Today I listened to a really interesting Planet Money podcast. They convened a panel of six economists across all political spectra, from libertarian to right-leaning to left-leaning, and asked them for what changes they could all agree on. Turns out that the following six economic changes that would, they all say, substantially improve our country and make taxes more equitable for everyone. Too bad they’re so crazy that no serious candidate would touch them with a ten-foot pole.
But, listening to the podcast, I found their arguments really compelling. Here’s the six-plank platform agreed upon by all these different economists.
- Cut the mortgage interest deduction. The deduction is inequitable between renters and homeowners and actually distorts the housing market by giving a bigger subsidy to weathy people who buy more expensive houses. Eliminating the deduction would probably lower home prices and might even allow government to lower taxes overall.
- Cut employer-sponsored healthcare deduction. Health insurance isn’t taxed for employer or employee, driving “too much of a good thing” for some health insurance. Strange idea, but if health insurance is so comprehensive that it completely insulates the consumer from the price of care, it encourages consumers to use medical care they don’t need. This then drives up the cost of healthcare for everyone. And the deduction basically subsidizes excessive healthcare plans.
- Eliminate corporate income tax completely. Don’t punish corporations for making money and don’t take money away from them investing in their growth or paying their emploees. If you want to tax wealthy people, do so directly. But don’t stop corporations from investing in their products by taking money from them.
- Eliminate payroll and income tax completely. Taxing income is an easy way to raise revenue, but taxes are also used to discourage things. Do we want to discourage income? No. Same with payroll tax. We don’t want to discourage job creation, right? Replace these with some form of progressive consumption tax. (Details on that would vary depending on the political leaning of the economist.)
- Tax bad things. If you provide deductions, you get more of something; if you tax something, you get less of it. So, start taxing “bad things.” What are the worst things in the world right now? Raise taxes on pollution of all forms, gasoline, energy use, and carbon emissions.
- Legalize marijuana. Don’t waste resources on putting drug-sellers in prison; save those resources and generate a whole new thing you can tax!
Like I said, the best economic platform you’ll never get to vote for. It’s one of those “it’s so crazy it just might work” moments, because they’re really talking about a complete and total overhaul of even the way we think about taxes.
The problem is that every loophole, every subsidy, every deduction helps someone. End one, and all the beneficiaries start squawking and wailing and, more to the point, they then kick the audacious politician out of office in favor of someone who will keep the subsidy. That’s how nothing ever changes. Because what’s best for the country as a whole isn’t always best for individuals, and we vote first and foremost as individuals thinking about our individual good.
I don’t have any solutions. How do we change the way 250 million people think?