Asymmetrical Information

'Twas a noble effort nonetheless.

Interesting, and it makes sense too. Hardly anything ever makes people work in unselfish unison.

There's something really funny about that Slate page though; on the bottom, there's an 'Advertisement' section, you know, to sell books. One of the books for this article, and the one I first hit, was "Tricks of the Tax Trade:
A CPA Reveals What the IRS Doesn't Want You to Know"

That IRS.

Well, as Milton Friedman has pointed out, Congresspeople are paid (literally) for handing out tax preferences, and you have to expect people to do what they are paid to do, so this mitigates against ever having a real preference- free tax code.

OTOH, the objections of Shapiro aside, the experience of 1986 shows that it is politically possible to significantly flatten the tax system by trading off loopholes and preferences for lower rates, once there is enought to trade off. We're heading there again, since as Congress creates new preferences it has to increase rates to make up the lost revenue, and increased rates then increase the incentives of taxpayers to obtain more preferences, and so on in a cycle. But we're not there yet.

And OTOOH, we could get a "flat tax" through the back door under current law by letting the Alternative Minimum Tax continue to sweep up more taxpayers. The AMT is basically a low-deduction scheme with a flat 28% tax rate. It's not indexed for inflation so it's catching more people every year (last year I had the pleasure of having it catch me) and given enough time it will catch everybody. Then we'll finally have reached the mythical "flat tax land", if not by a route the flat-taxers intended.

Since you advocated an negative tax, I didn't assume it was a flat tax. One could change the zero-point and rate of increase (curvature) to acheive any sort of overall effect with much less bookwork.

As for deductions, they could be reduced over their typical life. Deductions for mortgage interest could be gradually reduced over 30 years or the the life of the mortgage, whichever is less. This is how the deduction of interest for auto loans (and revolving credit)was removed over 5 years.

I read the article and all the discussions in the last post, and from all that I don't see why not getting the Jane Galt plan is reason to be upset. The main benefit it claims to give is future improvements in efficiency. But Shapiro argues that past experience suggests those improvements might not be that substantial.

Add in the huge windfall losses to homeowners and many companies, and you're taking a giant current hit to achieve questionable future gains. It looks to me like a good cost benefit analysis would probably conclude the Jane Galt tax plan is a very bad idea. I think you're commiting the sin of allowing a theoretical goal--maximum efficiency--to outweigh the real practical considerations here.

Yes, you're right that your proposed tax code would be more efficient. Just as the proponents of Kyoto and further greenhouse emission reductions are right that doing so would reduce the cost of global warming. But just as in that case, the economics are a little more complicated, as you're trading a large known cost in the present for a speculative future gain many years down the road.

My plan is a little more drastic. And it's also not designed to be put into place with massive government spending increases.

There are two different things called flat taxes.

One is a system of one single tax rate, which is really unimportant as far as simplicity and efficency goes and contrary to fairness.

The other is a broad tax base with no preferences, credits, and deductions to distort economic activity. That is a boon to efficency and simplicity and would goose economic growth for decades.

The Jane Galt Plan is the second thing.

By the way, In my worn 35th Anniversary hardback of Atlas Shrugged on page 1108 the following text occurs:

the sleet of the following morning fell down on front page stories announcing that a constructive, harmonious conference between John Galt and the country's leaders, on the previous afternoon, had produced "The John Galt Plan," soon to be announced.

All this occurs while New York in falling into depression, food riots rage in Minnesota, Dakota farmers are burning down the statehouse, and the railraods have failed in California. The desperate authorities have imprisoned John Galt in the Waldorf-Astoria attempting to force him to come up with an economic plan to save the country. They will have to falsify one since he won't cooperate.

What then are we to make of a post here titled "The Jane Galt Plan"?

Jane's discussion of changing the tax code was basically from the point of view of what's most economically efficient. I agree with the reforms and have advocated this sort of thing every year for years while doing my @$#@$@ taxes. But it ain't going to happen, too many vested interests. However, there is a much simpler procedural reform that might be possible and would have a profound impact on how people view taxes: end all witholding and make people pay their taxes quarterly. That would make everyone focus on their taxes every three months and feel it come out of their hide in large chunks, no more little bite size pieces that you didn't see and that don't really hurt that much.

Suddenly that bottom 50% that pays no federal taxes would start screaming about FICA and everyone else would scream about the whole mess. It might start some reform. Then again, the Democracts would probably pander to the bottom and try to shift all taxes to the upper 50%.

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