Friday, March 09, 2007

The Idea Shop on Democrat's Gross Receipt Tax

The Idea Shop sees fodder for Econ Grad Student studies,

This whole episode is pretty disappointing—a true victory of politics over intellectual honesty and sound policy. No economist worth her salt would ever recommend a GRT over the many, many good alternative ways of raising revenue that don’t lead to the hidden economic distortions of GRTs. Yet the Illinois governor’s office forges ahead, selling a widely discredited tax structure to the public as a tax on “business” rather than people.

This turgid resistance to the advice of economists is a remarkable thing to see first hand. As communicators, economists have a lot of work to do.

On the plus side, this wave of new GRTs promises plenty of good data on their economic drawbacks in about a half-dozen years. Watch for some terrific applied public finance work in about 2017.
Update: from an earlier Idea Shop post,
A note for trivia buffs: gross receipts taxes made a famous appearance in Ayn Rand’s Atlas Shrugged—remember the scene when central planner Wesley Mouch hits Colorado with a 5 percent gross sales tax, somewhere around page 250? The tragicomedy of bad tax policy continues. Read the full piece here.

4 comments:

Extreme Wisdom 8:37 AM  

Bill,

Texas, of some note in the "business friendly" universe, just passed a GRT for...

YOU GUESSED IT!!

...schools.
____

Until some one makes the effort to expose the waste, fraud and abuse in Public Ed, these taxes are just going to get worse.

No one is going to cut off the blood supply to the tumor until they realize its a cancer. Failure to do this will eventually lead to never-ending tax hikes of all varieties.

Anonymous,  6:01 PM  

I didn't realize that Unitarians read Ayn Rand.

Bill Baar 6:03 AM  

She was the Sunday morning Topic at the Unitarian Universalist society of Terre Haute's Rationalist Free Thinkers series of chats.

Anonymous,  8:35 AM  

There is a reason why Blagojevich, a pol after all, isn't trying for
a progressive income tax with a surcharge on the rich, perhaps the best option.

Yes, it requires a constitutional change. But that's not impossible if legislators really got behind it. Even business advocates, given the alternatives, could likely be brought around.

The problem is that most of our legislators are wealthy or are held captive by wealthy contributors, and would never take a leadership role, fearing that their own taxes would go up and/or they would lose rich contributor support.

Bad system, but we deserve the convoluted methods of raising funds exemplified by a GRT.

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