The debate about taxes

One of the tactics used in a debate is about the selection of the measurement. If you present a simple measure for a complex situation, you might be able to find one that supports your point of view. That is happening in taxes. Richard Butrick says the real problem with taxes isn’t tax revenue as a portion of GDP but rather the complexity of tax law.

Those who think we should raise taxes note that tax revenues are low. Therefore the taxes must be low. The opposite of this selective measurement approach is to note that the U.S. has one of the highest corporate tax rates in the world.

Defining the tax rate in terms of tax revenues, as Bartlett does, just obfuscates the problem of getting a handle on the relationship between the two.  Moreover, the relationship needs to be discussed in the context of another seemingly antithetical fact.  Corporate tax rates in the U.S, with the possible exception of Japan, are the highest in the industrial world.  Naturally the Democratic argument for raising taxes to reduce the deficit is founded on the tax revenue fact and the Republican argument is founded on the corporate tax rate fact.  The puzzle is putting the two together.

That brings up another problem in some debates where the argument is misdirected to avoid certain unpleasantness.

Time to ask the Herman Cain question: “Are we working on the right problem?”

Taxes are just a representation of what underlies them. That is the exemptions, loopholes, rebates, deductions and other such regulation that is intended to focus taxes for social policies. Those end up with horrific amounts of regulation that get extremely complicated and sometimes contradictory. That, in turn, ends up in a significant cost for everyone trying to figure them out and an environment where you can be in conflict with the law no matter what you do.

And then there’s Peru. IBT notes that a shooting star turns red. One of the most solid Latin American economies has decided enough is enough. Some of the wrong people were getting richer faster than everyone else. So they elected a communist, “a former Peruvian army colonel with a history of violence, coup attempts and anti-Americanism” to get things back in balance. As a result, the markets there have taken a dive. Resentment and envy have won the day and now it is likely that a balance will be restored to reflect that in the countries they admire, like Cuba and Venezuela and North Korea. There, the only rich folks are political and there are very few of them so envy and resentment isn’t such a big deal – especially when all of your efforts are focused on basic survival.

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