Taxed by Miles Driven – An Oregon Proposal

Gasoline TaxThere’s an interesting idea being tested in the Beaver state of Oregon and it has the potential to have a negative impact on me. The state has started a pilot program wherein drivers will pay a tax of 1.5 cents per mile driven instead of the 49.5 cents/gallon they currently pay in taxes. This includes the 18.5 cents/gallon federal tax.

The reason for this idea is that cars have become significantly more fuel-efficient in the last twenty years and that has greatly reduced the revenue generated by gasoline taxes. Adjusting for inflation it seems as if the revenue stream has dropped by about 40%. The money from such taxes are supposed to be used to pay for both the upkeep on existing roads and bridges and any new construction.

According to most surveys, the roads and bridges in the United States are in abysmal condition and that is a dangerous situation for anyone who travels on them.

The reason this method of taxation has a negative effect on me is because I own a Prius and get about 45 miles to the gallon. This means I fill up my tank about half as much as someone getting 23 miles to the gallon. Thus I pay about half the Missouri gasoline tax (35.7 cents/gallon) as my fellow Show Me state brethren.

The new system means that I would pay exactly the same amount as someone who drove an equal number of miles in a year.

As a Libertarian I’m often criticized for not wanting any government but that is an over-generalization. I think roads are one of the most important services the government provides and I think it is only equitable that I pay for the use I get from them. Not only my own driving but that of goods that are shipped over them to the stores I frequent.

However, this new per mile method doesn’t take into account the weight of the car which is a hugely important factor in damage to the roads. Lighter cars do far less damage to the roads than do heavier vehicles, particularly trucks. Now, roads are damaged not only by heavy vehicles but also by weathering and even the government is going to be hard pressed to find  a way to tax the weather (although I wouldn’t put it past them).

So, what is an equitable solution? I think Oregon is going in the right direction but it could easily be a multiple of the miles driven by the weight of the car. It seems like a formula would not be difficult to derive.

We all like our roads and benefit from them in many ways. The lifestyle we lead is in no small part based upon the transportation system in the United States. It is in our best interest to maintain it at peak efficiency.

All taxes should be based upon the service that government provides. If my Prius does X amount of damage to the road then I should be taxed X with Y added for the general weathering damage. People who drive more, who use heavier vehicles, should be taxed more than those who drive less or not at all.

This is an important argument in the Libertarian arsenal. We are not against taxes but we think that taxes must be justified by expenses. If the gasoline taxes, if all taxes, are designed to generate exactly the revenue necessary to maintain that particular service I will gladly pay them.

I applaud Oregon’s effort, which faces a number of tests including how to determine the number of miles driven and miles driven by out-of-state visitors. The idea is a move in the right direction, let’s see how the implementation goes.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Ideology
Current Release: The Spear of the Hunt
Next Release: The Broken Throne

NFL a non-Profit is that a bad thing?

Non-Profit OrganizationCorporate tax status is in the news lately with Apple but I just read another interesting story about the NFL. It turns out that way back in 1966 in a deal negotiated by then commissioner Pete Rozelle the NFL and sports leagues in general were declared non-profit organizations. What this means in practice is that the NFL doesn’t pay taxes. This despite the fact that the NFL earned about $10 billion in revenue last year.

If the comments on the story are to be taken as any indicator then most people are fairly upset by this state of affairs. Just as many people are upset with GE for paying no corporate taxes or by Apple avoiding paying taxes by shipping billions overseas to phony companies in Ireland.

The question I want to pursue today is the effect of the fact that the NFL doesn’t have to pay taxes. That NFL employees don’t pay taxes on hotel rooms when they come to visit your city, but I pay huge tax rates on my hotel room, on my rental car, on my airline tickets. Those are the taxes everyone is for, taxes on visitors to the city.

The result of this tax-free status is that the NFL has more money to spend on salaries. They have more money that they didn’t spend on tax lawyers. They have more money to build their league. The result is the NFL pays great salaries (which are taxable) and puts out a product that people apparently want to see. I do, I have season tickets to the Rams and gladly fork over my money every year. The result of the NFL not paying taxes is good for everyone. Now, could the NFL do things differently, do I quibble with the way they’ve run their long-term disability insurance for former players injured while playing the brutal game? Yes. But, would taxes help? To my way of thinking absolutely not.

Are corporate taxes, as they are structured today, totally counterproductive? In my opinion yes. Basically, the way it works today is that any business large enough to help Congress members get elected gets laws passed that make it relatively easy for them avoid taxes while small businesses, who can’t afford to bribe congress members, bear the brunt of the corporate tax burden. Now we begin to understand the root of the problem.

Congress passes laws not to help businesses in general but to help a particular business. Generally the one that pays for their political campaigns. When Congress passes laws that will supposedly ensure the safety of our food in reality they are passing laws making it impossible for a small cattle rancher to slaughter cows because the owner of the feed lots foots the campaign bills. When Congress passes a law to help the technical industry with overseas business they are actually passing a law that allows Apple to store huge sums of money overseas to avoid paying taxes while a company like Acumen Consulting gets stuck with the real tax bill.

These laws, passed by supposedly pro-business Congress members discourage competition and destroy business. These laws help huge companies like Pfizer and make it an unfair playing field for small companies like Jost Chemical Co.

Congress is currently in the business of deciding which company will succeed and which will fail. This is not capitalism. This is Crony Capitalism.

Detractors will argue that a business that gets to keep all its profit will simply pay the upper management even larger sums and there is that possibility. The pay structure of average employee to CEO is way out of whack but I think part of that is the unfair business model that Congress has created. When the model is biased towards large companies, and it is, then smaller, vigorous companies have a far more difficult time supplanting the behemoths. Not to say it can’t happen, it’s just more difficult. If a huge multinational company pays all its top executive outrageous sums but neglects its best workers then they will quickly lose all their talented people to smaller companies that treat their employees better.

The current system allows huge companies to pay little or no taxes while small businesses pay close to the ridiculous 35% rate. That’s one reason big companies aren’t all that eager to encourage the Obama administration to lower the corporate tax rate. Or at least those businesses that benefit from the current system. Walmart, for example, doesn’t have a huge corporate tax law division and largely pays their taxes. They want to lower the rate. GE, they like things just the way they are.

I’ve gone on a little long here but I want to sum up. The corporate tax rate as it stands today helps only the largest businesses that help fund the election cycles. It doesn’t help small businesses. It doesn’t help employees, it doesn’t help anyone. One look at the tax-exempt status of the NFL proves it. Their league is doing great and generating profit for many people; jersey sales, parking lots, hotels, construction companies (Jerry Jones spent $2 billion out of his own pocket to build a stadium), and many others. It’s a model we should at least consider. Don’t tax business profits at all. Tax salaries, capital improvement projects, purchases, whatever. At least give it a try because the current system is broken.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
Current Release: The Sword of Water (Jon Gray v. Eleniak the Golden Flame c’mon, that’s awesome stuff)
Next Release: The Spear of the Hunt

Internet Sale Tax – Coming Soon

Internet Sales TaxLegislation is slowly making its way through Washington D.C. that will institute a Sales Tax on internet purchases. Those in favor of this tax, although most refuse to call it a tax instead using the phrase Collection Issue, say it is unfair that internet sales do not have a sales tax whereas brick and mortar stores do have such a tax.

To understand why it is completely fair that Internet Sales don’t have a sales tax while Brick and Mortar do have one we have to understand the purpose of a Sales Tax, or any tax at all.

The rationale for such taxes is that in order to sell something to a consumer, the product and the customer must get to your store by state and federally built roads. They park in your store on free use parking lots generally built and maintained by municipalities. Stores use utilities; gas, electric, water, sewage, whose infrastructure requires government moneys. Internet sales clearly do not require this upkeep although if there is a warehouse where the product is delivered in the state it does require such resources. The roads used to deliver such a package to your door are also under that umbrella of activity.

However, the trucks that deliver goods pay gas taxes for the upkeep of the road. Gasoline taxes are generally justified as a way to pay for road and bridge building and maintenance. That makes perfect sense to me.

The only real justification for this new tax is the warehousing of goods which need employees to unload and load product for the consumer. These employees need water, heat, parking, etc. That is why Amazon is working out its own sales tax scheme with various states because they are building a network of warehouses all over the U.S. to ensure that your product is delivered promptly.

Now, here is my main point. If we become a society that orders our goods online we will significantly lessen the burden on utilities, parking lots, roads, and other government provided services. Brick and mortar stores will disappear and parks will appear. If we stop driving our cars all over to pick up toothpaste then the government spends less money and our taxes should likewise decrease. But, if we tax internet sales, whose price is lower for natural, capitalistic reasons, we are unfairly benefitting brick and mortar stores! Taxes should be lower on internet sales. This will, and is, creating many positive effects on consumption of gasoline, water, electricity etc! Not that the government should decide this one way or the other. If one business practice is cheaper and people like it then it should win out.

I’m not totally opposed to taxation on internet sales whose goods go through a warehouse in that state or municipality. I’m just saying it should be significantly lower for those specific cases and if there is no warehouse, there should be no tax at all. The reason it is lower is that only large trucks have to deliver the goods as compared to many cars coming and going. Warehouses have fewer employees than equally sized brick and mortar store where one warehouse might replace fifty or more traditional business locations.

The benefits of internet sales are many and we shouldn’t be discouraging this with unfair taxes that help brick and mortar stores under the misguided guise of “fairness”.

Tell me what you think in the comments!

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
New Release: The Hammer of Fire

Soda Tax – Good Idea?

Sin TaxAs the Federal government continues with their financial woes and bond rate manipulation costs state and municipality millions if not billions of dollars those entities are coming up with creative ways to tax. One of the most common and popular way to raise revenue is so-called “Sin Taxes“. One new idea coming to a city near you is to tax soda consumption.

I’m going to explore the idea of a Sin Tax and whether it is a reasonable way for municipalities to raise money for their operations. I don’t want to get too deeply into the idea of waste and government overspending but focus more on whether these taxes are useful.

The Wiki article details the proposed benefits of such taxes which include the revenue raised and the societal benefit of increased cost and the accompanying discouragement of sin. In this case the societal good is the weight loss that might be associated with reduced soda consumption and its attendant health benefits.

Sin Taxes have a long history in the United States with tobacco taxes being the most prominently known. For those of you, like me, who love history, you’ll be interested to know that Alexander Hamilton proposed the first tobacco tax back in 1794. The current federal tax is $1.01 per pack while state and even city taxes vary. In Missouri, my home state, the tax is $.17 per pack. It turns out this tax burden is far less than I was led to believe by tobacco companies and smokers in general although that is to be expected. Missouri’s tax is the lowest in the nation.

There is, in fact, a correlation between higher taxes and reduced consumption. So that part of the argument seems to be true. If the price point rises to a certain level then a segment of the population will stop using the product. However, at least one study indicate that smokers and obese people are actually less of a financial burden on the health-care system because they die much earlier than healthy people.

One of the main arguments against Sin Taxes, and proposed nationwide consumption taxation, is that they are regressive in nature. What is meant by this is that two people who smoke a pack a day are taxed equally but one is wealthy and the other poor. Thus the poor person is paying a far higher percentage of their total income. In essence the tax forces poor people to quit or bear a much higher percentage burden. This could be deemed discriminatory.

There is no doubt that companies push such tax hikes onto the consumer but that is really beside the point. Studies indicate that raising taxes on soda will generate revenue for cities and will drive down consumption. Whether that consumption rate decline will result in less obesity and medical expenses is in doubt. It is certainly the right of cities, states, and the federal government to tax.

As a Libertarian I think people should largely be allowed to make their own decisions and government shouldn’t be in the business of discouraging or encouraging personal lifestyle choices. Contrarily I also think that all people and businesses enjoy the benefits of government building and maintaining roads, bridges, sewer systems, schools, and utility infrastructure and should pay for that boon. Back to the other side, I think taxing “sin” sends a bad message. We don’t want you to do something but we’ll happily take your money for doing it.

It’s a tough question. Certainly they have the right to tax soda but is it a reasonable exercise of government power?

I have to come to the conclusion that it’s legal but I don’t like it. I like taxes to be directly related to a function of government. A gas tax should go directly to roads and bridges. A property tax should go to schools. An airline tax should go to airports and their employees. Cigarette and Soda taxes should go towards public health-care costs if they are deemed to be an expense. When all the tax dollars are mixed and mingled strange accounting starts to happen and it becomes a magnet for waste and theft. Just as a quick example; let’s imagine all the money taken for Social Security was put into safe, low-interest bearing accounts and doled out only to those who paid in. It would be fully funded and not only fiscally solvent but be running huge profits by now.

I think that is a better solution than taxing soda but it would require a large effort. An effort that is worthwhile in my opinion. Have taxes support the specific government function to which they are related. If soda costs money in health-care then the tax should be used for that purpose. I’m not convinced reducing soda consumption will reduce obesity and even if it did that such effect would lower health-care costs. Thus, I don’t think a soda tax is reasonable.

What do you think? Tell me in the comments.

Tom Liberman
Sword and Sorcery fantasy with a Libertarian Twist
New Release: The Hammer of Fire