11/16/2007

11-16-07 - 4

I've mentioned before that our system of taxes is badly broken. Roughly our system now (if we ignore Bush's temporary destruction) is a progressive income tax with lots of little regressive taxes and deductions and tons of exceptions.

Many of the deductions are designed to motivate certain good behaviors, but I believe that doesn't really work. Rather they just motivate people to find ways to save on their taxes and don't actually lead to good behavior. This is because they're too specific which leads to "I can do this to save on taxes" rather than "I need to behave differently to save on taxes".

A classic example of this is the hybrid car deductions (or solar panel deductions, or energy efficient appliance deductions, etc.).

The problem with these deductions is they are sort of one time things that allow rich people who can afford them to do something and get some bonus money. While it does have a certain small positive effect, it's not nearly the effect you could get through actually motivating people to do the right thing.

So people with hybrids get deductions, but people who carpool get nothing. Same with people who just don't buy a car and use public transit or bicycle. People who choose to live closer to work get nothing. And people who own 3 SUV's and also a hybrid get the deduction. Clearly the money is not reflective of benefits to emissions at all, and conceptually knowing that the hybrid deduction is out there is not a thought in people's heads which affects their day to day behavior. (it may affect their car buying choice, which is the small positive effect, but it doesn't encourage them to not buy a car at all, and it has this bizarre nonlinearity)

The best way to do that is through the capitalist system, where people can look at prices and make decisions. The problem is that prices do not reflect the true cost of things, and the government should logically step in to remedy that.

In the case of emissions, you have the ideal method - gas tax. Not only is this the ideal motivator, it's only a fair reflection. Gas taxes should pay for all the highways, bridges, vehicle testing, oil pipelines, foreign expenditures for oil, as well as the estimated long term future cost of cleanup due to emissions and other waste. This lets people see the true price and make a logical decision. The republicans weill say "but the taxes!" , well of course you can lower the income tax by the same amount that you take in, so there's no total change. The question of how much total tax you should take in is separate from the question of from where you get it. Anyway, regardless of the fairness of the charge on the gas tax, it's the best way to motivate conservation.

It's hard to think of any deductions in the tax system which are actually beneficial to the country and wouldn't be better served as fair usage taxes in a more capitalist pricing model.

You get the same thing on bigger scales with corporate tax breaks. Rather than motivate good behavior, they generally just provide loopholes and pork (free money) for specific companies that figure out how to capitalize on them. You would get much better results from using a market-based charge system. The goal should be to motivate companies to do the right thing on their own, economic benefit should correspond with national benefit. If for some reason they can't, they should be able to choose not to and just pay the price if that makes more sense. That price should be set high enough that the populace is willing to accept that payment in exchange for their bad behavior. If you think about that way, that price should be very high. How much money should a company pay to cut down a forest or blow up a mountain, or destroy habit? Every company that uses electricity is playing a small part of that.

Other obvious cases I've mentioned before are the fees charged to mining and drilling and logging companies which are not close to covering their actions & not close to motivating conservation. Another obvious one is the cost of water. Not only is water ridiculously subsidized across most of the US such that the cost of water doesn't pay for the infrastructure that delivers it - it should not only cover that but also be expensive enough to balance the environmental damage due to using that water and motivate conservation.

I don't mean to use Europe as an example of a place that gets it right because they certainly screw plenty of things up, but you can see the difference in behavior of everyone when prices are motivating. In many countries in Europe not only is gas very expensive, but so is power and water, and everyone just gets in the habit of conserving - people turn off lights when they leave a room, they wash dishes with the minimum of water, they reduce driving as much as possible - it just becomes part of your daily living, which the US system of tax breaks doesn't accomplish.

Of course this is likely to never change in the US because "tax break" sounds good while "gas tax" sounds bad, even if you adjust the overall rates so that the total tax taken is reduced, you'll get destroyed on the soundbite news programs.

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old rants