johaneriksson.se

Whether you believe that government plays too big a role in society, or too small, we should be able to agree that it is better for taxes to be collected in a way that causes as little economic harm as possible. Many things can be said about the American tax code, but not that it is a pinnacle of efficiency.

Harvard economist, and adviser to Mitt Romney, Greg Mankiw lays out some ideas for tax reform that most people should be able to agree on. They follow four basic principles:

1. Broaden the base and lower the rates
2. Tax consumption rather than income
3. Tax bads rather than goods
4. Keep it simple, stupid

Why isn’t this done? Individually, a lot of the specific policies currently in place enjoy substantial political support, and although we would be better off with an overhaul it is too tempting for politicians to cherry pick individual deviations that could win them votes. Perhaps this problem is made bigger by the type of electoral system that the U.S. employs for Congress.

Sweden reformed its tax system in the early 90:s, largely following those principles. Of course, since then, complexity has grown again, as individual policies change the code without paying sufficient attention to their impact on taxation as a whole.

2012 is probably not the best year to attempt something like this in the U.S., but hopefully efforts can be made after the presidential election.

—

Andra intressanta bloggar om: politik, ekonomi, usa, skatter

Economist Tim Harford points to the failures of environmental regulations like the CAFE standards, and concludes that carbon pricing is the way to go.

All this explains why a carbon price has to be the centrepiece of any policy on climate change. A price on carbon acts in more subtle ways than any regulator will be able to, encouraging a switch away from coal and towards nuclear energy and renewables, encouraging energy efficiency in every choice we make, and in the last resort, encouraging us to do without products, services and activities where the energy cost is just too high.

All true, of course. And yet it ignores the public choice problem that Harford himself identifies earlier in the piece.

With the price of domestic gas and electricity soaring, the cost of keeping warm, never off the politicians’ radar screens for long, is firmly back on the agenda.

Carbon pricing will increase the cost of electricity, at least in the short to medium term. That’s the whole point. And it’s not going to go down well with voters, even green-eyed ones. There is probably room for some amount of tax increases, especially if other broad taxes are lowered, but it’s an open question if there’s enough room to make any substantial impact on consumption decisions.

It’s a bit of a dilemma. While regulations are easier to slip by voters, they are also more likely to have vast, unexpected, negative, consequences that taxes lack. But taxes are more visible, and more likely to upset voters. Then there is the general problem with pigouvian taxes: how do you know when you’ve set the tax at (or close to) the optimal level?

—

Andra intressanta bloggar om: politik, miljö, ekonomi, skatter, klimat

You’ve probably read about Jose Manuel Barroso’s proposal to tax all financial transactions in the EU. It’s a rather bad idea, for lots of economic reasons, some of which are explained by Tim Harford here. Even the European Commission itself, of which Mr Barroso is the president, figures that it will lower GDP by 1.75%.

This all misses the crucial point. This proposal is not about economics, or even evil banks. It’s about the distribution of power. The Brussels elite has long been frustrated about not being able to independently tax its subjects. Now they’ve realized that the financial crisis, helped along with some populist rhetoric, could well be the opportunity of a lifetime. Or at least, of their time at the top.

That is why the proposal is even worse than its economic impact suggests.

—

Andra intressanta bloggar om: politik, eu, barroso, finanskrisen, skatter