Some New Tax Proposals

I have been giving a lot of thought to the federal budget deficit lately. Well, some thought. Not as much thought as I have been giving FiLife’s March Money Madness 16 blog tournament. I’m pretty sure they had 15 likely blogs and threw in BMA just to round out the field and add some humor.

Alas, I digress. As all us good Republicans know, the first step in closing the  budget gap should be a massive reduction in government spending. I’dCapitol start with the TSA and agriculture subsidies, but that’s just me.

And we’ve got to cut out these loss-making wars. Next time we invade an oil-rich country we need to actually take the oil. Everybody else will accuse us of going to war to get the stuff anyway, so we might as well cash in.

More digression. Sorry.

A quick glance at the federal spending pie chart will tell you that the bits of the budget that can be cut in the short run are not big enough to eliminate the deficit. (For a further, but somewhat out of date, breakdown that could turn anybody into a libertarian, if not an anarchist, click here.) It breaks my heart to say it, but we need some new taxes. Here are my suggestions.

Tax Credit and Debit Card Use

For reasons that frankly escape me, the use of plastic is widely considered a bad habit to be discouraged. Instead of challenging this point of view, why not go with the flow and slap a tax on this bad behavior? Also, apparently, most people don’t associate the size of the bill they get at the end of the month with what they spent, so adding a little to it won’t be noticed.

The figure I have in mind is 2%. The small proportion of the plastic wielding population that would notice an extra 2% are the kind that get cash back rewards on their cards, so the tax won’t hurt even these fussbudgets too badly. And unlike some other schemes, this tax would be very easy to collect.

Best I can figure, this would raise about $68 billion a year.

Tax Interstate Commerce

For as long as I can remember, state governments have been trying to apply their sales taxes to stuff bought by their residents from other states. Amazon.com seems to be particularly upsetting to them. And every so often the federal courts patiently explain to the legislators of one state or another that the US constitution expressly forbids states from taxing or otherwise interfering with interstate commerce.

That bit of the constitution was put in by well-meaning framers because they had this crazy idea that a state might try to interfere with business done across state lines so as to benefit their own local merchants. That is obviously and totally not what is going on here. Sure, taxing Amazon purchases makes them more expensive relative to local stores where voters and campaign contributors work, but that’s not the motivation. Honest.

So how about a federal 5% interstate sales tax on consumer purchases? State governments may be disappointed that they don’t get the money, but they will get over it. I’m not sure how much this would raise in total, but as an indication, Amazon had revenues last year of $24.5 billion and eBay had a gross merchandise volume of about $56 billion. So those two alone should be worth around $4 billion a year.

Tax iTunes

Okay, this is really just the same as taxing interstate commerce, but that smug Jobs fella bugs me. Tax on downloaded songs should be at least 10%. Apple is raking in $5 billion a year on this, so that’s an easy $500 million.

Tax Health Insurance Premiums and College Tuition

I’m lumping these together because they are both things that are widely considered too expensive and so are government subsidized in cloddishly complicated ways. But the cause and effect goes in the other direction as well: they are expensive partially because they are subsidized.

The problem is not that too many people can’t afford these things, but that too many can afford them. As long as so many people are willing to buy at any price, there isn’t much real effort put into constraining costs.

Making employer paid health insurance premiums a taxable benefit would raise $246 billion a year, according the the CBO. The doomed McCain campaign that foolishly suggested it estimated $3.6 trillion over ten years.

Based on a few possibly unreliable sources, I estimate that Americans spend $85 billion a year on college tuition. So a 10% tax would bring in $8.5 billion.

Tax Other Annoying Things

I know that if we put our heads together we could come up with a long list of things that we wouldn’t mind so much if we knew they were taking a bite out of the deficit. For example, let me suggest the following new excise taxes:

Twitter: $0.01 per tweet sent.

Fees charged by airlines for anything other than transporting a human: 100%.

Magazine subscription cards: $0.10, $0.25 if not attached so they fall out.

Asking a customer to show ID when using a credit card: $5 per incident.

Interleague baseball games: $5 million.

Time customer spends on hold during customer service calls: $0.25 per minute.

Blankets with sleeves: $1.

Of course, each of these would raise only a few drops of revenue. But if we can gather enough of them, I am sure we can fill the federal bucket. I expect readers to help out in the comments below.

Excluding the health insurance thing (the government has recently made other arrangements) my suggestions above would bring in $81 billion a year. That doesn’t close the whole gap, but it’s a start. Only $1.09 trillion to go.

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