Today’s Halbig v. Burwell decision at the U.S. Court of Appeals for the D.C. Circuit represents a massive rebuke of the Obama Administration’s interpretation of the Affordable Care Act (ACA) or “Obamacare.”
Our recovery isn’t as rosey as new job numbers would make it seem; the best way out of this slump? Cut the corporate tax rate!
The recent death of Eric Garner after an incident with New York police has recently made headlines and sparked controversy about excessive force and police practices. Sources report that police and prosecutors are investigating the use of a chokehold by an officer in the process of detaining Garner. All of this is relevant to our blog because Garner was in the process of being arrested on charges of illegally selling cigarettes, a crime that is only profitable because cigarettes are taxed at such exorbitant rates in New York City ($5.85 per pack in state and local taxes). Reason’s Hit and Run Blog covered this well: We should be concerned that the reason why the police swarmed Garner in the first place is getting lost. He allegedly possessed “untaxed cigarettes.” That is it. There is this press focus on how the police took Garner down, and the problem with that focus is the question, “Well, what do you do when a 400-pound man refuses to cooperate when you try to arrest him?” Or to put it another way: Would there be an objection to police using a chokehold to take down and subdue man who was engaged in violent activity harming others? Because you know that’s going to be part of the defense of this behavior. There needs to be more attention on the absurd reason that a pack of police officers was on top of Garner in the first place: black market cigarettes. It’s a crime that only takes place because of the city’s own oppressive taxation system. It’s a crime that happens when the city makes it too hard for people (especially poor people, of course) to get what they want legally. For now, we can put this tragic incident in with the many other unfortunate episodes of violence associated with cigarette smuggling . Follow Scott on Twitter .
A law professor wrote an article discussing our work ensuring state tax guidance to same-sex couples after DOMA was struck down . About half the states both (1) require state tax return filing status to match the federal tax return filing status and (2) ban gay marriage. As these together create a paradox for taxpayers, we worked with states to provide affirmative guidance and options, rather than just throwing same-sex couple taxpayers to the wolves. I’m pleased to say that every state did so. The article discussing this (and other interesting post-DOMA invalidation wrinkles, such as Medicare, Social Security, and military benefits) is Sarah R. Sullivan & Martha Prado, Preemption of Public Benefits in the Shadow of DOMA: When State and Federal Law Collide, 15 Fla. Coastal L. Rev. 225 (Winter 2014).
Australia is the first developed country to both institute and repeal a tax on carbon. On Thursday, July 17, the Australian Senate repealed its carbon tax with a 39 to 32 vote. After the repeal, Prime Minister Tony Abbot characterized the tax as destructive to jobs, families and the economy, without actually helping the environment. “The Carbon Tax was a $9 billion a year hit on the Australian economy,” he said, and stated that the repeal would “save the average Australian household $550 a year.” Under the repealed law, liable Australian entities had just began paying the top rate of 25.4 Australian dollars per ton of carbon pollution emitted. Liable entities were mostly large emitters (25,000 tons of carbon dioxide per year), who cumulatively produced about 60 percent of the country’s emissions. Australia implemented its carbon tax in July of 2012 with a tax of A$23 per ton of carbon. The tax was set to rise 2.5 percent each year until 2015 when a cap and trade system would be implemented. Australia’s attempt to tax carbon indicates that raising the price of energy consumption is difficult to implement properly and can be politically unpopular. Why is Taxing Pollution so Difficult? Setting aside the politics for a second, a carbon tax can make theoretic sense as a way to charge people for the social costs of their pollution. Economist call these uncompensated damages negative externalities. To offset these externalities, some economists recommend a tax on carbon emissions that is equal to the social cost of the pollution. These are known as Pigovian taxes, after the late British economist Arthur Pigou. The problem is, such tax schemes must overcome two hurdles to be sound tax policy. First, the collected tax must go to remitting the damage caused by the externality. And second, policymakers must be able to know the uncompensated cost of carbon emission. Additionally, regulators often lack sufficient knowledge or correct incentives to estimate and implement efficient carbon taxes. It is not an easy task to set a tax equal to the cost of the externality and distribute the revenue to compensate the appropriate individuals. Why is Australia’s Experience Important to the United States? Australia has been called an important laboratory for U.S. energy policy because of the similarities between the two countries. The continental U.S. is roughly the same size as Australia, both countries are heavily reliant on carbon producing fossil fuels, and the distribution of emissions by industry are similar. Both Australia and the U.S. are among the top per capita carbon dioxide producers in the world. The Australian laboratory for U.S. carbon tax policy seems to have demonstrated that politically, the costs of taxing carbon are prohibitively unpopular. The high social and economic costs of transforming an economy away from carbon emission are mostly borne by ordinary citizens. The first lesson in tax economics is: when people cannot quickly change their demand (as is the case with energy usage), most of the tax cost will be passed along to the consumer through higher prices. A tax on carbon is, by extension, a tax on energy. Taxing energy raises the price of transportation, heating, cooling, manufacturing, and everything else that uses electricity, gas, oil, or plastic. A tax on energy is a tax on growth and innovation. Historically, economic growth has been fueled by low energy prices and hampered by high energy prices. The Australian carbon tax has enforced this narrative by exacerbating the 2008 recession and handicapping its economic recovery. Most of the revenue generated from Australia’s carbon tax went to tax breaks for low income taxpayers and subsidies to power plants and aluminum manufactures. In theory a carbon tax is intended to place upward price pressure on carbon emitting activities, forcing emissions to decrease. However, the revenue from the Australian tax was redistributed in the form of subsidies to low income energy consumers and to some of the largest polluters. These two policies are fundamentally at odds. With one hand the government raised the price of energy, and with the other hand subsidized the use of carbon emitting energy to the tune of one billion Australian dollars. The carbon tax did provide some funding for alternative and green energy projects, but again this use is not supported by sound tax theory. The increased price of energy under the tax regime would theoretically incentivize private actors to develop new technologies – allowing the market to decide what the most efficient alternative technologies are. Instead, Australia invested much of the tax revenue into government research initiatives and subsidies for politically favored alternatives, displacing private investment. Well-structured tax policy would have used the tax revenue to mitigate climate related damage, not dictate future energy production. While carbon taxes can be alluring on the pages of a text book, in practice they fail to become good tax policy. The laboratory results are in and Australia says they are done with the experiment.
This November Massachusetts will vote to repeal House Bill 3847 . The law , signed in 2013, raised the state’s gas tax from 21 to 24 cents per gallon and automatically tied the tax rate to inflation for future years. Despite opposition by the group Tank the Gas Tax , which successfully gathered enough signatures to trigger a referendum to repeal the tax increase, the 2013 measure is a sensible solution that stabilizes state gas tax revenues for future years. Since 1991, the last time Massachusetts passed a gas tax increase, Massachusetts gas tax revenues have fallen 18 percent after inflation adjustment while the total level of state and local gas tax collections across the nation have Increased by 15 percent. Over this same period, Massachusetts gas tax revenues have fallen from 0.5 percent of the state’s GDP to only 0.15 percent, showing that gas-tax revenues have diminished even as the rest of Massachusetts’ economy has grown. Yes, consumers may be driving less and cars have become more fuel efficient, but the gas tax’s declining share of revenue and GSP from 1991 to 2013 show that this is not the entire story. The gas tax prior to the 2013 changes failed to generate revenue at a rate to match the growth of the rest of the economy. As the Consumer Price Index increased by 71 percent from 1991 to 2013, the value of a 21 cent tax on gasoline diminished. Essentially, Massachusetts has been experiencing a de facto tax cut for that last 20 years. Raising the rate from 21 to 24 cents and indexing the tax for inflation fixes this issue. Contrary to what groups like Tank the Gas Tax claim, tying the gas tax to the rate of inflation is not an arbitrary tax hike but a way to stabilize gas tax revenues.
IRS reveals hard drive containing Lois Lerner’s emails was destroyed in 2011 to protect “confidential taxpayer information”. Michigan voters will have a chance to decide to repeal the personal property tax.