the corporate-culture dept

Earlier this year, we wrote about how much effort Intuit has put towards blocking proposals to have the federal government send you pre-filled out tax forms. After all, the IRS already has your information, so why not just send you a form with all of your details filled in, let you check it over for any mistakes, errors or omissions, sign it and send it back? It would save a whole lot of hassle, and certainly would avoid problems caused by simple mistakes. But, of course, if the government made it easy to pay your taxes, why then, Intuit wouldn't be able to sell as many copies of TurboTax. So it's been fighting it all along.

Of course, some states have already implemented similar systems for state taxes, and Intuit then goes on the lobbying offensive to try to repeal those laws. Reader Xan points us to an LA Times story about the lengths to which Intuit is going to try to kill off a highly successful set of programs in California that have made it much easier for many, many, many residents, while at the same time saving the state millions of dollars. It's a clear win-win.

Well, except for Intuit.

Intuit is lobbying hard for California to ditch this tremendously successful program that helps both tax payers and the state, and replace it with a different program that... helps Intuit. It would offer a much more limited offering to many fewer people, mostly designed as an upsell to get people to pay for TurboTax. And, while Intuit hasn't been successful yet, it has been spending plenty of money supporting California state politicians on both sides of the aisle to try to find support for its efforts.

Filed Under: california, lobbying, software, taxes
Companies: intuit

House Increases Taxes On Venture Capital At A Time When More Investment In Innovation Is Needed

from the bad-thinking dept

For a little while now, we've noted various plans among politicians to change tax laws for private equity fund managers -- which is supposed to close some loopholes that allowed some bad investment decision making to happen. But one of the serious problems with those efforts are that they lump together all types of private equity, including hedge funds (which do have some issues) and venture capital, which functions entirely differently. Despite numerous warnings about this, it looks like the House has still gone forward with passing a bill that will greatly increase the taxes on venture capital partners, taxing part of the money they make as profits from investments as traditional income, rather than as capital gains (which is taxed at a much lower rate).

While I don't think this change will be as devastating as some have made it out to be, it could chill some aspects of investment. And, while I also don't believe that venture capital is the only way to build an innovative business these days, I do think it has an important place in the ecosystem, and is quite helpful for many companies. Taking away some of the incentives for venture investments, right at a time when we need greater innovation seems like a fundamentally short-sighted move. I understand the argument on the other side, that the partners are investing other people's money, and thus it's not "their" investment from which to earn capital gains, but to some extent that's misleading. The setup of most venture funds with carried interest (i.e., the profit share for venture partners) is to effectively trade their time and effort in the investment for a part of the investment. So it might not be their cash, but they do invest in other ways, and for that they get a share of the profits.

There are certainly lots of problems with our financial system today, and many questions about the private equity space. But lumping in venture capitalists who do long-term, high risk investments in private companies to help them grow, with hedge funds that do short-term, highly speculative gambling-type investments without much focus on the underlying business or prospects, is a dangerous move. There are problems with the venture capital model, but for the most part it works quite well in funding all sorts of innovative companies. Putting this kind of speed bump into the market won't stop venture capital investments, but it could have some pretty serious consequences, especially in terms of the type of companies VCs are willing to invest in. The Senate still needs to vote on this issue, and hopefully they recognize that this is not the time to punish venture capitalists.

Filed Under: capital gains, innovation, investment, taxes, venture capital