The Economist-Rethinking Taxes

Ok, so I’m not really an economist, I merely play one on my little blog, but without coming off as arrogant as a real economist, I would put mine, and for that matter most people out there who work for a living and who collectively account for over two-thirds of our economy with our spending, I would put our opinions and observations on the shelf marked real world, while relegating the theories of the actual economists on the shelf marked silly stuff from the ivory tower. Not that I’m against expert analysis, if I want my finances planned I’ll go to a financial planner, if I want a home designed I’ll check with an architect, and if I want my car fixed I sure as heck am not getting under the hood and making things worse. But when it comes to economic theory and taking advice from the so-called experts, I will revert to the words of the father of modern capitalism, Adam Smith, who I believe coined the term caveat emptor, which as we all learned back in school means buyer beware.

I don’t need to go into a diatribe about how the elite economic class managed a series of stupendous moves concerning derivatives markets, hedge funds, and mortgage lending that largely precipitated our current global recession, that ship has already sailed and it’s about as obvious by now as saying that Bush hasn’t been our most competent president. So looking forward, let’s see if we can’t minimize the damage that these geniuses are ready to inflict on us, starting with an idea whose time hopefully never comes, a gas tax.

This idea has been proposed for awhile, Thomas Friedman, who happens to be one of my favorite writers, is a big proponent of this bad idea. I just this morning read an editorial in the New York Times regarding the idea, and it goes like this. We need to have motivation to invest in alternative energy sources, and Americans are too stupid and selfish and short-sighted to stop our addiction to oil unless our beloved federal government steps in and taxes the hell out of gas. The floor they say should be $4 a gallon, so if gas is down to $1.50 as it is now in Arizona, then we would still pay an extra $2.50 per gallon with the difference going to the government, so that they in their infinite wisdom and fiscal discipline can spend it on setting up alternative energy industries. Wow, sign me up for that plan!

This idea is so dumb as to be infuriating on so many levels. For starters, why should any of us trust our federal government to wisely spend our tax dollars anymore? I have completely turned around in my thinking on this issue by the way, spurred along by both rich and conservative friends, and after considering their points and talking to people, not to mention doing some interesting reading, my stance on taxes has taken a strong shift to the right.
This is the same federal government that has squandered $850 billion dollars on the recent financial bailout plan, which was billed as one thing and an emergency measure that was so important that John McCain, who admittedly knows nothing about the economy had to rush to DC and hold special meetings. We were promised, to be fair by my guy Obama as well, that there would be oversight. Yeah, like the alcoholic teenager in the family provides oversight of his parents liquor cabinet. The plan turned out to be something completely different from what we were sold on, turned out not to be such an emergency measure after all, and included no oversight thanks to a clause snuck in by the Bush-Paulson team and approved by our oh so vigilant Congress that only allowed for oversight under the conditions of the original plan, which was to buy toxic securities and save our financial institutions and hence our capitalist economy from ruin.

But here’s the beautiful part of the plan, we decided that we didn’t need to buy those securities after all, therefore oversight is not needed and companies can for example, pay their top haunchos whatever they want in terms of bonuses and the like. On top of that, the Congress had the chutzpah to add an additional $150 billion in pork barrel spending to this supposedly emergency measure. So we were sold a bill of goods and will not get the promised results but are still on the hook for the bill. Hmm, sounds eerily familiar, the financial version of the Iraq War, which likewise was a joint venture on the part of our executive and legislative branches of government.

But we are supposed to trust this same set of bandits to take the extra money from this gas tax to do the right thing with it? Excuse me if I seem a little cynical, but this is madness. And people like to belittle Ralph Nader, somehow blaming him for Gore losing the election in 2000? Ralph Nader talks about the incredible government corruption and waste and calls for a taxpayer revolt, and he’s the joke? The joke is on us because we keep electing different foxes to guard the hen house, it doesn’t matter if the fox has a red coat or a blue coat, he’s still a fox for crying out loud. But we marginalize candidates like Nader and libertarian Ron Paul even though they speak the most sense and the greatest truth on matters such as these.

Back to the gas tax, it is a horrible idea to give the government money and trust them to do the right thing. That’s as ridiculous to me as the woman who meets her mate while having an extramarital affair with him, then somehow thinks he won’t do the same to her one day. The leopard doesn’t change his spots, and our government is pathetically inefficient and wasteful in its spending, and why wouldn’t they be, it’s not their money and they get away with it time after time.

The gas tax is also a bad call from a personal budget standpoint. It may be easy for liberals in New York City who use mass transit, or think tank economists who take limos to work to blather on about how we should spend more on gas, but those of us in the real world put gas in our tanks because we need to drive to work and to the market and to the kids ballgames and rehearsals. Nobody I know goes out for a leisurely Sunday drive anymore for the heck of it. Most of us commute to work out of necessity, and public transit is either too expensive, too inconvenient, or both. Granted, we can and should be more selective in our choice of vehicles in terms of balancing the needs for passenger space with fuel efficiency, but that should be our choice, not a mandate from the government.

The alternative energy industry will likely need some government stimulus to get off the ground in the form of initial investment that will allow burgeoning industries to achieve enough scale so that they can become self-sufficient and eventually profitable. There is a good book I read recently called “Freedom From Oil” which I would highly recommend and which addresses this important issue. But that should not be confused with the government running such industries. All of the best innovations and the most efficient practices come from the private sector and are guided by the free market. When the state runs industries it is historically inefficient and uncreative, and historically this has been the case.

Even communist China, which is an emerging economic power, is achieving this status by opening up their system and introducing a hybrid system of state control over politics but allowing private enterprise to run the economic sector. India is doing much the same, as they have changed their socialist policies of the 1970’s and 80’s, and as a result have seen tremendous growth and hundreds of millions of people have been lifted out of abject poverty as a result in both nations. Yet here we are, the capitalist nation that learned from the British and taught the rest of the world, seemingly reverting to socialist forms with the government taking over in large part the financial and auto industries. Somewhere Adam Smith is rolling over in his grave and Ralph Nader is shouting down the powers that be, only no one is listening to either because, well, Smith is six feet under, and Nader cost Gore the 2000 election.

The gas tax idea is just the tip of the iceberg when it comes to bad ideas on taxes. It would cripple our personal budgets and reduce consumer spending, it would give even more power to the government by further enriching their coffers, and it would likely have little positive impact on the development of alternative energy industries.

For that matter, taxing wealth on further reflection doesn’t seem to be such a good idea either, which is not to say that we shouldn’t have a progressive tax system. We should, and those who earn more and benefit more should pay a higher percentage, but it should not be punitive and the use of this money should be accounted for. Wealth for the sake of wealth is immoral, but much wealth is used to create more wealth for society, and that should be encouraged and not punished.

The gas tax however is even worse, because it is taking money out of the wallets of the people of the middle class who can least afford it and whose economic well-being is the driving factor in maintaining a healthy economy and social system. It is the equivalent of robbing Paul to pay Peter, and to my way of thinking Peter has been paid enough already with less than stellar results. It’s time for a new approach, something other than the failed policies of trickle down and tax everything in sight.