From a reader named Kevin Murphy (alas, not the Kevin Murphy):
Read More »
The Economist just reported on what you covered in the “The Downside of More Miles Per Gallon” podcast in February. It’s looking like Oregon is leading the way in possibly charging per mile: “A bill that would have applied a VMT fee to all new vehicles doing 55mpg and above died in the last legislative session; instead, 5,000 volunteers will join a new VMT scheme in July 2015. They will be charged at 1.5 cents per mile rather than paying the state petrol tax (30 cents per gallon).”
The Laffer Curve is a unicorn-y concept that seeks to explain the rate of taxation at which revenues will fall because earners either move away or decide to earn less (or cheat more, I guess).
If I were a tax scholar interested in this concept, I would be taking a good, hard look at the current behavior of top-tier professional athletes. Boxing is particularly interesting because it allows a participant to choose where he performs. If you are a pro golfer or tennis player, you might be inclined to skip a particular event because of a tax situation, but you generally need to play where the event is happening. A top-ranked boxer, meanwhile, can fight where he gets the best deal.
Which is why it’s interesting to read that Manny Pacquiao will probably never fight in New York — primarily, says promoter Bob Arum, because of the taxes he’d have to pay. Read More »
If you’re still fuming over taxes this year, take a look at Mike Duncan and Jason Novak‘s (slightly biased) cartoon explanation of the history of taxes. The income tax really got its start in 1913:
Congress immediately passes the Revenue Act of 1913, creating the first permanent income tax. No one really notices because the vast majority of incomes are taxed at just 1%. The mustache twirling robber barons get pretty grumpy, though. Then Wilson plunges us into WWI and unleashes the awesome potential of the new income tax. The top end rate jumps to 77% and revenue increases 635%.
(HT: The Big Picture)
Our latest Freakonomics Radio on Marketplace podcast is called “The Tax Man Nudgeth.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript.)
The U.S. tax code is almost universally seen as onerous and overly complicated. There is always talk in Washington about serious reform — Michigan Reps. Dave Camp (R.) and Sander Levin (D.) are currently working on it — but, Washington being Washington, we probably shouldn’t hold our breath.
So in this podcast we decided to take a look at the tax code we’re stuck with for now and see if there are some improvements, however marginal, that are worth thinking about. We start by discussing the “tax gap,” the huge portion of taxes that simply go uncollected for a variety of reasons. We once wrote about a clever man who helped close the gap a bit. In this episode, former White House economist Austan Goolsbee tells us why the government doesn’t try too hard to collect tax on all the cash that sloshes around the economy.
Yes, the cruelest month has begun, marked at its dead center by tax day. We have a Freakonomics Radio segment tonight on Marketplace about some tax-collecting ideas. Here, from John Steele Gordon in today’s Wall Street Journal, is a compelling attack on the practice of treating carried interest as capital gains. Would love to hear in the comments from some private-equity and hedge-fund folks why/how Steele isn’t right:
Read More »
To defend the favored treatment of carried interest, private-equity and hedge-fund owners argue that their share of the customers’ gains is analogous to “founders stock,” which is granted to the founders of a company when it goes public, even though they may not have personally invested money in the venture.
This analogy is bogus when the companies in which a fund is invested are not actively managed. A founder has a bright idea. He works hard to convince others of its worth so that they will invest in it. He works hard to get the company off the ground, investing his time and his sweat equity in the business (not to mention the forgone income from the 9-to-5 job he could have had instead). He is risking a lot: a substantial portion of his working life, his reputation, his potential current income, etc.
Friends have warned me about the new Medicare tax, 3.8% of one’s investment income. Since the tax only applies to people with higher incomes than mine, I am regrettably not liable for this tax. But what is the economic reason for putting an extra tax only on the investment income of the very well-off?
All Americans are eligible for Medicare at 65 (an age minimum that should be raised). Why should somebody with $100,000 in investment income but no earnings pay no Medicare tax, while someone who earns $100,000 from a job pays $1,450 herself, and $1,450 through her employer to finance Medicare? This seems inequitable. The tax on all investment income, regardless of one’s total income, should be the same as what one pays on self-employment income — 2.9%.
As Republicans and Democrats continue to bicker about spending and taxes, the Onion has stepped in with an excellent plan for averting a fiscal crisis:
STEP ONE: Eliminate school breakfast and lunch programs, Medicaid, the Consumer Product Safety Commission, the Environmental Protection Agency, Medicare, PBS, New Mexico, elk, the Coast Guard, and all dams.
And, our favorite, Step Three:
STEP THREE: Eliminate federal prison system by converting U.S. territory of Guam into an unsupervised penal colony known as “The Gauntlet.”