Posts tagged with: taxes

Blog author: jballor
Wednesday, May 3, 2006
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This section from Reinhold Niebuhr’s Moral Man and Immoral Society: A Study in Ethics and Politics strikes me as quite true:

The coercive factors, in distinction to the more purely moral and rational factors, in political relations can never be sharply differentiated and defined. It is not possible to estimate exactly how much a party to a social conflict is influenced by a rational argument or by the threat of force. It is impossible, for instance, to know what proportion of a privileged class accepts higher inheritance taxes because it believes that such taxes are good social policy and what proportion submits merely because the power of the state supports the taxation policy. Since political conflict, at least in times when controversies have not reached the point of crisis, is carried on by the threat, rather than the actual use, of force, it is always easy for the casual or superficial observer to overestimate the moral and rational factors, and to remain oblivious to the covert types of coercion and force which are used in the conflict.

This obfuscation of motives is part of what differentiates charity from taxation. True charity cannot be coerced.

See also: Reinhold Niebuhr Today, ed. Richard John Neuhaus (Grand Rapids: Eerdmans, 1989).

You may have heard about the debate in Washington that erupted late last week, as Senate Democrats and Republicans sought ways to respond to rising gas prices. According to Marketplace’s Hillary Wikai, the majority Republicans settled on “a $100 gas-tax rebate to be paid for by drilling in Alaska’s Wildlife Refuge.”

Michigan Democrat Debbie Stabenow proposed “a $500 rebate but pay for it by cutting the tax breaks for oil companies.” She said, “We should instead put that money back in the pockets of the people paying the high gas prices.” But one other Democratic plan was to stop taking that money from the people in the first place, at least temporarily.

The NYT reports that “Democrats were pushing for a 60-day suspension of the federal gas tax of 18.4 cents a gallon, and the Senate Republican leadership settled on the rebate.” The short-term nature of the proposed solutions lead many to suspect that any of the proposed moves are simply pandering to the voters in an important election year.

Indeed, Congress has good reason to distract us from the reality of the situation. As Benjamin Zycher comments (text here), “Oil industry earnings per gallon were about 19 cents in 2005, and have increased to about 23 cents more recently. Federal and state taxes per gallon of gasoline average 46 cents. And so by all means, yes: Let’s have a debate about who is profiteering from the gasoline market.”

Of the two options, clearly suspension of the tax is preferable to filtering money through the government bureaucracy and letting it trickle back to taxpayers. But why make it temporary? If Congress really wants to address the rising price of oil over the long-term, the only thing it can really do is act on what it directly controls. Congress doesn’t control supply and demand, but it does control how much it adds in taxes to the price per gallon. Why not cut or suspend the federal gas tax indefinitely? States could do the same, by the way.

Here are some of the reasons that even the 60-day relief plan was tanked, given by Congressional staffers:

Those leaders and Finance Committee aides said many Republicans opposed the Democratic plan because they feared that oil companies, which pay the gas tax, would not pass savings on to the public, or that the laws of supply and demand would push the price up again.

There was also the probable opposition of House Republicans, who have been reluctant to jeopardize the flow of the gas tax revenue to the highway trust fund that underwrites road and bridge projects.

“Our folks thought it might amount to nothing for consumers,” said one aide who was granted anonymity to discuss internal leadership deliberations.

The first excuse is really just quite lame. If increasing demand raises the prices further, they would still be lower than they would be if the 18.4 cent tax were still in place. The second paragraph really tells the tale. If Americans are addicted to oil, maybe politicians are addicted to taxes.

Instead of being worried that the move might “amount to nothing for consumers,” the politicians are clearly more worried that any move to cut taxes would “amount to nothing” in terms of spendable tax revenue.

Placing limits on the levels of government taxation of gasoline would be a much more substantial and effective move than attempts to set price controls, as advocated in an online petition introduced by Michigan Governor Jennifer Granholm.

According to MichiganGasPrices.com, Michigan gets nearly 20 cents (19.875) in tax revenue per gallon of gasoline sold, and this figure does not include the additional 6% sales tax that is tacked on.

Government leaders should never forget that they are entirely dependent on the productivity and labor of the nation’s citizens for their budgets. Their task is to responsibly and faithfully administer those funds, acting as stewards on behalf of the tax-payers. Attempts to point the blame for rising gas prices solely on oil companies, without acknowledging the basic role of rising demand and high levels of government taxation, is irresponsible and disingenuous.

Blog author: kschmiesing
Thursday, February 9, 2006
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In this season of taxation, it is refreshing to consider strategies for lowering taxes and making governments more efficient. London’s Institute of Economic Affairs recently published a fascinating monograph by Richard Teather, The Benefits of Tax Competition. It’s available for download here.

Teather examines from various angles the issue of tax competition among nations—that is, the practice of national governments’ lowering taxes for the purpose of attracting foreign companies and fostering and retaining domestic ones. He reviews the relevant existing research, analyzes the evidence, and concludes that the objections don’t hold water and that tax competition is, all in all, a good thing.

It is worth noting that the same principle applies intranationally. I recently heard a speech by a candidate for governor of Ohio who has made the state’s oppressive tax structure the centerpiece of his campaign. He tells of a humorous conversation with an Indiana state official who posits as the main cause of that state’s economic vibrancy, “Ohio’s dumb policies.” In other words, talented young people, entrepreneurs, and existing businesses are all fleeing Ohio for environments more conducive to prosperity–like Indiana.

If you’d like to see how your state’s taxes compare with others around the country, check out this informative map provided by the Tax Foundation.