Think Economically

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Maximum understanding, minimum average total cost.

Read up: Tax expenditures cost $1 trillion a year, or almost the entire deficit.

Tax expenditures are huge. What are they? Government spending disguised in tax language. They make government look smaller than it is.

Income tax expenditures added up to about 75% of the tax actually collected (Burman et al 2007), but have gone up to about 94%. I’m just doing this math in my head, but that means income tax rates are almost twice as high as they would have to be without these loopholes. Not only that, but these deductions cause a regressive shift in the tax structure.

The politics governing them are pretty straightforward: provide a tax loophole to a favored constituency and from below, your profile looks like that of a small-government conservative, axe in hand, taking apart the beast blow by blow. Meanwhile, from above, lobbyists and special interests get the bird’s-eye-view of someone well aware of who, precisely, is circling overhead, waiting to pluck that axe from the hand right before pecking out the liver.

So what to do? There’s been some political chatter, but bilateral disarmament here…well, I’m skeptical.

Read up and then write somebody, maybe:

Wikipedia has a surprisingly terse overview–someone should maybe get on this–here: http://en.wikipedia.org/wiki/Tax_expenditure, with a little more here: http://en.wikipedia.org/wiki/United_States_federal_budget#Tax_expenditures

The tax policy center has a briefing book here: http://www.taxpolicycenter.org/upload/Background/I-8TaxExpenditures.final.pdf

Burman, Geissler, and Toder have a 2007 paper in the AER proceedings that does the accounting and analysis: http://www.jstor.org/stable/10.2307/29729999

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Price controls in the market for gasoline. Could Gingrich push gas prices lower? Should we actively make gas more expensive?

Gingrich says gas should cost two dollars and fifty cents. When markets and politicians disagree, the market usually wins. Still, every time gas prices creep higher, there’s political hay in claiming you can fix it.

Thomas Friedman has a whole different idea on how to handle the price of gas: push it up and let it stay there. Ivan Eland calls it mercantilism.

Some crazy guy still thinks we should peg the dollar to gold. I say crazy because that’s crazy.

What would happen to the market for gas with price controls? Check the video:

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