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’d 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 (For a further, but somewhat out of date, breakdown that could turn anybody into a libertarian, if not an anarchist, click here.)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.

Government, Taxes | Frank Curmudgeon | March 26, 2010 12:59 pm

No Comments

By Investor Junkie, March 26, 2010 @ 1:24 pm

What no blog post about the newly minted HC law?
By Neil, March 26, 2010 @ 1:46 pm

Any blog post dealing with the HC law is doomed to be pointless. Nobody – including the politicians who passed or opposed it – understand how it will affect either personal finances or the federal budget (or the provision of health care, for that matter). So all you end up with is a stock ideology-base interpretation about how it will save/doom all Americans.

Best steered clear from, at least until there’s some solid evidence in to support one side or the other.
By downfall, March 26, 2010 @ 1:51 pm

“Interleague baseball games: $5 million.”

I laughed. Hard. Way to buttress your cranky old man cred. By the way, it’s been 13 years since interleague play was introduced as part of the regular MLB season. Meaning that today’s rookies grew up watching interleague baseball games as part of the regular season. Have a nice day!
By Dangerman, March 26, 2010 @ 1:56 pm

Speaking of healthcare reform, it actually does tax health insurance premiums. For “cadillac” plans only, and starting in 2013 mostly. But doing so is expected to raise ~$150 billion.
By ctreit, March 26, 2010 @ 2:42 pm

Good one: TSA and agricultural subsidies. Also good: stopping the wars and taking the oil when we do go to war. – Now I am digressing, too. My proposal: We make a new law that puts a 100% tax on any “convenience fee” charged by any company; no new fees can be added and fees cannot be raised. Ticketmaster would become a big tax collector overnight!
By Dan, March 26, 2010 @ 3:41 pm

We’ll know conservatives are serious about reducing spending when they include defense spending in the conversation. Right now that’s political blasphemy.
By CalLadyQED, March 26, 2010 @ 3:54 pm

Why don’t we tax elected officials on the meetings they miss? For example, if you congressman doesn’t show up to all the sessions and committee meetings, he could be required to pay a fine.
By Jon @capitalistmaven.com, March 26, 2010 @ 4:06 pm

Seriously, why hasn’t the TSA been cut already? You’d think there would be little political fallout, since nobody likes them.
By Hibryd, March 26, 2010 @ 5:54 pm

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

I know the list isn’t 100% serious, but the merchants are the one who take it in the pants if a credit card is used fraudulently. They’re out the merchandise and the money. How would you suggest they confirm that a customer is not handing them a stolen credit card if they can’t check ID?
By hickchick, March 26, 2010 @ 7:42 pm

I thought we could take care of all this by taxing the smokers and fat people. What gives?
By FV, March 26, 2010 @ 7:45 pm

Taxing debit and credit card use? That’s priceless…

How about a 50 cent tax on every dollar spent on any lottery game? For every $10,000 spent on this lottery tax, the proud player should qualify for a one night stay in the White House Lincoln Bedroom. Just my $0.02…
By Mtt, March 26, 2010 @ 11:35 pm

It would be a great accomplishment to cut military spending in half. That would save 300 billion, and we would still more than double China’s budget.

It would save our soldier’s lives. It would restore our leadership ability, and enhance future economic growth.

It’s really a great solution.
By Investor Junkie, March 27, 2010 @ 12:10 am

@Neil That’s not true. There are some facts by what some of public companies must write down because of the new law. You know those silly SEC and GAAP requirements?

To stay on target to the post….

I propose a tax anyone who attends one of Obama’s sales pitches on the never-ending campaign trail. After all they are for what he proposing, so they’ll be all for the tax.
By David Wendelken, August 24, 2010 @ 4:25 pm

Tax people who don’t vote.