State Tax Reform Advice For 2014 -- Think About Spending

Jan 1 2014, 12:05pm CST | by

State Tax Reform Advice For 2014 -- Think About Spending
Photo Credit: Forbes Business

Writing for a tax magazine, I have always focused on the revenue side of public finance. I believe that there is either a right way or a wrong way to raise money to pay for public services. Everyone assumes that any significant changes to the tax system must occur in a revenue neutral way – that is, we will be spending the same amount of money after reform as we did before reform. I have written about this before, making the point that there is no reason to limit changing the tax system in this manner. Neutrality is a political contrivance – designed to show that liberals and conservatives are nice people.

But in thinking about tax reform efforts in the past year, I am more convinced than ever that our refusal to rethink the size of government makes fixing problems with the tax code impossible. Here is what we know. Cutting government programs is difficult because each program has a constituency that will fight like a gladiator to protect its access to public money. So when the topic of tax reform comes up, conservatives and liberals vow to find a fix that will neither raise nor decrease spending. But we also know that politicians – the majority anyway – generally hate raising taxes. This reflects the fact that most of their constituents hate the idea of paying more taxes. But the costs of government continue to increase. And that leads to worse tax policy as states look to gimmicks, excises, gambling, and other junk ways of collecting revenue. It also ensures that some horrible tax policies are never fixed.

For example, business entities pay about 50 percent of all sales taxes in the United States. They should probably pay zero. Repealing the sales tax on business inputs would cost billions of dollars. No one has the guts to call for such repeal because it would require that other taxes be raised or government services be cut. One can make the same argument for repealing the state corporate income tax and the state estate taxes, neither of which work well in an open, global economy.

My advice? If you are not willing to pay for a certain level of government with broad-based taxes on personal income, consumption, and property, reduce your spending.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days.
 
 
American whiskey faces challenge in whisky-gulping India
Washington, Nov 23 (IANS) For the most part Indians love things American, but when it comes to their tipple, the world's largest whisky drinkers usually go for Scotch or their very own home-made brands.
 
 
Tiny shrimps hold clue to alien life
Washington, Nov 23 (IANS) A tiny shrimp residing at one of the world's deepest undersea hydrothermal vents holds clues about what life could be like on other planets, NASA scientists report.
 
 
What causes discomfort among users of contact lenses
Melbourne, Nov 23 (IANS) If you are not comfortable wearing contact lenses, it could be due to degradation of the lipid layer in the eyes' natural tear film, says a study.
 
 
 

Latest from the Network

A8 Chip of iPhone 6 and iPhone 6 Plus Can Handle 4K Videos
The outstanding features of the A8 chip are continuing to be revealed, as the processor is found to have the capability of playing 4K videos on the new iPhone 6 and iPhone 6 Plus.According to Mac Rumors, the fact has...
Read more on Apple Balla
 
One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days. The death...
Read more on Business Balla
 
American whiskey faces challenge in whisky-gulping India
Washington, Nov 23 (IANS) For the most part Indians love things American, but when it comes to their tipple, the world's largest whisky drinkers usually go for Scotch or their very own home-made brands. Indians...
Read more on Business Balla
 
Tiny shrimps hold clue to alien life
Washington, Nov 23 (IANS) A tiny shrimp residing at one of the world's deepest undersea hydrothermal vents holds clues about what life could be like on other planets, NASA scientists report. These tiny shrimps in the...
Read more on Business Balla
 
Katy Perry hits back at Australian media
Los Angeles, Nov 23 (IANS) Singer Katy Perry has called the paparazzi in Australia "perverted" and "disgusting" for following her along the beach and for asking her to pose during her visit to the country for her...
Read more on Celebrity Balla
 
Tiger Woods gets new swing coach
Miami, Nov 23 (IANS) Former World No.1 golfer Tiger Woods said that he has named Chris Como as new swing coach. Como is the fourth swing coach for Woods since the American turned professional in 1996, reports Xinhua...
Read more on Sport Balla
 
All's not well between Kourtney Kardashian, Scott Disick
Los Angeles, Nov 23 (IANS) Pregnant reality TV star Kourtney Kardashian has hinted at a relationship strife with partner Scott Disick by posting a cryptic message-based image on a social media platform. The 35-year-...
Read more on Celebrity Balla
 
$1 Samsung Galaxy S5 Best Buy Black Friday Deal is on Sale Now
Best Buy has released a new set of deals on Sunday 11/23 including a deal advertised in the Best Buy Black Friday 2014 Ad. The $1 Samsung Galaxy S5 Black Friday deal is now on sale at bestbuy.com.The regular price of...
Read more on Apple Balla
 
What causes discomfort among users of contact lenses
Melbourne, Nov 23 (IANS) If you are not comfortable wearing contact lenses, it could be due to degradation of the lipid layer in the eyes' natural tear film, says a study. Patients with discomfort showed degradation...
Read more on Business Balla
 
Rosetta's comet landing captured in 3D
London, Nov 23 (IANS) A stunning 3D image generated from data collected by Rosetta Lander Imaging System (ROLIS) aboard the European Space Agency's Philae lander shows what it would look like to fly over the surface of...
Read more on Business Balla