Taxes to Raise, Taxes to Lower April 14, 2010
I thought that I had better get this out, because April 15 is just around the corner.
Taxes that should be raised:
The gasoline tax, by $.50 to $1 a gallon. I oppose cap and trade, however, because it is a bureaucratic mess. If California were in a position to afford it, I would say that we need to compensate for this by adopting a Cal-EITC that would about make things even for lower middle income working families. I’m not sure that California can afford this at the moment, but in the long run I’d like to see it.
Some luxury sales taxes and consumption taxes. If we want to go after what Calitics likes to call the Yacht Party, tax yachts and bling bling and items of that sort. And instead of heaping ever higher taxes on cigarettes, which not very many people smoke nowadays, how about higher taxes on cigars?
Taxes that should be lowered:
The California tax on corporations. It is discouragingly high. And it falls harder on the small corporations that create most of our new jobs and innovation, than on the “big corporations” we all worry about. It is, in a way, a double taxation, because when people get dividends and salaries they are taxed again.
The payroll tax should be lowered and made more progressive, and at the same time Social Security and Medicare should be means tested so that the very affluent cannot get benefits. The payroll tax is the most regressive of taxes. The income tax is mildly “progressive,” though never again should there be the high rates over 40% for the top bracket that prevailed before Reagan. I would like to see the sum of the two taxes, income and payroll, be something close to a flat tax.
Tax deductions that should be eliminated:
The corporate deduction for interest, unless the interest is for investment in improvements and not doing things like leveraged buyouts.
The homeowners’ deduction for interest on second homes or any home other than the address where the owner is registered to vote. I am willing to leave the homeowners deduction on the principal residence, but in some ways renters deserve a better tax break too. I’m not sure it’s as good an idea to invest so radically in homeownership as we did in the past. Inflation hedges and stocks and bonds and a healthy portfolio may prove to be a better investment than a home – especially inflation hedges and hard money.
Taxes that should not be raised:
I would keep the part of Proposition 13 that sets a ceiling on homeowners’ property taxes. Income, sales, and consumption taxes involve real money actually changing hands and the government taking a piece of it. Wealth taxes fall when money may not necessarily be changing hands and the individuals may be illiquid or “house poor.” The same can be said for death taxes, at least on illiquid items like real property. If we adopt a split roll, the commercial property tax should be capped at 200% of what it would be if it were residential – the sky should not be the limit. Most businesses are not “rich.”
Other Proposition 13 related matters:
It should take only 51% in the legislature to adopt a budget. I might be willing to leave the 2/3 requirement in for raising taxes, if at the same time there had to be a 2/3 vote of the public to pass any fiscal earmarking initiative like Proposition 98. And I would like to make that retroactive, farther back than Proposition 98! Or at least have us re-vote all these fiscal earmarking initiatives with a 2/3 requirement.
I am sure that I have now infuriated just about everyone!