the rich are getting richer as a percent of total wealth and that's bad for America.
No, it isn't. What's bad is where individual people don't have adequate purchasing power and that has little to do with whether someone else has a lot of money. Economics is not a zero-sum game. The existence of millionaires does not harm an individual's purchasing power, and punishing millionaires does not benefit you or me.
Promote efficiency in the upper income brackets; tax 'em.
The wealthy are already efficient. They pay higher tax rates on more money than anybody, and are still 'the wealthy'.
Taxing them heavily doesn't help the poor, simply because it doesn't deal with the reasons they are wealthy or with the reasons the poor are poor.
If you want to change a system, you don't fiddle with its outputs alone. If you want to win basketball games, you don't go to the scoreboard and take points away from the winning team- you work on passing and teamwork and free throws and all the stuff that causes your team to win basketball games. If you want to cure a disease, you don't just treat the symptoms, you deal with the cause. If you want people to be financially equal, you must deal with why they're not- otherwise you're just fiddling with the scoreboard. (and taking their money.) It's like trying to win basketball games without focusing on how to play better basketball.
You can tear down the wealthy all you want, and you can rationalize that as 'promoting efficiency', but it won't make for anything close to equality- because in the end, rich and poor people are that way for reasons other than their tax rates.
I only make $42k and made far, far less when I had 2 kids in school; where is the $10k per kid coming from?
It's been pointed out elsewhere that the number is closer to $8500, but the answer is: Other people's taxes. Not everybody has kids, remember, but everybody pays taxes. You're welcome, we've been helping you out.
This is one of the good things about public funding for education- your kids had school paid for even though you seem unaware of where the money came from.
His point is valid- we can have the states fund and certify schools without being the providers of said schools. It can certainly be made to work.
You're still trying to make it more complex than necessary.
rather than proving your consumption level - you are simply given a rebate equal to what has been decided is the level of income that is tax free
substitute 'consumption' where you said 'income' and you've got it. Peg the rebate level to, say... poverty-level consumption, or poverty-level-index plus $10, or whatever the right tax-free consumption threshold you see fit.
unless all items of consumption are taxed at the same rate, the rebate will favour households that consume lower-taxed goods (get same rebate, but have paid less tax).
2 points:
1) I'd strongly discourage tiering of tax rates, purely for reasons of simplicity. A single flat rate on retail goods would work. Leaving used goods and b-2-b transactions un-taxed would promote efficiency and favor the used goods market, as well as avoid the impossibility of enforcing the tax when you or I try to sell our used video cards.
2) How is that a problem? No, this is the point- by taxing behavior, rather than particulars about what one earns, we reward value-based judgment, which is good for the economy.
What about households that consume less than this rebate amount? That's essentially untargeted welfare, isn't it?
Not untargeted at all- it simply targets behavior, rather than some other factor (for example, income or belt size). This creates the potential for anonymous taxation, and vastly reducing complexity. Consumption correlates much more closely to ability to pay (wealth) than does income, and does not require extensive record-keeping.
If someone making $500k/yr wants to live at the poverty line and avoid consumption taxes, they'll put their money in the bank or in the market where it'll be used to grow the economy, spurring further economic activity- and in doing so they'll free up not only their own capital, but also the resources they would have consumed. Any way you look at it, it's a win-win if the tax system favors capital formation, savings, and investment over consumption.
And business? Do they still get to claim employee pay as an expense? Factor inputs are, after all, that which a company is 'consuming'?
If you tax business, you just create a cascading tax, which is bad for business and raises no 'new' revenue.
In a sense, business doesn't pay taxes, it passes the charge along to 3 possible places:
1) To revenue, in the form of higher prices or lower profits,
2) to labor, in the form of lower pay for employees, foregone training or fewer employees, and/or
3) to capital, in the form of foregone investment in infrastructure, equipment, inventory, etc.
It's estimated that between 22 and 29% of the price of anything you purchase that was made in the U.S. is what it cost your whole supply chain to comply with and pay their taxes. You already pay corporate income tax, it's just cascaded in to the prices of goods you buy.
For this reason, a single-tiered tax at the end point of retail sales makes sense. Let the tax be expressed as tax, not as a rolled-in-to-the-unit-cost inflation in price.
I reckon there's probably just as many problems with the 'consumption tax' model as there are with the 'income tax' model - the international aspects, my god! Everyone'll be earning in the US and consuming in Canada - and the effort required to implement it would be better spent fixing the model we (a global 'we') have
There will undoubtedly be problems to solve, but none of the ones you've presented are nearly as bad or as numerous as the ones we have today. Consume in Canada? Fine....but if you bring your Canadian-bought car back to the US you'll pay the consumption tax in the form of an excise. Just like you do today already. I think you're drastically underestimating how bad our current tax system is.
Consumption taxation is efficient, handled by software built in to cash registers, transparent, easy to understand, far less intrusive than income taxation, and is easy to audit with 4th grade math. Infrastructure for it is already in place.
This is just shocking. I know public schools can be a mess and are certainly in need of reform (AND more funds) but abolishing them? How exactly are the underprivileged supposed to send their kids to school? I thought America was supposed to be about everyone being able to make something out of themselves? Well, without basic level education that is fucking hard.
The parent isn't saying that public education should be abolished, but rather that the monopoly the public schools have on the education dollars we already pay should be abolished.
The state provides 3 functions today, and is only really good at 2 of them: 1) They collect taxes to fund schools 2) They certify schools 3) They provide schools.
The state is good at #1 and #2 above. In many cases, they are good at #3, but in many cases they are not- and where they are dismal is in responding to the cases where they are not good. #3 is an area that could, in my view, benefit from some competition.
The abolition of public schools does not preclude the possibility of continuing to certify schools or publicly fund education. It *could* mean simply giving parents an education voucher worth whatever the state allocates for that childs' education- then they could shop for their child's education, compare options that cost more to see if it's worth it to them to pony up more, etc.
there's a very simple theoretical way of doing it. However, it's phenomenally impractical.
It's only as impractical as you make it-and based on your comments, it sounds like you're assuming that the only way to pay taxes is by counting on people to track and report their taxable activity honestly and settle up the bill at the end of the year, as is now done with income. This, I agree, would be phenomenally impractical- if, by phenomenally impractical, you mean 'precisely how we already do it'.
A switch to a flat-rate, progressive retail consumption tax (with a standard prebate/rebate/deductible to make it progressive and un-tax necessity-level consumption) would simplify things a lot, be very good for business, and actually make enforcement easier- in the US, instead of 140M+ household returns, there would be ~19M retail points of sale. Auditing sales is vastly simpler than auditing income. Retail sales taxes are already calculated by software, are anonymous, transaction-based, and don't require the kind of invasive nonsense we tolerate today.
That's just totally impractical. How are you going to track that? Businesses have an incentive to report their employees pay, b/c that's an expense for them. Households aren't going to tell you how much they spend, because by understating the amount they get taxed less. Shops can't report it, unless you require ID for every - EVERY - purchase. You can forget about trackable electronic payments: cash will be king, again, for the same reasons that, if you want avoid income nowadays, you do everything with cash.
You're making it more complicated and impractical than it needs to be. It's not as if the only way to do taxes is the way income taxes are done- by tallying up and tracking everything you do and paying later.
You don't have to track consumption and pay the bill later, you would pay consumption tax at the point of sale and that (along with a standard rebate) could be your whole relationship to a taxing authority.
There's no need to track income if it's not taxable, and there's no need for your employer to track expenses if they're not used to deduct from their income....and there's no need for the state to track you personally, to know about your income, or really anything you do if that's not the basis for tax revenue. The only thing that makes *that* necessary is the desire to tax the same behavior differently in different people, based on what they earn or own. THAT is what makes a tax system invasive, complicated, and totally impractical. Not that that has stopped us.
Note that in the US, the cost to comply with the tax code is estimated to be near 29% of the revenue it generates.
Ironic, this. We've been howling for blood because for years, the default user in Windows has been an Administrator and nobody needs that kind of privilege and it's a security nightmare and no wonder people who run that way end up 0wned.
Now MS has gone and done the right thing, and the best we hear is how annoying it is?
MS is now finally taking security seriously enough to do the right thing, and clearly it was not an easy thing to do. I recall trying to run Windows boxen as least-privileged-user, and it sucked. To fix all that pain... I'm impressed. This is an unqualified Good Thing.
I'm also impressed with protected-mode IE, which runs sandboxed with significantly less privilege than even a LUA user. Aero... yadda yadda yadda. I don't care about the eye-candy, but I *do* like that I can get to my programs faster than I could in XP. checkitout... ctrl+esc enter (brings up the start menu with the cursor in the search bar) type the first 4 letters of your app that might be nested down 4 menu levels deep, say, "msdn", and hit enter.
There are a million ways to make consumption taxes progressive, just like income taxes, but without the problems associated with taxing production.
Really? My taxation professor would be very interested to know about them, I'm sure.
A flat-rate consumption tax can be made progressive by the same means a flat-rate income tax can be made progressive; by establishing a prebate or standard deductible. This un-taxes the first [n] amount of the taxed activity. If we did away with our income taxes and replaced them with a flat-rate consumption tax but un-taxed basic subsistence-level consumption by sending everyone a check each month for [n] amount of taxable shopping, the result would be that in order to pay a positive amount of taxes, you'd need to consume above [n] level and your effective rate would become progressively higher the more you consume.
High-income earners don't have a consumption basket so vastly different from low-income earners that it is possible to target them on the consumption side to any significant degree
Nor is there a compelling need to. Consumption taxation targets consumption, not income....and given that a good portion of tax code is devoted to mitigating the harm of taxing productive behavior and savings (really, the US tax code's 50,000+ lines of code could be interpreted as an expression of an ongoing disagreement about just what taxable income really should be), there's something to be said for getting away from it altogether.
Progressiveness is nice, but not when it costs everyone more than it should.
Our tax system is already full of wierd rules; there's the 'Jock taxes', designed to capture the income of professional athletes who play [n] times a year in a given city. Why not telecommuters?
It's been noted above that the whole notion of incurring tax simply for having telecommuted 'into' a given place is problematic- sure, the city could mandate it and if they catch you, they can sure curtail your wages... but this simply points to an underlying issue: taxation based on income is already inefficient and hopelessly complex, enforcement isn't funded and probably wouldn't be cost-effective... and it's only getting more complicated as different taxing localities attempt to exploit the fact that income can be accrued remotely because work can be done the same way.
Remember, we live in the country where lawmakers figure it's reasonable to require a person to track where and how they earned all their money, and to use 50+k pages of code that the IRS can't get the same numbers out of more than once. If I had my druthers, I'd like to see income-based taxation go away, and there's a reform proposal before congress pushing for just that: http://en.wikipedia.org/wiki/FairTax/shameless plug
This particular implementation probably won't be realistically useful, but it does point to the fact that they're working on the main technology issue preventing us from moving to an H2 economy: storage. We don't know how to store H2 in a way that scales.
Realistically, once this problem is solved, putting the rest together will be trivial by comparison. We already know how to run H2 in fuel cells and even in internal combustion engines. We also know how to make h2 from a bunch of different sources, and this is the major value an H2 economy would provide: the ability to produce your energy in a variety of ways that don't involve drilling for oil and paying 3rd world dictators to be 3rd world dictators.
The real payoff that a switch to H2 would make available is that it can be generated from electricity- and the truth is that we don't generate a hundredth of the electricity we could, simply because we don't have the infrastructure to store it.
The thing about Hydrogen that has me most interested is that it promises to be the sort of energy storage medium worthy of building the next generation of infrastructure around. Provided we can solve the problems of how to effectively store the stuff, it could be what varied energy markets (tidal, wind, wave, geothermal, solar, biomass, etc) convert their surplus capacity into for trade or time-shifting.
The storage problem is probably the biggest hurdle we face. The concern about conversion inefficiency misses the point, to an extent: the only time it will make sense to create hydrogen is when there's excess energy to be converted to storable form: (think "I've got a megawatt solar array on my roof and I only use half that to run my house. I *could* sell that back to the grid... or can I put that into my gas tank?")
One of the arguments against H2 as a fuel is that there's a cost to convert to H2- and in our 'there's an energy shortage' way of thinking, this cost may seem unacceptable, except for one thing: There isn't an 'energy' shortage. There's an abundance of un-harnessed capacity where you live, in the form of wind, sun, biomass, possibly tide, geothermal, nuclear, etc. What's missing is not energy, but rather a way to capture it for later use that's cheaper than going to the gas station and buying a gallon of gas. Remember, we didn't build gigantic hydro dams to create electricity- we built them to store water, because we can't store electricity on that scale....and the reason we use gas is not that it's safe or cheap, we use it because it's dense, portable storage and we've already invested in the infrastructure required to find, refine, transport, store, and convert it into the kind of power we want(i.e., you press the pedal, your car goes forward).
This aspect of hydrogen (that is, its potential to be the next general storage medium) may be one of its bigger obstacles; the green crowd are some of the most violently opposed to its adoption simply because some of its potential sources (and two of its cheapest sources today) come from natural gas and coal. Of course, it is less efficient to make h2 from natural gas than it is to burn the natural gas directly; same with coal. Thus, it's highly unlikely we'll ever see 'green' support for a hydrogen infrastructure so long as coal and gas are cheaper than other energy sources- perversely, the green crowd seems to prefer sticking with fossil fuel, rather than building out H2 infrastructure and running the risk that carbon-based fuels might be used to source H2 energy. Ironically, H2 (potentially the cleanest of all energy carriers) is less in favor than the petroleum it would replace.
Interestingly, it costs about $4.00 to produce a kilogram of h2 using solar electrolysis, which is about the energy equivalent of a gallon of gas. Hydrogen can be burned in internal-combustion engines, as well as in fuel cells (tho fuel cells are more efficient). In fact, the new BMW 7-series vehicles are coming with a tank for H2 and a gas tank- the same internal combustion engine will run on either.
It sounds to me like this patent is part of the coming competition over standards; how will we store, buy, sell, and move our Hydrogen (if h2 ever becomes the lingua franca of energy storage)? Right now there are 3 real ways to store hydrogen, each of which presents its own advantages and challenges. It can be a compressed gas (which takes lots of space), liquid (which involves cryo-temperatures and is probably the least safe), and blowing it into a matrix of some metal hydride (nickel, palladium, etc). Probably the micro-glass-ball idea is a shot at doing the latter. Interestingly, using a metal hydride allows for the densest storage capacity of all 3 modes, as well as the stablest storage- to get the h2 out, warm the metal and it'll exhale h2. None of these are terribly easy to scale, and these different modes will make for interesting challenges when it comes to deploying h2-fuel vehicles. If your vehicle uses a metal-hydride storage matrix and the fuel station dispenses cryo-liquid, how will that work?
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The wealthy are already efficient. They pay higher tax rates on more money than anybody, and are still 'the wealthy'.
Taxing them heavily doesn't help the poor, simply because it doesn't deal with the reasons they are wealthy or with the reasons the poor are poor.
If you want to change a system, you don't fiddle with its outputs alone. If you want to win basketball games, you don't go to the scoreboard and take points away from the winning team- you work on passing and teamwork and free throws and all the stuff that causes your team to win basketball games. If you want to cure a disease, you don't just treat the symptoms, you deal with the cause. If you want people to be financially equal, you must deal with why they're not- otherwise you're just fiddling with the scoreboard. (and taking their money.) It's like trying to win basketball games without focusing on how to play better basketball.
You can tear down the wealthy all you want, and you can rationalize that as 'promoting efficiency', but it won't make for anything close to equality- because in the end, rich and poor people are that way for reasons other than their tax rates.
This is one of the good things about public funding for education- your kids had school paid for even though you seem unaware of where the money came from. His point is valid- we can have the states fund and certify schools without being the providers of said schools. It can certainly be made to work.
2 points:
1) I'd strongly discourage tiering of tax rates, purely for reasons of simplicity. A single flat rate on retail goods would work. Leaving used goods and b-2-b transactions un-taxed would promote efficiency and favor the used goods market, as well as avoid the impossibility of enforcing the tax when you or I try to sell our used video cards.
2) How is that a problem? No, this is the point- by taxing behavior, rather than particulars about what one earns, we reward value-based judgment, which is good for the economy.
Not untargeted at all- it simply targets behavior, rather than some other factor (for example, income or belt size). This creates the potential for anonymous taxation, and vastly reducing complexity. Consumption correlates much more closely to ability to pay (wealth) than does income, and does not require extensive record-keeping.
If someone making $500k/yr wants to live at the poverty line and avoid consumption taxes, they'll put their money in the bank or in the market where it'll be used to grow the economy, spurring further economic activity- and in doing so they'll free up not only their own capital, but also the resources they would have consumed. Any way you look at it, it's a win-win if the tax system favors capital formation, savings, and investment over consumption.
If you tax business, you just create a cascading tax, which is bad for business and raises no 'new' revenue. In a sense, business doesn't pay taxes, it passes the charge along to 3 possible places:
1) To revenue, in the form of higher prices or lower profits,
2) to labor, in the form of lower pay for employees, foregone training or fewer employees, and/or
3) to capital, in the form of foregone investment in infrastructure, equipment, inventory, etc.
It's estimated that between 22 and 29% of the price of anything you purchase that was made in the U.S. is what it cost your whole supply chain to comply with and pay their taxes. You already pay corporate income tax, it's just cascaded in to the prices of goods you buy.
For this reason, a single-tiered tax at the end point of retail sales makes sense. Let the tax be expressed as tax, not as a rolled-in-to-the-unit-cost inflation in price.
There will undoubtedly be problems to solve, but none of the ones you've presented are nearly as bad or as numerous as the ones we have today. Consume in Canada? Fine.
Consumption taxation is efficient, handled by software built in to cash registers, transparent, easy to understand, far less intrusive than income taxation, and is easy to audit with 4th grade math. Infrastructure for it is already in place.
The parent isn't saying that public education should be abolished, but rather that the monopoly the public schools have on the education dollars we already pay should be abolished.
The state provides 3 functions today, and is only really good at 2 of them:
1) They collect taxes to fund schools
2) They certify schools
3) They provide schools.
The state is good at #1 and #2 above. In many cases, they are good at #3, but in many cases they are not- and where they are dismal is in responding to the cases where they are not good.
#3 is an area that could, in my view, benefit from some competition.
The abolition of public schools does not preclude the possibility of continuing to certify schools or publicly fund education. It *could* mean simply giving parents an education voucher worth whatever the state allocates for that childs' education- then they could shop for their child's education, compare options that cost more to see if it's worth it to them to pony up more, etc.
A switch to a flat-rate, progressive retail consumption tax (with a standard prebate/rebate/deductible to make it progressive and un-tax necessity-level consumption) would simplify things a lot, be very good for business, and actually make enforcement easier- in the US, instead of 140M+ household returns, there would be ~19M retail points of sale. Auditing sales is vastly simpler than auditing income. Retail sales taxes are already calculated by software, are anonymous, transaction-based, and don't require the kind of invasive nonsense we tolerate today.
Ironic, this. We've been howling for blood because for years, the default user in Windows has been an Administrator and nobody needs that kind of privilege and it's a security nightmare and no wonder people who run that way end up 0wned. Now MS has gone and done the right thing, and the best we hear is how annoying it is? MS is now finally taking security seriously enough to do the right thing, and clearly it was not an easy thing to do. I recall trying to run Windows boxen as least-privileged-user, and it sucked. To fix all that pain... I'm impressed. This is an unqualified Good Thing. I'm also impressed with protected-mode IE, which runs sandboxed with significantly less privilege than even a LUA user. Aero... yadda yadda yadda. I don't care about the eye-candy, but I *do* like that I can get to my programs faster than I could in XP. checkitout... ctrl+esc enter (brings up the start menu with the cursor in the search bar) type the first 4 letters of your app that might be nested down 4 menu levels deep, say, "msdn", and hit enter.
Our tax system is already full of wierd rules; there's the 'Jock taxes', designed to capture the income of professional athletes who play [n] times a year in a given city. Why not telecommuters?
/shameless plug
It's been noted above that the whole notion of incurring tax simply for having telecommuted 'into' a given place is problematic- sure, the city could mandate it and if they catch you, they can sure curtail your wages... but this simply points to an underlying issue: taxation based on income is already inefficient and hopelessly complex, enforcement isn't funded and probably wouldn't be cost-effective... and it's only getting more complicated as different taxing localities attempt to exploit the fact that income can be accrued remotely because work can be done the same way.
Remember, we live in the country where lawmakers figure it's reasonable to require a person to track where and how they earned all their money, and to use 50+k pages of code that the IRS can't get the same numbers out of more than once.
If I had my druthers, I'd like to see income-based taxation go away, and there's a reform proposal before congress pushing for just that: http://en.wikipedia.org/wiki/FairTax
This particular implementation probably won't be realistically useful, but it does point to the fact that they're working on the main technology issue preventing us from moving to an H2 economy: storage. We don't know how to store H2 in a way that scales.
Realistically, once this problem is solved, putting the rest together will be trivial by comparison. We already know how to run H2 in fuel cells and even in internal combustion engines. We also know how to make h2 from a bunch of different sources, and this is the major value an H2 economy would provide: the ability to produce your energy in a variety of ways that don't involve drilling for oil and paying 3rd world dictators to be 3rd world dictators.
The real payoff that a switch to H2 would make available is that it can be generated from electricity- and the truth is that we don't generate a hundredth of the electricity we could, simply because we don't have the infrastructure to store it.
The thing about Hydrogen that has me most interested is that it promises to be the sort of energy storage medium worthy of building the next generation of infrastructure around. Provided we can solve the problems of how to effectively store the stuff, it could be what varied energy markets (tidal, wind, wave, geothermal, solar, biomass, etc) convert their surplus capacity into for trade or time-shifting.
...and the reason we use gas is not that it's safe or cheap, we use it because it's dense, portable storage and we've already invested in the infrastructure required to find, refine, transport, store, and convert it into the kind of power we want(i.e., you press the pedal, your car goes forward).
The storage problem is probably the biggest hurdle we face. The concern about conversion inefficiency misses the point, to an extent: the only time it will make sense to create hydrogen is when there's excess energy to be converted to storable form: (think "I've got a megawatt solar array on my roof and I only use half that to run my house. I *could* sell that back to the grid... or can I put that into my gas tank?")
One of the arguments against H2 as a fuel is that there's a cost to convert to H2- and in our 'there's an energy shortage' way of thinking, this cost may seem unacceptable, except for one thing: There isn't an 'energy' shortage. There's an abundance of un-harnessed capacity where you live, in the form of wind, sun, biomass, possibly tide, geothermal, nuclear, etc. What's missing is not energy, but rather a way to capture it for later use that's cheaper than going to the gas station and buying a gallon of gas. Remember, we didn't build gigantic hydro dams to create electricity- we built them to store water, because we can't store electricity on that scale.
This aspect of hydrogen (that is, its potential to be the next general storage medium) may be one of its bigger obstacles; the green crowd are some of the most violently opposed to its adoption simply because some of its potential sources (and two of its cheapest sources today) come from natural gas and coal. Of course, it is less efficient to make h2 from natural gas than it is to burn the natural gas directly; same with coal. Thus, it's highly unlikely we'll ever see 'green' support for a hydrogen infrastructure so long as coal and gas are cheaper than other energy sources- perversely, the green crowd seems to prefer sticking with fossil fuel, rather than building out H2 infrastructure and running the risk that carbon-based fuels might be used to source H2 energy. Ironically, H2 (potentially the cleanest of all energy carriers) is less in favor than the petroleum it would replace.
Interestingly, it costs about $4.00 to produce a kilogram of h2 using solar electrolysis, which is about the energy equivalent of a gallon of gas. Hydrogen can be burned in internal-combustion engines, as well as in fuel cells (tho fuel cells are more efficient). In fact, the new BMW 7-series vehicles are coming with a tank for H2 and a gas tank- the same internal combustion engine will run on either.
It sounds to me like this patent is part of the coming competition over standards; how will we store, buy, sell, and move our Hydrogen (if h2 ever becomes the lingua franca of energy storage)?
Right now there are 3 real ways to store hydrogen, each of which presents its own advantages and challenges. It can be a compressed gas (which takes lots of space), liquid (which involves cryo-temperatures and is probably the least safe), and blowing it into a matrix of some metal hydride (nickel, palladium, etc). Probably the micro-glass-ball idea is a shot at doing the latter. Interestingly, using a metal hydride allows for the densest storage capacity of all 3 modes, as well as the stablest storage- to get the h2 out, warm the metal and it'll exhale h2.
None of these are terribly easy to scale, and these different modes will make for interesting challenges when it comes to deploying h2-fuel vehicles. If your vehicle uses a metal-hydride storage matrix and the fuel station dispenses cryo-liquid, how will that work?