Four items for the Fiscal Cliff negotiations

Fiscal Cliff negotiators: tax alcohol; tax tobacco; tax carbon; eliminate “carried interest.”

1. A phased-in, but ever-rising, greenhouse gas tax or carbon tax. (Raises revenue, protects the planet.)

2. Tripling the federal alcohol tax. (Raises about $15B/yr. in revenue, prevents violent crime – including about 600 homicides per year – and auto accidents, protects health, prevents birth defects.)

3. Tripling the federal cigarette tax, with half the proceeds from each state going back to that state if its local tobacco taxes are at least half the national average. (Raises about $8B/yr. in federal revenue and gives about the same to the states, protects health, discourages interstate smuggling.)

4. Treating “carried interest” as ordinary income rather than capital gains. It’s only a couple of billion bucks a year, but let’s make the Republicans vote either for or against continuing to give Mitt Romney and his ilk big gifts.

What frustrates me no end is that the first three are obviously efficiency-increasing as well as revenue-raising, and yet I have no confidence that they will even be on the table.

Update In response to comments:

1. Taxes on driving need to cover four aspects of cost: contribution to global warming, conventional air pollution, congestion, and roadbed wear & tear. (You might add a fifth: contribution to energy imports and thus to the global importance of the Middle East.) A greenhouse-gas tax, or more narrowly a carbon tax, covers only global warming. Conventional pollution should be covered by an annual registration fee based on the product of a vector of pollutants-per-mile times total miles driven. Congestion should discouraged by a per-minute or per-mile charge for being on crowded roadways at crowded hours (or parking in congested places), collected by a GPS-enabled Smartpass. Roadbed wear-and-tear goes roughly as miles driven times the square of the vehicle weight; again, that could be an annual fee.

2. High tobacco taxes produce illicit markets, and the need for enforcement. Not the end of the world. The cost of enforcement is covered many times over by the revenue collected, with the health benefits as a free extra. Tripling the federal tobacco tax would add about 20% to the price of a beer: not enough to generate much of a black market, but enough to somewhat suppress drinking by heavy drinkers and those without much disposable income, including many teenagers.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

50 thoughts on “Four items for the Fiscal Cliff negotiations”

  1. I want to nominate another for ‘obviously efficiency-increasing as well as revenue-raising’: tolls! Our driving is medium harmful when we do it at non-rush hours to shop, or visit the arboretum, or even to enjoy the Blue Ridge Parkway. Our driving is very harmful when we do it at rush hours, every damned day, spewing exhaust, alone in the car. Rush hour congestion drives overbuilding relative to the actual needs of the community.

    Further, if driving is tolled, Maryland captures the value it otherwise gives away for free to Virginia and District drivers on its roads, and Virginia captures the money it otherwise gives away to long distance commuters from West Virginia. I want to draw this particularly to your attention, Mark, since you are a long term Californian living distant from its borders and are now passing away some time in low gas tax central VA: next time you drive to the District, buy some gasoline at one of Arlington’s remarkably large number of low gas tax gas stations, and note that the car ahead of you is from MD and the one behind is from the District.

    There useta be a good economic argument against tolls, in the deadweight loss of toll taker’s wages and lost time waiting at the toll booth. Both of those are eliminated by electronic collection: the people who value the service pay for it. Also, if tolls are on all roads, the incentive for the deadweight loss of shunpiking goes away. If the tolls are 4x as high in rush hour, people will have real incentive to find the other people who live in El Cerrito and work in San Ramon and make a car pool, and the person who needs to go to Home Depot and could go any time during the day will wait til ten o’clock.

    Some proglefts have opposed tolls on grounds that they are regressive – Michael Hiltzik has swanned away on this theme in LA Times. I don’t buy the argument, but it’s worth taking a look at. Certainly a second-quintile guy driving to his $12/hr job in the central city is paying a whole hour of his time for toll when the $60/hr podiatrist in the next car is paying only 12 minutes. On the other hand, the 2Q guy is paying two and a half hours for the day care late fee when he shows up ten minutes after six at the day care, and the podiatrist is paying only a 1/2 hour.

    If everybody gains 45 minutes of commute time not spent, a group of 2Qs going to San Ramon from Richmond and El Cerrito will form, they pay $4 each on toll, their commute is shorter, and the podiatrist has 45 minutes extra to work so Brown’s new taxes can capture another $7. It’s all good!

  2. If we’re going to have rational taxation, how about dividing vehicles into objectively determined classes according to roadbed damage caused per mile traveled, (This varies by several orders of magnitude between overloaded trucks and ordinary passenger vehicles.) and replacing the current fuel tax, (Which is an extremely crude proxy for road maintenance expenses caused by a vehicle.) with an annual “road damage” tax based on category and miles driven?

    The current fuel consumption based system radically distorts our system for getting people and cargo moved around, by forcing passenger vehicles to subsidize trucks.

    I also like Glen Reynold’s proposal for a steep tax on income above one’s government salary earned in the first 5 years after leaving government service. As he say, “Leave a $150K job at the White House, take a $1M job with Goldman, Sachs, pay a $425K surtax.”

    1. It’s good to recognize the externalities due to the weight of the vehicle. Just expand your externalities to include pollution effects (aka CO2 / NO / O3 / CO / particulates) which do scale roughly with fuel use.

      Also in urban areas, the constrained quantity is very often the raw number of vehicles. A Honda Civic consumes the same ‘space’ resource as a Ford Suburban, more or less. Adding more lanes is often impossible, and traffic itself begets more traffic.

      So what wins out? Ease of implementation I suggest. Fuel taxes and tolls are a much easier way to run the game. If we need an added cargo truck tax, let’s tack that on for trucks only.

    2. Reynolds’ proposal re post-Federal-employment surtaxes is a con, and you fell for it.

      I assume that Reynolds intends the reasonably foreseeable consequences of his proposal to effectively shut down the revolving door, one of which is to make it much more difficult for agencies like DOJ, IRS, and SEC to attract talent. If you want those agencies to be permanently outgunned by private sector lawyers, and therefore unable to carry out their missions, I wish you’d explain why.

      1. In theory, the government should attract talent by paying for it, not by allowing people to cash in on connections made, and take delayed compensation for decisions made, after departing.

        1. Brett, can you name a single Republican politician or pundit who would support adequate pay for Federal civil servants? Glenn Reynolds certainly doesn’t.

          1. As the old joke goes, you’re both right.

            I’d support the tax idea if we start paying civil servants enough to make staying in government more attractive.

            I’d also support it even without that in the case of elected officials who become lobbyists. There is no reason why former members of Congress ought to be able to cash in on their connections and knowledge of the process to become highly paid professional rent-seekers.

          2. I’m a federal civil servant. We make plenty of money, compared to other people who have similar levels of education and energy. I don’t have to hustle for business: the tasks come to me, and they are generally interesting, and I am confident that they have social value. I like what I am doing and the workplace is humane.

            Every time we advertise a vacancy, we get a number of qualified applicants, which is pretty good evidence that the world outside sees us as adequately compensated. DOJ, IRS, and SEC can expect to have plenty of applicants for the foreseeable future as we work down the mountain of underemployed law grads, not to mention those yet to come out of the pipeline. I am perfectly happy to see SEC hire graduates of McGeorge or Creighton and have them face down the Yalies from Crowell and Moring, I think they will do fine.

          3. Well, there’s ample room for disagreement as to what constitutes “plenty of money.” I didn’t leave my GS-15 position in the Office of Chief Counsel at IRS because I didn’t like the work; I left because I couldn’t provide the standard of living I wanted for my family in a high-cost area on a GS-15 salary. If I could have made what a third-year BigLaw associate makes, I would still be there, and I’d be happier than a pig in slop.

          4. Just to add in: these are the pay steps for GS 15
            99,628
            102,949
            106,270
            109,591
            112,912
            116,233
            119,554
            122,875
            126,196
            129,517
            3321 is the increase from one step to another.

            In 2007 the income which put you at the bottom of quantiles was: $94,000 for the top 10 percent; $129,000 for the top 5
            percent, $295,000 for the top 1 percent, $450,000 for the top 0.5 percent, and $1,246,000 for the
            top 0.1 percent. So the question is maybe – ought we be paying high level civil servants more than 95% of the population? If it’s a matter of the cost of living in the DC area, maybe we make obeisance to the shade of Senator Byrd and move the office to West Virginia.

            One of the really interesting aspects of Governor Walker’s campaign success, to me, was his ability to peel off the private sector union workers and to get them to feel ill used by the better wages and benefits enjoyed by public sector workers in Wisconsin.

          5. So the question is maybe – ought we be paying high level civil servants more than 95% of the population?

            It all depends upon what you need them to do. If you want tax attorneys with the sort of ability and experience that will allow them to go toe to toe with the sort of tax attorneys that Fortune 500 companies can trot out, then, yes, you’re probably going to have to pay them that much.

  3. Mark:

    Agree with most of the above and especially with your frustration. Some caveats:

    1. Aren’t cigarettes taxed about right, in most places? It is my understanding that at max they have social costs of about $4 a pack. The Feds already tax cigs a $1 a pack, then probably most populous states tax cigarettes about $2 a pack, then add on another $1 from the AG settlement 15 years ago along with tobacco companies constant litigation.

    I agree cigarettes are under-taxed in states like KY, but I think they may be over-taxed in WA and NY states, for example, and in Finland…

    2. How much would the Federal tax impact the cost per drink, retail or bar?

    Frank

    1. Cigarette taxes are high enough now if we consider only the costs borne by people other than smokers and their families. But they’re not high enough to cover the cost to a seventeen-year-old of letting the Marlboro Man trap him into nicotine addiction. Tripling the federal tax would increase the price of a grocery-store beer by about 20%. The price of a beer at the bar would barely budge.

      1. Thansk for the intel on alcohol taxes.

        I guess you and I have different sources for the social costs of smoking-I have read four dollars a pack, you seem to have a higher estimate. Kip Viscusi says it is a wash if you include reduced long-term care costs!

        Frank

  4. Alcohol and tobacco taxes should be as high as they can be set without creating counterproductive black markets. Likewise for marijuana if and when stable legalization occurs.

    1. If your goal is to reduce the consumption of those substances as much as possible, then sure.

      But since most people don’t have that goal, don’t hold your breath.

    2. Alcohol and tobacco taxes – tobacco anyhow – DO create counterproductive black markets in the Iriquois reservations. On first look, this seems to be more a matter of the level of government at which they are charged. Cigs come up in trucks to the rez from low tax states. If the Feds imposed a whopping big tax on the cigs and then rebated to state govts you would have less incentive for this.

      Come to think of it, that would solve the problem, if you think it’s a problem (I’m in VA, why should I think it’s a problem?!) of high-tax Marylanders and District people coming over to Arlington to buy gas.

  5. Good proposals. But I thought the negotiations were about cutting taxes and increasing spending from the new, excessively austere January 1 baseline. The problem is that politically it´s Obama´s only chance to get any new or raised taxes of any kind through Congress before 2014, and probably during his whole second term.

  6. Sorry, but I have to disagree on the tolls thing. It isn’t only about the real total cost each user incurs; it’s also about fairness in allocating social burdens. With tolls, all that will happen is that poor and middle-income people will have to pay at a level they really can’t afford because they have no real alternative in most parts of the country, and better-off people will escape paying what they should for public goods. Once you institute widespread tolling, how can you then collect new income- or asset-based taxes either for road improvements or for mass transit? It’s a much easier sell just to increase tolls, on the excuse that tolls are a user fee and the users are mostly captive; but then any new money will go only to roads, making the problem that much worse.

    Which is the fundamental problem with the user-fee model for so much of what we do. If something really is a public good, we ought to pay for it in a fair way, which to me means taxation according to means well beyond what’s needed for subsistence. Making people pay too much for necessities of contemporary life can come very close to the then new-fangled excise taxes that people rioted against in Walpole’s day in England, or the pre-revolutionary French salt tax (it would be like a refrigerator tax today).

    I understand the idea of using taxes to discourage undesirable behavior. But aside from the Catch-22 involved– really successful taxes of that kind will eventually negate themselves– I’m willing to bet there’s a big difference between the level of tolls/taxes that will begin to change behavior and the amounts of money that are needed to support even the minimum level of the undesirable behavior without grinding peoples’ faces. And politically, the easy thing is always to raise taxes from people who have no choice except to pay them.

    Case in point: PA Turnpike. The current and a prior governor wanted to privatize it for a one-time windfall that would go to rebuild an antiquated and under-maintained statewide road infrastructure. That didn’t fly, and neither would actual, you know, taxes. So this current governor forced the turnpike commission to turn over a huge additional payment every year instead. The commission meets this extortion partly by raising tolls. But lately the state auditor pointed out that the hikes only cover part of the payment. The rest is raised by selling bonds, so the commission’s debt is spiraling astronomically. But it’s about the only recourse they have if they don’t want to price that road out of the market completely.

    The bigger point is that for at least 25 years our tax system has been moving far too much in the direction of getting public money from people who don’t have any choice about paying taxes, fees, or whatever kludge it is that raises the money, because they don’t have the clout to buy themselves an exemption– they’re the pigeons in the system. More money is always going to be needed and the easiest way to get it will be, in this case, to raise tolls.

    That’s the real world of tolling, and of expecting tolls to do wondrous things beyond supporting some part of the facilities that charge them. I do think it’s different for corporate levies like carbon taxes because the payers are all in the same boat and can spread the cost out among their customers. Individuals can’t do that, though, and have almost no leverage on the income side. For them, user fees are just another squeeze.

    BTW, re differential road taxes, it used to be the case, and may still be, that many states collected truck taxes based on either gross weight or the number of axles. Some of us may remember that fleets sometimes used to have tailgate signage that said things like “this vehicle paid $xxxx in road use taxes last year.” It was always four figures, something around $2400 comes to mind. So in at least some states that was being done, and presumably still is.

    1. Actually, the main point to tolls isn’t to discourage driving. It’s to make the price of driving equal to the costs that it imposes. If you allow the public to pay less to drive than it costs the rest of us, then you will get a bunch of freeloading. Make the tax system progressive in other ways, but don’t let people pass the costs of their behavior on to others, no matter what their income level is.

      1. I agree with Altoid, and disagree with J Michael. Ignore the impact; forget what’s progressive and what’s regressive. Consider only the fundamental concept that we all share in the costs of public good.

        If you want to make the price of driving equal to the cost it imposes, then advocate charging full-value tuition for schools. Those of us without children will pay MUCH lower taxes. Otherwise, the argument is based not on principle, but simply on expediency–what’s easy to get through the legislature.

        1. No, it’s not. Schools don’t entail large scale negative externalities. Quite the opposite. They create large scale positive externalities and thus deserve to be subsidized. Driving is different.

      2. I understand that part of it, so the catch-22 doesn’t apply so much to tolls. What I do think needs to be taken into consideration, though, is that raising them to that level (which I assume is pretty high because so much in the way of current externalities would now be included) is a major change away from a wide-ranging and long-standing set of public policies that encourage and subsidize driving. People have developed habits and spending patterns under the old policy regime, and at least as important, employers developed pay and compensation patterns under it. Those patterns are slow and expensive to change, and in some cases really can’t be changed except over generations (housing availability in big cities, for example).

        In that context, I think making low-income people pay the full costs of what they do, though in the abstract it’s a good thing socially and planetarily for people to do, is disproportionately sticking them with the bill for problems created in large part because of past policy decisions; largely because of those policies they’re the people least able to pay. So things like raising minimum wages and making alternative transportation much more available and affordable should also be part of the picture, imho.

        Bottom line for me is that I don’t want us to accept the idea that new costs, and particularly costs we’ve been bearing in non-monetary ways and are now moving to monetize, should normally be dumped on people who under the current policy regime really can’t afford it. Some thought has to be given to how people are going to be able to pay new costs. I think costs like these should be phased in over years or decades– for tolls, at minimum over the life of a typical car loan– with a package of related changes that allow people to adjust.

        A close analogy is our response to the mortgage meltdown. We threw money at the banks and saved them but refused to write down mortgage principal to current, or even less inflated, values. That means individual homeowners are eating almost all the lost housing value. But the losses were created by the interaction of many players operating according to then-current policy, and as far as I can see, in most cases the buyers were the least culpable, and they’re surely the least equipped to bear the cost. And yet.

        So I’m cynical. Actors should bear the costs of what they do, sure. But that can’t be a model for public finance. The problem is that in practice, the “user pays” idea will always work out to apply to government functions the little people use and not to things like the courts, or trade promotion, or defense, or other things which aren’t used in discrete chunks and which most people never use directly. “User pays” is also less than an eyelash away from the idea behind consumption taxes and is pretty easy to morph into flat income taxes. All of these will shift the burden away from people with means and influence and onto people who don’t have the means or influence to avoid paying. Which is what a certain political party has been fighting to the death to achieve, and it’s wrong. So I think when we talk about capturing social costs, we need at the same time to address the distribution of means to pay for them.

        1. I vote for Altoid!!! This toll business may make sense in economic theory, but like many suck, it is unfair. It isn’t {i}difficult{/i} to change one’s commute — it is often just not possible. And it is pie in the sky to think everyone can carpool. These sorts of things sound great to academics.

          1. to italicize (I discovered a day or so ago), one uses angle brackets with the code em inside to start and /em inside to finish. One can bold the text by doing the same thing with ‘strong’.

            ‘suck’ wasn’t all that wrong, given your intention… but I know you’re typically more polite than that!

        2. Then phase it in and increase progressivity elsewhere. The problem with your argument is that it applies to everything. Airline ticket costs are a much heavier burden on poor people than rich people, so should we subsidize them?

          In particular, your argument applies to every single thing that could be done to reduce CO2 emissions. They all rely upon raising the relative cost of energy, including gasoline. So you effectively argue that we should never do anything about global warming because its relative costs will fall disproportionately on those who aren’t as well off.

          The problem is that in practice, the “user pays” idea will always work out to apply to government functions the little people use and not to things like the courts, or trade promotion, or defense, or other things which aren’t used in discrete chunks and which most people never use directly.

          The way to fight this is to fight it on the things where user pays shouldn’t apply. As I said in reply to Ken Rhodes, the goal is to make sure that negative externalities are paid for, not everything from the public fisc. Something like education, in which the costs essentially are all explicit and paid for up front make sense to cover entirely through appropriations. This is especially true if they create positive externalities. Drving, on the other hand, produces numerous less beneficial things. In the long run, the only way to reduce those is to make driving more expensive. We can just wait for rising gas prices to accomplish this for us, but I really don’t think that’s the best way to go about it.

          1. I disagree with this entire idea. What we need are clean cars. I don’t know where you live, but where I live, there isn’t *ever* going to be a good alternative to driving for most people. The layout is entirely wrong, we are all entrenched, it’s just *not* going to happen.

            The problem is climate change, not driving. Let’s stay focused.

            Also, it is much much more difficult to try to rework one’s entire life. It’s not like putting on a darned sweater and turning down the thermostat. No one is saying that we should do nothing. Plus, my guess is, we do subsidize air travel … and pretty much every other thing, somehow. So, that’s not much of an argument for you either.

          2. I’m not arguing that we do nothing. I’m saying that individuals have a lot invested in behavior and spending patterns that were largely shaped by government policies, in this case a raft of them since at least WWII. If a change in policy is going to cost them big-time, as this one likely will, then in recognition of where prior policies have put everybody, we should also be proposing new ones that ameliorate those costs, a package deal. Systems, not just single goals.

            The problem with your position is that it would impose large new costs on current necessities of life for most of the people affected, but doesn’t give them any way to meet those costs. This is particularly true, and particularly acute, for people who don’t make much money to begin with– and their income level is largely a result of past policy choices too. People need to get to work in order to do all the good things that an income allows, like eat, maintain shelter, etc. Outside of maybe half a dozen metro areas in the country, that means cars. Not so long ago, lack of access to cars was often pointed to as one of the single most important obstacles for poor people in finding employment. We have a lot of poor people in this country and recent income trends suggest we’re likely to have a lot more. To say nothing of people on fixed incomes, like Social Security. So it’s not just curmudgeonly grumbling.

            You mention increasing progressivity somewhere else. I’m not sure where that would be. A lot of the people in worst shape are getting things like EITC and other transfer payments, so there is the possibility of some further offset that way. But that really wouldn’t do much for people whose financial lives center on cash flow and who don’t have any cushion to wait for tax time, no matter how responsible they may be. That’s why I suggested changing the minimum wage as part of the deal. Maybe another idea would work better, I don’t know.

            Again, I’m not trying to say we should do nothing, but rather that we need to think systemically and address the unfairness that’s obvious in proposing a big new cost. Large numbers of people may or may not have alternatives to flying, but most people don’t fly that often. In most places, under current circumstances, they do need cars to get to work.

          3. And NCG is right– air travel is very heavily subsidized, just in ways that are usually hidden. So were the railroads back in the day. And ironically, the post office used to be one of the most important sources of subsidy in both cases. But that’s an argument for another day.

          4. If a change in policy is going to cost them big-time, as this one likely will, then in recognition of where prior policies have put everybody, we should also be proposing new ones that ameliorate those costs, a package deal.

            How is this any different than the Republican talking point about every regulatory change being a taking? If you insist on this, then that means that nothing will ever get done. You may not think you’re arguing that we do nothing about global warming, but anyone who uses the phrase “in practice” as often as you do should recognize that in practice, that’s exactly what you’re doing.

            Again, I’m not trying to say we should do nothing, but rather that we need to think systemically and address the unfairness that’s obvious in proposing a big new cost.

            Okay, I’m listening.

          5. Geez, J Michael, you really know how to hurt a guy! But no, not a taking. A taking, as they’ve proposed it, would require government compensation for any regulatory changes that affect property or other values. That’s a legal and constitutional issue (and I think a serious and tendentious misreading of the clause and our regulatory history, even pre-New Deal and pre-EPA, but we don’t need to go there).

            What I’m talking about are issues of fairness and practical politics. You can just go ahead and force new costs on people if you want, but unless some attention is paid to bettering their ability to bear the cost, you’ll only create enemies who can’t wait for the next election so they can vote the global-warming hoaxers out of office and get rid of the taxes. And in the meantime a lot of them will get to work on the phone trees and have people constantly calling and contacting their congresscritters. That tends to have effects. You don’t impress people with the seriousness of an existential problem, and motivate them to address it, by making their daily lives more miserable and telling them to suck it up. If you want to ignore the politics of it, don’t be surprised if you get a reaction that makes effective climate action impossible.

            The second sentence you quoted was a summary sentence. Above it are a couple of possibilities that may or may not be good ones. One involves public money, the other doesn’t. You’re welcome to go back and read them.

          6. But no, not a taking. A taking, as they’ve proposed it, would require government compensation for any regulatory changes that affect property or other values. That’s a legal and constitutional issue (and I think a serious and tendentious misreading of the clause and our regulatory history, even pre-New Deal and pre-EPA, but we don’t need to go there).

            Legally it’s a different issue, but ethically it’s exactly the same. Someone made decisions about their life based upon currently enacted policy. Do we, or do we not, owe it to them either to never change that policy or to compensate them if we do? Your argument really is exactly the same as why the Republicans argue that, morally, these are takings even if the legal argument is different.

            We simply cannot decide that we are shackled into continuing bad policies. And if you are saying that we could do something like change the minimum wage at the same time, then we aren’t disagreeing at all, given that several comments previously I said, “Make the tax system progressive in other ways . . .” I think that raising the minimum wage is probably an inefficient way to attack this particular problem (although it might be a good idea for other reasons), but I’m perfectly willing to entertain alternatives. Regardless, though, we have to start charging those who use roads the costs of that use, because it’s really bad policy to encourage people to drive more by subsidizing it. Only subsidize things you want to encourage.

          7. And NCG is right– air travel is very heavily subsidized, just in ways that are usually hidden.

            Right. Do you think that we should never get rid of those subsidies because some people have structured their lives around taking advantage of them?

      3. The problem here is that many people have no sensible alternative. Driving to work is expensive as it is, but mass transit is just not available or practical for too many workers.

    2. So why don’t we enact the carbon taxes, and then just *give money* to poor people to make up for the impact?

  7. Organized crime is no doubt very much in favor of the idea of tripling federal sin taxes. Plan on spending a big chunk of the increased revenue on increased ATF enforcement to keep it coming in.

  8. Mark, Re: Balanced Approach (to fiscal non-cliff, austerity-bomb in disguise)

    Under Reagan/Greenspan, payroll taxes were GREATLY INCREASED on workers to cover baby boomer worker retirement, and income taxes on the rich were GREATLY REDUCED to, in effect, “invest” the newly-inflowing ocean of worker payroll tax revenues.

    So, an honestly balanced approach, now, might be to SOMEWHAT REDUCE payroll taxes, and SOMEWHAT INCREASE taxes on the wealthy. Then go from there.

    Let’s have none of this, “Hey, let’s balance by having worker lifestyles greatly harmed, while merely giving a mere whisp of indigestion to the rich.”

    1. Absolutely.

      I suspect we have reached a point where it is possible to earn vast sums by financial market activity that provides no real social benefit.

    2. Yes, plus a small currency-conversion or capital-movement fee ala the Tobin tax. Neither would need to be very large, just enough to slow down the money flows and outweigh the margins on in-and-out trades.

  9. “Conventional pollution should be covered by an annual registration fee based on the product of a vector of pollutants-per-mile times total miles driven.”

    I’m voting for tolls here, again – collected by GPS smartpass is fine. But you make a lot of pollutants going 4 miles in an hour at rush hour, maybe comparable to the 50 miles you might drive on an uncongested road.

  10. “High tobacco taxes produce illicit markets, and the need for enforcement. Not the end of the world. The cost of enforcement is covered many times over by the revenue collected, with the health benefits as a free extra.”

    It’s hard to run a big tobacco factory without detection. So if the Feds tax the stuff at the factory, and then give a share of that tax to each state based on the orders going to that state, you have done a lot. If you can buy a lot of cheap cigs at a store in NC and truck them to NY and sell them – that makes it a lot easier to skip the difference in taxes.

  11. Here’s an item: Restore the Clinton spending levels. Let’s not use a temporary crisis as an excuse to permanently expand government, by using “stimulus” spending as the new baseline. Nothing should e called a “cut” unless it’s to below pre-“stimulus” levels. Anything less than that is just phasing out the temporary stimulus.

    You might inject adrenaline into somebody’s heart during a heart attack. You don’t then connect the needle to an IV bag, and keep it coming at the same rate for the rest of their life. “Stimulus” spending is, by definition, temporary.

    1. You realize that the stimulus spending was always defined as temporary and that exactly what you claim to want is the baseline, right?

  12. 2. High tobacco taxes produce illicit markets, and the need for enforcement. Not the end of the world. The cost of enforcement is covered many times over by the revenue collected, with the health benefits as a free extra. Tripling the federal tobacco tax would add about 20% to the price of a beer: not enough to generate much of a black market, but enough to somewhat suppress drinking by heavy drinkers and those without much disposable income, including many teenagers.

    No, it’s not the end of the world, it’s just the further escalation of corruption and violence in our society, that’s all. What Mark says can theoretically be done “many times over” isn’t being done with what I would judge success in the real world. Google “new york cigarette black market” for all the examples you could want. There exists — right now — a large, lucrative, and violent black market in cigarettes due to excessive taxation. I’ve seen studies that conclude that well over 50% (I’ve seen estimates as high as 80%) of the cigarette market in New York is illicit. More taxation will only make matters worse.

    “health benefits as a free extra”? There ain’t no such thing as a free lunch. The price is corruption and violence, which is certainly not a “health benefit”. It’s not worth the heavy price we must pay to vainly attempt to save someone else’s health from themselves in this way.

    I’m very curious about this theory that raising the tobacco tax affects the price of beer. Last I checked, tobacco wasn’t a very popular beer ingredient.

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