If You Mess It Up, Clean It Up
Cleaning up after myself was something Madre and Grandma beat into me at an early age; it was the price of being allowed inside the house. But as the eldest of five, I was also expected to clean up the messes my younger siblings had created. Frankly, chores were a lot easier when what I was cleaning up was a mess of my own making. Moreover, there was something hugely satisfying about the times when my wormy little sister was caught shirking in her room and forced, spitting and snarling to join in the cleanup efforts. All these years later, I feel much the same way about paying taxes, particularly those that go to support programs and ideologies I find anathema.
But my libertarian leanings notwithstanding, some taxes actually make sense to me.
Taxes on gasoline and diesel fuel, for example, pay for roads and highway maintenance, putting the onus for their upkeep on the people who actually use them. Taxing our likker supposedly helps offset all the social damage done by us shiftless chard-swilling drunkards. Redemption taxes on bottles and cans not only encourage less wasteful packaging, but provide industrious homeless and wayside drifters with a ready source of lunch money. Those sorts of taxes don’t offend me in the slightest, and in times of national travail even seem like a reasonable part of the solution.
Although never a huge crowd-pleaser, new taxation will most certainly become an increasingly more pressing issue as our Country attempts to get its torpedoed economy righted, repaired, and back in the water. Our local, state and federal governments can’t just come right out and tell us that our tax obligations have doubled and may, in coming years, double again. So as with the measured quantitative easing of housing prices, wage and job cuts, and soon, rising interest rates, they’ve begun to come up with a lot of clever new ideas for wringing every last penny out of us without literally triggering an armed insurrection.
Two proposed new taxes will likely be up for public debate in the coming months, and on a purely practical basis, both seem to me to be relatively user-responsible ways of counteracting the budgetary deficits that are besetting governmental agencies around the country.
In California, four voter initiatives dealing with the legalization, regulation and taxation of marijuana have been cleared for petition, a comprehensive summary of which can be found here.
Given the tacit support of Gov. Schwarzenegger, who has called for an “open debate” on the issue, it is likely that at least one of them will garner the required 433,971 signatures necessary to place it on the June 6, 2010 ballot.
A not-so-subtle backdoor approach to full-scale legalization of the maligned weed, people who under other circumstances would be taking to arms at the very suggestion of quintupling an existing tax, (on legal usage,) are in this case demonstrating in support of initiating one. Legalization and taxation, they argue, would flood the market with cheap product and dis-incentivize illegal Mexican/Chinese grower cartels in our state and national forests, freeing up USFS and local authorities to police more pressing matters. It would regulate who could sell marijuana and to whom, and ensure that users access the public health system to screen for infectious diseases and unsanitary conditions. It would provide a source of income to unemployed pot enthusiasts, furloughed bureaucrats, and backyard hobbyists with some space to spare in their kitchen gardens. And in addition to providing potentially billions of needed simolleans (and sensemilla for that matter,) to depleted State coffers, it would finally end the moral hazard bred by disrespect for what has for years been considered by a good many Americans to be a really, really stupid prohibition. (Official number of Americans who have “tried” marijuana at least once is estimated by drugabuse.gov at somewhere near 40%, while alternet puts it at closer to 47%.) The exact figures are open to interpretation.
What is known is that in the last decade nearly 6.5 million Americans have been arrested on marijuana charges, 89% of which were for simple possession. That’s a lot of public-defender expenses, incarceration expenses, probation expenses, and social services expenses we could eliminate. One has to question whether the social costs of enforcing the laws against marijuana are commensurate with the tax monies to be gleaned from taxing and regulating its use. As has been seen in the gay civil rights movement with which it is concurrent, the well-organized push toward legalization and taxation of marijuana promises to stir up a spirited debate.
A second tax proposal now gaining momentum was first suggested in 1971 by Yale economist and Nobel Laureate, (1981) James Tobin, for whom it is named. The so-called Tobin Transaction Tax would levy a fee on every financial transaction that goes though any of the world’s markets, bourses, or exchanges, and the proceeds used to offset the imbalance between the influence of the financial industry and the public economy at large.
When British PM Gordon Brown resurrected this proposed global tax at last month’s G-20 meeting in Scotland, Timothy Geithner reportedly opposed it on the grounds that it would be too hard to implement internationally. “I have not seen a version of that kind of tax that I think would work, be effective, and would be appropriate for our country,” he later told a congressional hearing.
Unspoken, of course, was the effect such a transaction tax might have on trading houses such as Goldman Sachs, and how it might impact international currency manipulations by agencies such as the Federal Reserve. Nancy Pelosi also expressed reservations about the feasibility of its even-handed international application.
However, the idea is beginning to take hold in an election-conscious Congress increasingly besieged by outraged citizens of all political stripes who feel that the financial sector has grown too big and too powerful for the society it is supposed to serve.
Last Thursday, Senator Tom Harkin (D-Iowa) and Representative Peter DeFazio (D-Oregon) proposed a bill that would impose a .25% tax on all securities transactions. Obviously tied to Obama’s plan for a “jobs bill,” and aimed at Wall Street, not the small investor, the bill has the support of labor and an increasing number of grassroots taxpayer organizations.
Predictably, business and banking lobbyists sprang into action.
“Weakening our capital formation system is not a better outcome” says David Hirshchmann, president of the United States Chamber of Commerce’s Center for Capital Markets Competitiveness.
Michael McMahon (D-N.Y.), Carolyn Maloney (D-N.Y.), and Debbie Halvorson (D-Ill.) all representing districts rife with wealthy banking and investment interests circulated a letter which read in part, “…A $150 billion tax on financial transactions will fall on millions of hardworking Americans who are saving for their future through their 401k plans, mutual funds, pensions and other savings vehicles,…”
European banking interests have taken an even more cynical red-meat approach, tying support for the tax to “helping poor nations like Africa” or “funding those who care about climate change.” In coming weeks, one expects to see similar obfuscating tactics from the American banking industry.
Timothy Geithner, no doubt chastened by President Obama’s recent remarks on the economy (see below,) met with House Speaker Pelosi on Thursday. Of Geithner’s G-20 remarks in opposition to the tax, House Financial Services Committee chair, Barney Frank, who was present at the meeting, reported, “She said that Geithner felt he had been misrepresented.” Further clarification was not immediately forthcoming, but apparently Mr. Geithner has now taken a more nuanced stance on this issue.
Finally, for those of us whose concerns about the President’s handling our national economy have brought us to the verge of mayhem, may I suggest taking the time to read through the following exchange between economist Robert Kuttner and our banker-in-chief during the question and answer session following last Thursday’s jobs summit at the White House. As with most of the President’s unfiltered remarks, I found it not only thoughful, but even reassuring. And at this point, that’s saying a lot.
ROBERT KUTTNER: You know, most of the things that have been proposed today cost money, and there is this concern about the federal deficit….
BARACK OBAMA: Well, I think this is an important point. You know, we’ve been talking a lot about specific initiatives. There is a macroeconomic element to this whole thing. And so let me just amplify what was just said.
We have a structural deficit that is real and growing, apart from the financial crisis. We inherited it. We’re spending about 23 percent of GDP and we take in 18 percent of GDP and that gap is growing because health care costs, Medicare and Medicaid in particular, are growing. And we’ve got to do something about that.
You then layer on top of that the huge loss of tax revenue as a consequence of the financial crisis and the greater demands for unemployment insurance and so forth. That’s another layer. Probably the smallest layer is actually what we did in terms of the Recovery Act. I mean, I think there’s a misperception out there that somehow the Recovery Act caused these deficits. (Note: all emphases ahansen’s.)
No, I mean, we had — we’ve got a 9-point-something trillion-dollar deficit, maybe a trillion dollars of it can be attributed to both the Recovery Act as well as the cleanup work that we had to do in terms of the banks. In turns out actually TARP, as wildly unpopular as it has been, has been much cheaper than any of us anticipated.
So that’s not what’s contributing to the deficit. We’ve got a long-term structural deficit that is primarily being driven by health care costs, and our long-term entitlement programs. All right? So that’s the baseline.
Now, if we can’t grow our economy, then it is going to be that much harder for us to reduce the deficit. The single most important thing we could do right now for deficit reduction is to spark strong economic growth….
…We understand that in this administration. That’s not always the dialogue that’s going on out there in public and we’re going to have to do a better job of educating the public on that.
The last thing we would want to do in the midst of what is a weak recovery is us to essentially take more money out of the system either by raising taxes or by drastically slashing spending. And frankly, because state and local governments generally don’t have the capacity to engage in deficit spending, some of that obligation falls on the federal government.
Having said that, what is also true is that unless businesses and global capital markets have some sense that we’ve got a plan, medium and long term, to get the deficit down, it’s hard for us to be credible, and that also could be counterproductive. So we’ve got about as difficult a economic play as is possible, which is to press the accelerator in terms of job growth, but then know when to apply the brakes in the out-years and do that credibly. And you know, we are trying to strike that balance, but we’re going to need help from all of you who oftentimes are more credible than politicians in delivering that message.
Because we want to leverage whatever public dollars are spent, and we are under no illusion that somehow the federal government can spend its way out of this recession….
(The full conversation can be found here).
by ahansen
