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Posts tagged ‘The Economy’

Apparently, honesty is bad for the economy

I saw this report while reading the paper on the Canada Line on Friday:

New federal rules that threaten to ban companies convicted of crimes from public contracts could kill jobs and hurt the Canadian economy, warns a study conducted for a powerful business group.

The report lists the potential consequences of Ottawa’s so-called integrity framework, a measure strengthened last spring to disqualify would-be suppliers busted in Canada or abroad for offences such as fraud, bribery and extortion.

You read that correctly.

This is relevant to why those who support tort reform are at best misguided (though well-intentioned) and at worst shills for corporatocracy. It is easy to get riled up at million dollars in damages for pain and suffering. The point behind millions of dollars in damages is to make it hurt” so that the wrongdoer has an incentive to stop. If it is instead a low amount it becomes an immaterial expense.

Why a carbon tax is good

I found a really good article on why BC’s carbon tax is the way to go (links removed and emphasis added):

If the goal was to reduce global warming pollution, then the B.C. carbon tax totally works. Since its passage, gasoline use in British Columbia has plummeted, declining seven times as much as might be expected from an equivalent rise in the market price of gas, according to a recent study by two researchers at the University of Ottawa. That’s apparently because the tax hasn’t just had an economic effect: It has also helped change the culture of energy use in B.C. “I think it really increased the awareness about climate change and the need for carbon reduction, just because it was a daily, weekly thing that you saw,” says Merran Smith, the head of Clean Energy Canada. “It made climate action real to people.”

It also saved many of them a lot of money. Sure, the tax may cost you if you drive your car a great deal, or if you have high home gas heating costs. But it also gives you the opportunity to save a lot of money if you change your habits, for instance by driving less or buying a more fuel-efficient vehicle. That’s because the tax is designed to be “revenue neutral” — the money it raises goes right back to citizens in the form of tax breaks. Overall, the tax has brought in some $5 billion in revenue so far, and more than $3 billion has then been returned in the form of business tax cuts, along with over $1 billion in personal tax breaks, and nearly $1 billion in low-income tax credits (to protect those for whom rising fuel costs could mean the greatest economic hardship). According to the B.C. Ministry of Finance, for individuals who earn up to $122,000, income tax rates in the province are now Canada’s lowest.

We out to be taxing things we want to discourage (besides carbon, this ought to include things like fast food and sugar, and financial transactions like high–frequency trading) and reducing or eliminating taxes on things we want to encourage (like high–density living and transit use).

And a big thumbs down to Oklahoma for taxing solar energy.

Word of the year 2013 are chosen because reasons!

The American Dialect Society has chosen its words of the year for 2013. First the other categories:

  • Most Useful was “because” when used to introduce another word, like in the title of this post.
  • Most Creative was “catfish”, when you misrepresent yourself online in the pursuit of romance.
  • Most Unnecessary was “sharknado”, a tornado full of sharks that came out of a movie.
  • Most Outrageous was “underbutt”, the underside of people’s buttocks, made visible by certain clothings.
  • Most Euphemistic was “least untruthful”, the smallest amount of lying.
  • Most Likely to Succeed was “binge–watch”, which is to television shows what binge–eating is to food.
  • Least Likely to Succeed was “Thanksgivukkah”, having Hanukkah start on (US) Thanksgiving.
  • Most Productive was “–shaming”, a form of public humiliation.

As an aside, I am surprised there were no “economy words” like shutdown, sequester, debt ceiling, etc. If this is due to them being common than I really don’t like the implications of that.

And the Word of the Year? Because… because reasons! Because useful! Because everywhere!

In a companion vote, the ADS sibling organization, the American Name Society, chose Francis (after the pope) as its Name of the Year.

How to simplify the tax system

Considering that yesterday was the day that most Canadians were supposed to have filed their tax returns, I see the usual complaints about it being complicated. With that in mind, here are two possible ways to simplify the tax system. They offer features that should appeal to people from all across the political spectrum.

The first one is known as a “negative income tax“. About four in every five economists (79%) agree (possibly with provisos) that “the government should restructure the welfare system along the lines of a ‘negative income tax.'” The features of a NIT are as follows (I’ve explained them in comments elsewhere, but this is the first time in a post at this blog):

All income, whatever the source, is taxed at a flat rate. This includes incomes that are currently exempt, taxed differently, or deferred, such as capital gains and inheritances. Second, all deductions, whatever the basis, are eliminated. This includes ones like charitable donations, political party donations, or hazardous jobs. The result of this is that everyone with the same nominal income pays the same tax. Third, all welfare systems, like social assistance or unemployment insurance, are eliminated and instead converted into a refundable tax credit of some amount. Each taxpayer subtracts the refund from the income tax they paid. If the result is negative, they get a refund from the government. If the result is positive, they pay the difference to the government.

Let’s use examples to demonstrate. For the sake of this example, we’ll assume that the flat rate is 20%, and that the refund is $5000. There is nothing special about these numbers; they are examples only.

Alice’s T-slips indicate that she earned $20000 last year. She pays 20% of that ($4000) in taxes. She gets a refund of $5000, which means that she actually gets a net $1000 from the government. The same year, Bret earns $25000. He pays 20% of that ($5000) and gets a $5000 refund. Therefore, he actually pays no net taxes and gets no money from the government. The same year, Chris earns $30000. This taxpayer pays 20% of that ($6000) in taxes. After the refund, $1000 is still owing, so this taxpayer actually pays a net tax of $1000.

As can be seen from the examples, by tinkering with the rate or the refund, a guaranteed minimum income can be maintained, and any arbitrary no tax payable point can be chosen. Update (2013–05–05): And it goes without saying that certain “special circumstances” can be given a slightly different refund, such as dependents or disability.

The negative income tax system has a number of significant advantages over the current regime (after the jump). In no particular order:


Something that should happen, but won’t

This will probably one of the very few times I might have something nice to say about Republican obstructionism. ThinkProgress reports (my emphasis):

House Republicans let the five-year farm bill expire at the end of September without a new law to replace the massive measure covering billions of dollars in programs, including food stamps and agriculture subsidies….

I’m against cutting food stamps, but in the unlikely event that this obstructionism results in the end of American agricultural subsidies I will be really glad. Agricultural subsidies are one of the worst possible things a government can do with its money. For the most part, these line the pockets of agribusinesses and cattle barons. Contrary to popular believe, only a minute fraction of agricultural subsidies go to family farmers. The chief effect of these unnecessary subsidies is to distort the food market, mostly by artificially lowering prices. The effect is to give an income to agribusiness that the free market won’t (or can’t). In almost every other circumstance, wingnuts would be screaming “SOCIALISM” until their vocal cords broke. But in this case, we usually end up with bipartisan agreement to squander government money. It should come as no surprise that an overwhelming majority of economists agree that agricultural subsidies should be eliminated.

In many cases, these market distortions skew people’s food choices, especially towards unhealthy foods. Elimination of agricultural subsidies would hence improve public health.

Eliminating agricultural subsidies has an additional benefit. Agriculture is one of the few areas where poor countries have a comparative advantage. Eliminating agricultural subsidies (in all countries, not just the US) would allow farmers in those countries to make more money, causing economic growth and development. This is exactly what foreign aid is supposed to do. Therefore, if agricultural subsidies are eliminated, we will get most if the advantages of giving foreign aid, without any of the costs. Indeed, since eliminating these subsidies would have much of the effect as giving aid, we could even cut foreign aid, therefore saving more money.

We could get billions in revenue

A new study has determined that more than 366,000 British Columbians use marijuana, with the market value of their purchases being about half a billion dollars a year, According to the study, taxing it (the same as with alcohol or cigarettes) would bring in billions in new revenue (links removed):

The researchers also point to data from Washington, which recently held a successful referendum to legalize pot, that suggests the same number of pot smokers in that state could bring in $2.5 billion in taxes over five years in a regulated system.

This is one of the reasons why marijuana should be legalized. It would free up money spent prosecuting and incarcerating non–violent criminals who harm no one other than themselves. It is especially important, as the legalization in Washington state could cause a grey market of British Columbians going there to get their marijuana. Completely legalizing it here would prevent such an event. As it stands, a potential boost to ours (and more diffusely, the Canadian economy) is being lost and undercut.

And this study shows yet again why socons should never be allowed to control the public purse. Given the chance, they’ll always deny revenue and blow the budget on puritanism, going after people for doing something they probably do themselves.

Why a carbon tax is the way to go

An editorial in the New York Times got me thinking about why a carbon tax is a better way to fight global warming and climate change than either cap–and–trade or efficiency regulations.

Here are several reasons I can think of:

  • Carbon taxes always provide an incentive to pollute less and use less energy. Even if you cut carbon emissions by half, you still are paying taxes for the carbon you do emit, and therefore still have an incentive to eliminate it. Compare this with efficiency regulations, where someone has no incentive to reduce energy use once the regulation is met. In addition, all too often regulations are designed by businesses themselves, so as to prevent competition (rent seeking). Also compare this with cap–and–trade, where a source of carbon credits may well allow heavy polluters to continue, just because they have deep pockets. A lot of money will not allow someone to avoid paying a carbon tax.
  • Carbon taxes drive both individuals and companies to use less energy. Cap–and–trade is usually done by businesses, and efficiency regulations only impact new products (unless old ones are mandated to be destroyed).
  • According to the editorial, a carbon tax is far cheaper than efficiency standards once a global view of costs is taken into account.
  • Carbon taxes (especially those on fuel) make people drive less and live in denser environments. On a per capita basis, cities are more energy–efficient than suburbs. For example, recycling and public transit are more feasible in densely–populated areas. And people who drive less are less sedentary and therefore healthier.
  • It is possible that cap–and–trade and efficiency standards alone will not do enough to mitigate climate change.
  • A carbon tax is easier to offset as part of a green tax shift than other methods. It can even lead to lower tax levels overall, such as here in British Columbia (cite).
  • Efficiency improvements are subject to the rebound effect, where the decreased cost of using a resource partially offsets gains from using it more efficiently. A carbon tax does not generate perverse incentives.
  • A carbon tax is easier to adjust. If too many pollution permits are issued, cap–and–trade will not have much of an effect since it is harder to eliminate privately–owned pollution permits.
  • Many countries that export oil are rentier states, which means that they earn most of their revenue from natural resource royalties. Those royalties pay for oppressive paramilitary forces that enforce authoritarianism in those countries. A carbon tax will eventually reduce revenues received by those countries, improving freedom there and those countries’ human rights situations.

Hence, for all of the above reasons, a carbon tax is the way to go. My preferred offset is to payroll taxes. But such has virtually no chance of being enacted in the United States (a better chance in Canada [I hope]), due to the extreme polarization and total irrationality (and far worse!) of a number of politicians there. And since climate change is a major danger, Christian conservatism’s climate change denialism makes it, in the long run, the world’s most dangerous ideology.

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