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Some intelligent (and, surprisingly, right-leaning) economists are talking about changing the tax structure so we'd get a cut in payroll taxes that would be exchanged for a hike in taxes on greenhouse gases. The idea, it seems, is that cutting payroll taxes would put more cash in the pockets of American workers -- which it would, and quickly. But payroll taxes are used to fund the Social Security program. And you pay a lot -- more than 15% of your payroll income. So the government would have to make it up with taxes somewhere else. Since the incoming Obama administration and the Democratic-controlled Congress have made it clear they intend to take action to reduce greenhouse-gas emissions, one method would be to create a tax on the production of those gases. Like it or not, they're probably going to do something -- and there's definitely a case to be made that doing it with taxes rather than regulations would be easier on the economy as a whole.
Speaking of taxes and government spending, the Federal debt to the penny as of Friday was $10,552,775,879,227.14. Divided by the 305,513,779 people living here, your personal share is $34,541. If that's not enough to scare you, try this on for size: The real Federal debt -- not just the debt we already have, but the debt that we've already promised to take upon ourselves in future obligations to programs like Social Security and Medicare, is $184,000 per person. Even worse is the overall debt, public and private, that we've run up in this country.
With the freezing and thawing taking place, rivers are rising around the state, reminding us that there's still lots of levee work yet to be done all over Iowa. There are similar risks all over the country.
There's talk of changing the tax structure here in Iowa to allow municipalities to assess their own income taxes, on top of what you pay to the state and to the Federal government. Most municipalities rely pretty heavily upon property taxes, and given the changes in the real estate market of late, one can understand why those local governments might want to have another option at their disposal. But the bigger problem is this: Iowa has a colossal budget shortfall, driven by the state's rapidly-increasing rate of spending.
Ideally, a good tax system strikes a balance between efficiency and fairness. On one hand, efficiency comes from leaving the taxpayer with the smallest burden possible...and it's quite obvious that today's income tax structure does nothing of the sort. But there's also an element of fairness involved. Some private-sector activities put a bigger strain on the government than others; for instance, if a moped and a semi-trailer drive on the same roadway, it's obvious that the semi is going to put more wear and tear on the concrete. So it wouldn't be fair to charge each of them the same amount for using the roadway.
It's a lot like setting prices in a restaurant: If you go to an all-you-can-eat buffet, you'll probably end up taking more than you'll actually eat (creating waste) and almost certainly will spend a little more time around the dessert table than you otherwise would. It's really easy to handle the bill, but there's a lot of waste involved, and it's not a great system if you're on a diet. But on the other end of the spectrum, there are restaurants where everything is a la carte -- including every side dish. At the extreme end, one can almost imagine being charged per leaf of lettuce. In a place like that, the diner undoubtedly pays careful attention to exactly what he or she is ordering -- but there's a lot of hassle involved.
Ideally, when it comes to taxes, we seek the system that places the smallest burden of paperwork and annoyance on the average taxpayer, while ensuring as best we can that the people and organizations that use government services the most end up paying their fair share. As much as some purists might hope, there's no "magic bullet" solution -- but we definitely can't afford to ignore the debates happening right in front of us.
Keywords in this show: Auditor of State • carbon taxes • debt • economics • Federal debt • flooding • greenhouse gases • income taxes • Iowa • levees • Medicare • Obama, Barack • payroll taxes • property taxes • real estate • rivers • Social Security • taxes