Casinos make the case for high levels of taxation

I spent the last four days in the air conditioned wonderland of a casino (the Rio) in Las Vegas at the annual Netroots Nation convention. Many people love casinos, myself included.  But I never gamble (as they guy in the elevator said to me yesterday, "The only way to win is not to play.")  I love casinos because they are freaking nice -- gorgeous innovative architecture, air conditioned, pretty lights, good music, and extra oxygen pumped in to make everyone feel better.

Washing my hands one afternoon in the casino's restroom -- complete with high ceilings, granite countertops and a dedicated employee to keep it clean, I got to thinking... it seems to me that casinos make the case for much higher levels of taxation in society. 

Because the REASON that casinos are so nice is that they tax the hell out of people. Going to Vegas is like putting your money into a mutual fund that is guaranteed to lose at least .2% of your money (blackjack) and may cost you as much as 29% of your money (Keno).  But people LOVE Las Vegas -- in part because all of our losing then leads to great works of architecture (replicas of Paris, New York, and Egypt for example) and cheap breakfast buffets (as one side note -- the Rio now offers an ALL YOU CAN EAT ALL DAY buffet at 7 different casinos for the one low price of $39.99). 

In fact that's the reason that palaces in France are so nice and the reason why so many people want to visit France as a tourist destination -- because a former French government taxed its people at a high rate and built great public works that have lasted for centuries.

Interestingly, Vegas casinos also tax the rich at a very high rate.  The whales (like Tiger Woods or Jerry Buss) with their private jets, limos, and secret entrances to the casinos end up leaving much more cash behind than the average gambler.  

The strangest thing about Las Vegas is that people actually seem to enjoy losing.  It's like the purifying ritual of risk and loss taps into some deep limbic desire of Thanatos, for loss and rebirth. 

So I guess all the IRS needs to do in order to become more popular is to making paying taxes more fun and exciting!  Perhaps they could add scantily clad go-go girls dancing on the customer service desks at the various IRS offices while pumping in extra oxygen and 1990s dance hits?  Also, the IRS could merge with various state lotteries (which after all are just voluntary tax systems structured as games) -- such that once a year someone's name is pulled out of a hat and his/her entire tax bill is forgiven!

But all kidding aside, the fact is, casinos show that under some conditions, people voluntarily embrace high levels of taxation.  Las Vegas involves something of a trade -- casinos give inexpensive food, inexpensive accommodations, and lovely public works in return for high levels of taxation (gambling).  I think the same is true for the public sector in a way -- if people feel that they are getting a high level of service -- health care (not just health insurance), education, and well-designed public works projects, they will be much more willing to pay taxes at a higher rate.

Are markets actually calling on governments to raise taxes?

It seems to me that the markets are actually calling for higher taxes.  Because look -- the markets seem to want deficit reduction.  Got it.  But if you do deficit reduction through spending cuts you kill the recovery and send the economy into a double dip recession.  So the only way to get deficit reduction plus growth is through increasing taxes.  For Greece, or the UK, or Germany, or the U.S. to cut deficits through cutting spending right now would be complete insanity. 

Tax Toxics!

With April 15 fast approaching, I thought I'd do a post on taxes.

As a progressive, I believe that a certain level of taxation is both reasonable and necessary. It's just the investment we all make to live in a democracy. Roads, bridges, schools, national defense, (and national health care!), benefit us all but require that we all chip in our fair share.

At the same time, I accept the argument that "whatever you tax you get less of." It makes sense of course -- the more things cost, the less of it you can buy and taxes raise the cost of things. As a result, beyond a certain base level it does not make a whole lot of sense to tax income, because, we generally want more income and more employment not less.

In the public debate over tax policy, Republicans bang out a constant drum beat of no taxes, no taxes, no taxes. It's childish and irresponsible (which is why they haven't done a good job with governing). But Democrats, it seems to me, too often get run over because they are just standing still on taxes -- defending the status quo or offering a watered down version of the Republican drumbeat.

It's time for Democrats to go on offense on taxes at the federal, state, and local level. If Democrats could go on offense on taxes, I believe they could usher in several decades of electoral dominance. What would it look like for Democrats to go on offense on taxes? In a sentence:

TAX TOXICS!

Whatever we tax we get less of right? So tax the hell out of things we don't like -- toxics, any form of pollution, and any non-renewable resource. For every $1 raised by taxing toxics, Democrats could invest in new technologies to destroy old polluting industries. These new investments would create new high paying jobs and put the United States on a course of continuous improvement in our quality of life. It would basically fund an industrial policy in perpetuity -- 1) kill old and dirty industries through taxing their waste stream; 2) replace with new non-toxic technologies; 3) sell to the world.

Lester Brown at the Earth Policy Institute has proposed that we use taxes on toxics and other forms of pollution to lower income taxes. To a point, I think that's a good idea and a wonderful way to build popular support. But I also think it has its limits. We don't want government to become addicted to the revenue it gets from toxic taxes. For example, the U.S. currently has a policy of using revenue from timber sales to fund schools in the northwest. The policy is a disaster -- basically requiring the clear cutting of forests in order to keep schools open. It seems to me wiser to use toxic taxes as a tool to destroy dirty polluting industries rather than as a source of funding for basic services.

Not all toxics are appropriate for taxation. Some toxics like mercury, are so detrimental even in small quantities, that they should just be banned completely. But in other cases, the tax would effectively function as a gradual ban. Lester Brown writes, "we propose a worldwide carbon tax to be phased in at $20 per ton each year between 2008 and 2020, stabilizing at $240 per ton." A typical coal-fired power plant generates 3,700,000 tons of carbon dioxide a year -- and the old coal-fired power plants spew even more. At even $20 a ton, in the absence of pollution controls, the typical coal-fired power plant would be facing $74,000,000 in taxes a year (just on the CO2 -- we could also tax the sulfur dioxide, nitrogen oxide etc.) and the older plants would quickly be out of business. We could take every dollar of that tax and invest in solar, wind, and geothermal for example -- quickly replacing our old industry infrastructure with new clean technologies.

We could also tax plastics, pesticides, mercury in those funky new lightbulbs, toxics in household products, non-sustainably farmed lumber... the list goes on and on. Presently, pollution puts profits in the hands of corporations while passing huge health care costs onto the public sector. Taxing the heck out of toxics and other forms of pollution would dramatically lower health care costs, reduce government costs, and improve quality of life for all Americans. In fact, it's not even really a tax increase, it's just putting the true costs of pollution back on the companies that create it, rather than sticking you and me (and the public sector) with the bill.

The fact that Democrats haven't already embraced this idea shows just how much power the old polluting industries and their lobbyist dollars have in Washington.

But taxing toxics (and other forms of pollution) is an idea whose time will come.

What if America's oil industry were nationalized?

Some of the best stories are often buried on page C13 of the newspaper.

Take for example, the story on page C13 of today's New York Times. The very last sentence in the article contained information that made my eyes bug out--cartoon style:

"Last year, Pemex [Mexico's state owned oil monopoly] sales surpassed $100 billion [that's with a b] but it paid $79 billion in taxes [also with a b], which accounted for almost 40 percent of Mexico's federal budget."

Imagine if all the oil reserves in the United States were nationalized. It's our oil, as a democracy we can choose to do what we want with it right? Imagine if Exxon and Shell and every other oil company that does business in the U.S. paid 80% of their revenue into the U.S. treasury. We could pay for health care for every American (several times over). We could build new schools and parks, and cure cancer, malaria, and AIDS--all while lowering taxes for every American. Sometimes the best solutions are simple, obvious, and right in front of our nose.