Archive for December, 2012

Ditching Health Insurance

I’ve harped on this issue before, but I still don’t get it: why aren’t businesses in favor of universal health care and severing the link between employment and insurance? Businesses don’t really want to be in charge of insurance plans; if they could get away with it, they would drop insurance. But they can’t, and the consequences for those that try are pretty severe. Every business would like to do it, but unless everybody does it at the same time, nobody wants to go first.

If businesses didn’t have to offer health care, they could focus their energy on doing what they do best, be it selling widgets, cars, cakes, what have you. Employers also wouldn’t need to spend time and money benchmarking their competitors. Employees wouldn’t let a lack of health coverage prevent them from switching jobs, which is a major impediment to labor market liquidity. Entrepreneurship would increase. Finally, those currently administering plans on a company-wide level could do something that adds more to their employer’s productivity.

It’s a win all around, and that’s what confuses me. Why don’t businesses support it?

That’s a tax plan!

The Center for American Progress (CAP) came out with a tax plan. And it’s a pretty darn good one! It’s actually fairly close to a plan I’d support. It raises the top bracket to Clinton-era levels, it caps deductions, it increases the capital gains tax and the tax on dividends, it gets rid of the AMT, and it taxes cigarettes, alcohol, and newly-legalized internet gambling (something I would dearly like to be able to do). This is exactly the kind of tax reform that Obama should support.

So what’s wrong with it? David Frum actually has a very good insight into what the tax battle is on the Republican side today: it’s about the merely rich versus the super-rich. The merely rich would have higher taxes under the CAP plan, ‘tis true, but the super rich would have much higher taxes. The super-rich seem willing to toss those below them beneath the wheels of the bus to save their own skins, which is not altogether surprising.

I have little faith that this tax plan will be implemented, but this would be a great starting point for Democrats in Congress.

Austerity Bombe

A few facts about the budget:

1. Tax revenue as a percent of GDP is incredibly low. Lower than even the lowest of the Reagan years. Lower by far than the Clinton years.

2. Popular programs are popular.

3. Raising taxes on those making more than $250,000 a year is popular.

4. People who want to cut spending honestly don’t want to cut things they like.

5. Everybody can sit on their hands and taxes will go up automatically.

So really, can we pretend that a serious budget proposal is something that doesn’t involve tax increases? Taxes are going to go up. They have to in order to afford the kind of government Americans want. The sooner we all acknowledge this, the sooner we can figure out how to design our tax system to raise revenue in fair and distortion-reducing ways. That’s the debate to have. Those who refuse to raise taxes are literally shooting the hostage. These are not serious people, unless by “serious” you mean “willing to destroy billions of dollars of wealth to prove a point”.

Historical Tax Incidence

Note: These graphs have been corrected in the 2012 Tax Incidence post.

I like analysis, and I like tax policy. Put the two together, as I’ve done before, and it’s a pretty sweet time. But I have a lot of numbers at my disposal, much more than the past couple of years. So because I had little better to do, I decided to calculate my tax incidence for the time I’ve been working, which is a very long time indeed. All the details after the jump.

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