Monday, November 24, 2014

The other four-letter f-word

Many people like to assert "fair" this and that. They usually get away with it in spite of the fact that they do not offer useful definitions. Perhaps there aren't any. So this is a big scam. Politicians and other grand-standers love to align themselves with policies and proposals that are "fair."

The U.S. graduated income tax is a mess. The Economist (May 25, 2013; gated) published these details: Changes to IRS code since 2001 = 4680; number of words in the tax code = 4 million; man-years spent complying each year = 3 million; percent filers paying for help = 89%; money spent on compliance = $168 billion; taxes owed but uncollected each year = $400 billion. This is a "progressive" tax with strong leavening of (and invitation to) crony-capitalism and lobbying. The various meanings of "progressive" seem to get stranger all the time.

One can say that almost anything other than the status quo would be an improvement. Here is a Hall-Rabushka proposal. In this version, there is a 19% levy on all consumption above $12,600 -- for a family of four. This was suggested some years ago so the numbers would change. Indexing is surely possible.  This H-R proposal does build in a high marginal tax rate as soon as spending crosses the $12,600 barrier. Is that "fair?"

How about no exemptions but a guaranteed universal basic income ($50,000 per family per year?).  "Universal" as in for everyone.  The super-rich would probably use theirs for charitable donations.  Is all this "fair?"  Think about no welfare administration plus a vastly slimmed down and simplified IRS. The still unfolding Lois Lerner saga (30,000 lost emails found!) adds to the attractiveness of the proposal.

If we could only place (and collect) a tax on use of the f-word.