Combo update: high MPG in trains, taxes and economic growth get along, discipline beats IQ

Freight trains have doubled fuel efficiency since 1980
Cars are the big news in fuel economy because of the recent increase in CAFE standards, but it's trains that really scoop the efficiency scores.  One ton of freight ( on a train moves 480 miles per gallon.  For comparison, and Honda Accord would have to get 320 MPG to match it).  That's probably why liberals love commuter rail, beneficiary of $9.3 billion in stimulus dollars.

High taxes don't cause growth, but they don't kill it either
A nice chart by Paul Krugman exploding the conservative-spread myth that high taxes and growth aren't good bedfellows.  Also note that the federal debt wasn't rising back then, either.

Hard work trumps natural ability
In the long run, it's hard work that matters, not innate IQ (and IQ can be increased through study).  A study of students found that "Students who were more self-disciplined and were able to delay gratification performed better than their peers who had higher IQs."  In other words, keep at it.

FiveThirtyEight: Politics Done Right: The Ultimate Tax on Harmful Activity?

Should the progressive income tax be switched to a progressive consumption tax?:

"Under a progressive consumption tax, each family would report its income to the IRS and also its annual savings, much as many now document their annual contributions to 401(k) and other similar accounts. A family's income minus its annual savings is its annual consumption, and that amount minus a large standard deduction—say, $30,000 for a family of four—would be its taxable consumption. Rates would start low, perhaps 20 percent, then rise gradually with total consumption. For example, a family that earned $60,000 and saved $10,000 would have annual consumption of $50,000, which, after subtracting the standard deduction, would mean taxable consumption of $20,000. It would owe about $4,000 in tax, about the same as under the current income tax."

I like pigovian taxes (taxing bad things to pay for good things), so I'm curious how this might compare to a carbon tax, for example.

Frank at fivethirtyeight follows up this post with more on the reaction and implications, one of the latter perhaps being a de-escalation in the "keeping up with the Joneses" that takes place in America. Sounds good to me.

Progressive taxes: forget rates, let's bracket

A great post on fivethirtyeight.com looks at the top tax bracket historically.  Summary: the rate has been much higher than the current sub-40, but the bracket also applied to much higher income levels.  His thought: instead of just undoing the ill-conceived Bush tax cuts, slap on a millionaires tax bracket with a higher rate.

Many Americans don't even know tax rates

For all the whining about taxes, it seems that many Americans don't even know how federal income taxes work. Tax brackets are marginal, they only apply to the income that falls in that bracket, not all your income. The idiots who are trying to reduce their income to drop down a tax bracket are only going to accomplish the former: reduce their income.

Dumb

Diet pop will save you calories and dollars

A nice piece by Nicholas Kristof on the brilliance of New York Governor Patterson's plan to make ends meet by taxing sugared soda. 

An 18 percent sales tax on soft drinks and other nondiet sugary beverages 

Why is this so great?  Because taxing unhealthy behavior is one way that we can make money by improving health.

Let’s break for a quiz: What was the biggest health care breakthrough in the last 40 years in the United States? Heart bypasses? CAT scans and M.R.I.’s? New cancer treatments?

No, it was the cigarette tax. Every 10 percent price increase on cigarettes reduced sales by about 3 percent over all, and 7 percent among teenagers, according to the 2005 book “Prescription for a Healthy Nation.” Just the 1983 increase in the federal tax on cigarettes saved 40,000 lives per year.

And why are sugared drinks in particular so bad?

Evidence is accumulating that sugary drinks are a major contributor to obesity because of the evolutionary heritage I mentioned at the outset: Except for soups, liquid calories don’t register with the body, according to Professor Popkin and other specialists. [emphasis mine]

Tax the hell out of them.  

Palin, patriotism, and (payroll) taxes

Gov. Palin made a big stink in the VP debate about taxes and patriotism:

You said recently that higher taxes or asking for higher taxes or paying higher taxes is patriotic. In the middle class of America...that’s not patriotic. 

I couldn't disagree more, and Thomas Friedman has a great column today explaining why paying taxes is in fact far more patriotic than anything else Gov. Palin has suggested we do:

Palin defended the government’s $700 billion rescue plan. She defended the surge in Iraq, where her own son is now serving. She defended sending more troops to Afghanistan...

I only wish she had been asked: “Governor Palin, if paying taxes is not considered patriotic in your neighborhood, who is going to pay for the body armor that will protect your son in Iraq? Who is going to pay for the bailout you endorsed? If it isn’t from tax revenues, there are only two ways to pay for those big projects — printing more money or borrowing more money. Do you think borrowing money from China is more patriotic than raising it in taxes from Americans?” That is not putting America first. That is selling America first. (emphasis mine)

A lot of Republicans consider it a given that taxes must go down, and then spending.  But we've tried that for every Republican administration since Ronald Reagan, and each time it's simply led to deficits and massive increases in the national debt. 

This is the issue: we currently spend what Americans expect from their government, but we don't ask them to pay for it.  Cutting spending means cutting programs Americans want, from defense to health care. 

It's time to do like the American family does in a pinch - try to make more money - and raise taxes.  Because it is patriotic to earn your living.

Comparing presidential tax plans

Which do you prefer, tax cuts with debt or tax cuts that are paid for?  That's your choice in the tax plans of the campaign.  McCain's plans skews to the rich (in percent of income and absolute dollars) and will increase the deficit.  Obama's plan offers tax cuts skewed toward the middle class and pays for it with an income tax surcharge on the very rich.

 

Why tax incentives for jobs fail

Minnesota has a program to create tax-free "Job Zones (JOBZ)" to give an incentive to companies to create more jobs in distressed areas. It seems to work as well as most corporate welfare. Here's a story on the report from the Legislative Auditor and here's a brief summary of the boondoggle:

• There is no formal mechanism within JOBZ for evaluating whether a subsidy is needed, and, if so, whether a more limited subsidy could achieve the same business expansion.
• Within the business subsidy agreement itself, there is no deadline for creating the promised jobs, and no requirement to maintain the jobs through the life of the tax forgiveness.
• Using state unemployment tax data submitted by the firms benefiting from the program, the auditor's office found that the increase in employment at JOBZ businesses was 20 to 30 percent lower than what DEED was reporting.
• Although JOBZ was supposed to target economically distressed areas for business tax relief, need has not been a factor in designating JOBZ zones

Only Republicans outsource to lose money

It's tax season, judging by the W-2 forms and mailers with multiple perforations showing up in my mailbox. So here'a a thought about how those tax dollars are being spent, in one specific tax-related agency.

The IRS is outsourcing tax collections to private collections firms because of a shortage of in-house revenue officers. The collectors will help bring in billions of tax dollars that might otherwise go unpaid. For their fee, the collections agencies will keep 22-24 cents of every dollar they collect. Not a bad deal for keeping the IRS lean and mean, eh?

Except that the overhead for the IRS to do the work itself is only three cents of every dollar. That's right, government is 7-8 times more efficient at collections than the private sector. And it adds up. Over 10 years, the IRS reports that it could collect up to $87 billion in underpayments, compared to less than 2 billion from the contractors.

Note: this isn't the only way the Republican administration has hamstrung the IRS. It also prevents them from providing free tax e-filing.

Tax cuts never pay for themselves

President Bush likes to lie about tax cuts, implying that they will magically boost revenues if they help the economy. Disagreeing with the economics is like disagreeing with gravity, sir, it doesn't make it true.

The irony is that if we know we're going to increase the deficit to provide economic stimulus, why not put it in the pockets of those who would provide the most? The poor.

Things that make me pissed #5

Ignorant righteous indignation.

The commuters from a few south metropolitan exurbs (Lakeville and Farmington) of the Minneapolis-St. Paul area are up in arms about a new permit system at a closer-in suburban bus station. Area residents and commuters from Apple Valley and Burnsville pay a regional transit tax to supply bus service around the area and to the downtowns of Minneapolis and St. Paul. However, they've been frustrated by a lack of parking at one of the transit stations, caused by as many as 60% of the commuters being from areas outside the transit tax area. The city council recently passed an ordinance requiring permits for parking, available only to residents of the municipalities who pay the taxes supporting the transit.

The reaction from the freeloaders?

"If it's a public transit facility, it should be open and accessible to members of the public, and Farmington residents, last time I checked, were part of the public," said Farmington Mayor Kevan Soderberg, who said he's gotten calls from residents who said they would organize a boycott of Apple Valley businesses if the permit system goes into effect...

Rep. Pat Garofalo, R-Farmington, called the permit plan unfair and said if Apple Valley moves ahead, he'll consider introducing a bill next session to prohibit cities from requiring permits at transit stations.

Let's check the logic here. These exurban residents elected "no new taxes" Republicans to the state legislature (and probably local office) with over 60% of the vote in 2006. And yet, when denied access to a desired public service that they do not pay for, they raise holy hell.

I've got two words for you, transit freeloaders: pay up!


Note: the boycott threat is particularly amusing. Checking the Apple Valley Chamber of Commerce website shows seven listings for retail stores, all national chains. Oh no, don't boycott Wal-mart, they might go out of business!

Do corporations have more right to a patent than universities?

Slashdot asks if universities should be able to hold patents and intellectual property if they get grants and donations (and taxpayer funds) as an educational institution.

I have another perspective? Why not?

If taxpayers funded the studies through an educational institution, shouldn't it be able to reap some of the benefits? In some cases, corporations can sponsor university research and obtain the intellectual property rights. Shouldn't a taxpayer-funded institution have the same rights?

If the concern is letting universities profit from research funded by third parties, then call me confused. Most universities have a wide range of funding sources for their research, from public money (state and federal), alumni donations, and corporate sponsorships. Is the variety of funding sources somehow more repugnant than a corporation who receives money from consumers?

If the concern is freedom of information, then it seems that patent law generally would be the source for concern. Are patents too broad in scope? Too long? Should certain things not be patented? The constitutional source of patents (Article I, Section 8) is a good start:

The Congress shall have power to...promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;

IRS agrees to not compete with tax preparation services

A legal deal between the IRS and tax filing companies such as H&R Block explains why e-filing often involves shelling out part of that refund. Lower income folks (AGI less than $52,000) can get free federal e-file, but the corresponding state's e-file always costs extra. The IRS has explicitly agreed to not provide a free e-filing option for all taxpayers (despite the cost savings to the IRS) because of this deal.

Two things are disturbing. One, that a government agency can not only decide against providing a service, but can enter into a binding agreement not to (as opposed to Congress trying to prevent competition). Two, that the lawyer for the tax preparation companies threatened to paint the IRS as "Big Brother" if it ever decided to provide the e-file service.

Last time I checked, your social security number is not a mystery to the IRS.

Feed the beast?

It's a whole new world when a Cato Institute chairman not only comes out against "starving the beast" (the principle of shrinking government by cutting taxes) but says that in fact tax increases may be the most effective way to slow government spending.