You are not alone.
Neither party excites me. I guess I am a social liberal, fiscal conservative, somewhat libertarian - a paleoRepublican?

I rate Nixon, Carter and Clinton as very disapointing and GWB as a disaster.

an economics blog I follow had this post earlier this week:
++++++++++++++++++
The GOP sends me an Email

I've made an effort to limit the number of political posts on this blog. This will be an exception ...

As an introduction, I'm a lifelong Republican and former youth delegate to the RNC (when I was in college). The GOP sent me an email today and I've posted excerpts on Angry Bear: The GOP Talking Point.

I'm ready for a change.

Now back to economics ...

I think the idea was meant to be, "universal health care is a desideratum which we should be working to implement." Hard to disagree with.

I would support increasing the minumum wage, but I do not want to link it to the CPI for the reason you mention -- wage/price spirals.

I think we should ensure universal health care for children, but I think universal health care for adults may be too expensive.

) Simplify and increase the progressivity of the tax code. Completely agreed on the simplification -- which is why I vehemently oppose the increased progressivity.

Sorry, Dan -- you're wrong here. You can have a very simple tax that is completely progressive. All that means is that , instead of multiplying by .08, you calculate with a very simple formula from a tax table ). It is dishonest to mix simplifcation and progressivity -- they are almost totally orthogonal.

Thomas Sowell often counsels "compared to what." It is fine to hold Bush in very low esteem, but, compared to Kerry?

I suspect with Kerry we would be in collective anguish over his inability to make a decision and lead our troops. Fighting terrorism solely in the courts is a very unattractive alternative.

This answer strikes me as complete nonsequitur:

6) Simplify and increase the progressivity of the tax code.
A: Completely agreed on the simplification -- which is why I vehemently oppose the increased progressivity.

That's an incoherent answer. The most obvious way to increase progressivity, namely, increasing the numbers toward the high end of the tax table in the IRS booklet, has no effect on the complexity of the tax system.

You can imagine lots of changes that would both simplify and increase the progressivity. For example, eliminate the social security tax and make up the shortfall by increasing the amounts in the income tax.

If you want to argue against progressivity, fine. But complexity is not an argument.

Yes, I agree with Josh above. Could you please explain, Dan, why support for tax simplicity is an argument against progressivity?

For example, (not that I am endorsing this), why couldn't one simply adopt the Forbes "flat tax" package except for the flatness - i.e do all the simplifications necessary to be able to "fill out your return on the back of a postcard", but when it comes time to calculate the actual tax owed, simply refer to a tax table instead of doing a simple multiplication?

Doesn't the first part of 7 discriminate against (some) religious groups, flying in the face of the second part of 7?

No wonder you answered it the way you did.

The only way someone could agree with both parts would be if s/he were an anti-religious person who thinks that only those self-identified as religious can discriminate on the basis of religion.

Tao and Josh,

Highly progressive taxes encourage people with a lot of resources, who (could) make a lot of money, to find ways to conceal or defer or deflect or export their pay so they don't have to pay so much in taxes. This distorts the tax revenues, which forces the tax code writers to come up with ever more clever rules and regulations to stop those with the resources from dodging taxes. The tax code gets more and more complex. Mistakes and foolishness creep in. Incentives and disincentives become ever more complex and perverse. The more progressive the tax code, the faster the code progresses away from simplicity toward chaos.

Flatter taxes encourage the upper end of the income structure to take their pay in cash and pay the taxes on it. This does not distort tax revenues and doesn't force the tax code writers to get creative, though congress does tend to spend all the increased revenues, grass-hopper like, instead of saving a little for a rainy day.

And that's the important thing to pay attention to. Tax Revenues are the important thing. Did tax revenues go up or down with the tax rate cuts that were passed in 2000/2001? They went up. The tax rates became flatter, less progressive at the top, tax rates for middle and lower income earners went down, and tax revenues went up. This result is anti-intuitive and instructive. Both conservatives and liberals should approve of the result. The liberals just can't get past the words "tax cut" to understand that it was effectively a "tax revenue hike."

Pangloss gets the dynamics of progressive taxes and code complexity correct. But there's more. Beyond the sheer incentive for high earners to dodge high marginal rates, the more non-linear you make the tax schedule, the more opportunities there are for tax arbitrage. People can come up with all sorts of schemes to move tax liability toward the entity in the lower tax bracket, or to defer or speed up income into low-bracket time periods, etc. These schemes then require lots of complex regulations about how to define income.

In addition, as the economy grows, progressive taxes lead to "real bracket creep" as more of the population is exposed to the higher brackets. Aside from the poor incentive properties of such creep, it enables the Congress to spend more without having to vote on tax increases.

Highly progressive taxes encourage people with a lot of resources, who (could) make a lot of money, to find ways to conceal or defer or deflect or export their pay so they don't have to pay so much in taxes. This distorts the tax revenues, which forces the tax code writers to come up with ever more clever rules and regulations to stop those with the resources from dodging taxes. The tax code gets more and more complex. Mistakes and foolishness creep in. Incentives and disincentives become ever more complex and perverse. The more progressive the tax code, the faster the code progresses away from simplicity toward chaos.

You realize this undercuts your basic argument -- thats it possible to make a very simple tax code that is enforceable and easily definable. You are now claiming that its not possible to make such a code because people will try and find loopholes in it. Admittedly, the incentive to find loopholes is higher at higher marginal income tax rates, but the fact that such loopholes can exist invalidates your entire argument.

And basically what you're saying is this -- wealthy people will try to find loopholes in a simple progressive system so we must create a system that gives them a huge loophole so they have no incentive to find further loopholes.

ax Revenues are the important thing. Did tax revenues go up or down with the tax rate cuts that were passed in 2000/2001? They went up. The tax rates became flatter, less progressive at the top, tax rates for middle and lower income earners went down, and tax revenues went up. This result is anti-intuitive and instructive. Both conservatives and liberals should approve of the result. The liberals just can't get past the words "tax cut" to understand that it was effectively a "tax revenue hike."

I could take this argument seriously if it wasn't so fundamentally dishonest

1) The bulk of the increase in revenues was in corporate tax revenues. Corporate taxes werent cut at all.
2) The economy hit the doldrums in 2000-2001 and has recovered to a large extent since. Of course in a recovery you'll increase revenues.
3) Now you can claim that tax cuts contributed to the recovery. They undoubtedly had a stimulatory impact on the economy, as did huge deficits. So did monetary policy (very low rates till last year). It is dishonest to signal out tax cuts as the only factor in the recovery and even more dishonest to ignore the huge negative impact of the deficit overhang.

Beyond the sheer incentive for high earners to dodge high marginal rates, the more non-linear you make the tax schedule, the more opportunities there are for tax arbitrage. People can come up with all sorts of schemes to move tax liability toward the entity in the lower tax bracket, or to defer or speed up income into low-bracket time periods, etc. These schemes then require lots of complex regulations about how to define income.

What "entity" in the lower tax bracket ? You could well tax S-corps or LLCs at the same rate as individual income, that would solve that issue. In terms of defering or speeding up income, that is a minor problem in general except for very high earners. If you need such "complex regulations" then your claim to be able to build a very simple tax system is flawed anyway.

n addition, as the economy grows, progressive taxes lead to "real bracket creep" as more of the population is exposed to the higher brackets. Aside from the poor incentive properties of such creep, it enables the Congress to spend more without having to vote on tax increases.

Nonsense. We already have tax brackets indexed to the CPI (since 1985), and that can continue. Congress cannot spend more in real dollars because of this so called "bracket creep" because it doesn't exist (except for at the AMT level).

Incidentally, I said earlier that Bush did not cut corporate taxes at all. What I meant was that marginal corporate tax rates were not cut. But incidentally, the corporate tax rate is a flat (but not simple tax). that flatness does not prevent corporations from using every technique possible to avoid paying income tax, including sending income abroad through accounting techniques (overvaluing outside corporate services, undervaluing US patents etc).

Yes, highly progressive systems are a disincentive to work and to indulge in tax evasion. But most of that has little to do with the simplicity of the system.

Nothing about strengthing unions? And this guy calls himself liberal? only in America.

Also, where is the "end the military industrial complex" and stop attacking poor countries part? or slash the military 95% or so... or raise Official Development Aid by 100 billion or so...

Yeah, this guy is liberal like Joe Lieberman and Evan Bayh, which is to say, right wing by world standards.

Wow, that would do wonders for private investment in general and the stock market in particular. No.

Dan, you're part-economist and I'm not, but I'm still puzzled here. Stockholders are hardly at the front of the line when it comes to corporate bankruptcy anyways. What this change would do would be to force bondholders to insist on prefunding of pension obligations, right? They can perfectly credibly make and enforce that demand, to protect their own position come bankruptcy time. Prefunding pension obligations is presumably costly, or else it'd be uniformly done already, but it's not distinctively costly to investors, is it? It's *reallocative* between pre-bankruptcy stockholders and post-bankruptcy workers; might mean a onetime hit to the overall level of the stock market. But it doesn't do anything I can see to make the capital markets less efficient or dynamic or to discourage any investment after the onetime adjustment. What am I missing?

Joe M: Atrios's purpose, in making that list, was to find the "least common denominator" that all Democrats would agree on. The two things you name are certainly supported by Atrios, but they're not supported by DLC democrats. So they're not in the list.

Pangloss writes,

"Tax Revenues are the important thing. Did tax revenues go up or down with the tax rate cuts that were passed in 2000/2001? They went up"

How can you write this? It is an empirical question, and it is just plain wrong. Are you simply ignorant and lazy - and just making claims about the world as you wish it to be, or just dihonest?

From the CBO
Federal Income tax receipts, in billions

2000 - 1004.5
2001 - 994.3
2002 - 858.3
2003 - 793.7
2004 - 809.9

Josh Yelon,
First off, democrats are not the same as liberals. I consider myself very liberal, and i would rather vote for republicans then democrats (though, i generally vote third party). democrats are typically the worst form of garbage-eating slug on earth (with, of course, some very notable exceptions). It is a damn shame that they are lumped in with regular human beings like everyone else. of course, republicans are typically criminals or fascists, but at least they admit (or make it too obvious to deny) they are bought off.

But, more importantly then my anger at american political parties, the entire basis of the left for the last 150 years has been support for unions and organized labor. so it just goes to show how messed up this "liberal" list is that it doesn't even consider the most central aspect of the ideology. to talk about something stupid like "paper ballots" and ignore labor is just more proof as to why the USA will continue to destroy the world, because even the "liberals" don't understand it.

Too bad "do you hate America?" wasn't on the Atrios list.

Foreign policy doesn't show up on it either. Neither does trade. "Pro-family policies" may or may not include increasing the child credit. Immigration is missing in action. But there are some other fairly signficant issues that are missing too, for reasons other than the ones that explain the above (mostly that Democrats disagree with each other).

These include tax rates, as in raising them. At some point we will need to do this. Why would Democrats not want to say so? Or spending; I understand the official Democratic position on spending to be NCSOA -- Never Cut Spending on Anything. Even the fight against earmarks, some of the easiest targets in creation, has had to be led by Republicans. Defense is missing from the list, I guess because too many liberals still consider the military too boring to think about. What about increasing foreign aid? Gas taxes? We all assume that the approved liberal position on any issue affecting trial lawyers is what the trial lawyers say it is. Is it?

For the record, my score on the Atrios test is several points lower than Dan's, mostly because I see little reason to change the legal status quo with respect to marriage -- certainly not at the federal level -- and don't think contraception needs to be at the top of Washington's priority list either. But the issues omitted here are awfully big ones these days.

I agree with simplification. But combined with making taxes more progressive? No freakin way.

Tax progressivity tends to make the tax code more complex. Especially when it involves targeted tax cuts, such as the school loan interest deduction. I remember that that deduction required something like ten lines of calculations, which was necessary to reduce the amount of the deduction for higher income brackets.

(Ironically, the complexity of targeted tax breaks discourages some from taking advantage of them, finding the whole mess too complicated to deal with.)

I can probably agree with leftists on part of the corporate giveaways issue. I oppose the Ex-Im Bank, OPIC (both of which funded failed Enron investments), and agriculture subsidies. But I suspect the left defines "giveaway" far more broadly than I do.

Based on the litmus test, my liberal rating is maybe 3%.

Oops, shoot that score to 9.6% - forgot about the medicinal marijuana issue.

About my math...I gave myself a quarter point for the tax question, knowing that the left is far more interested in progressive taxation than simplified taxation. And a generous one-fifth point for the giveaway question, guesstimating the gap between my definition of "giveaway" and theirs.

For what it is worth here are the ones I responded to with other than No.

1. I opposed the Bankruptcy Bill that Congress enacted with a lot of support from Democrats. The first version was introduced, at the behest of the credit card industry, during the 90s. I opposed it because I believe the Torah requires us to treat debtors with lenience. I would favor repeal, I know other conservatives who feel the same way.
2. I have always been open to a compromise on the Estate Tax, which the Democrats have never offered. Such a compromise would reduce the rate of taxation to align it with the Income Tax. However repeal is a better alternative than reverting to the pre-2001 law.
7. Simplification is a great idea, until we have to pay for it. I think it should be paid for by a $2.50/gal gas tax increase and a 16.67% VAT. However, in a country where prices are set in the market, the idea that you can know a priori who bears the real economic burden of a tax is nonsense.
9. Sure. Whatever that means. Let's start by shuting down the Corporation for Public Broadcasting. (h/t Prof B)
11. Jacob. The real impact on would be on private companies that rely on the banking system for funding. Monitoring is not free. Enact this change and there will not be a private defined benefit plan in the US in 5 years.
12. You can't have it both ways. You can't have Roe v Wade and state control over the use of marijuana. Personally, I favor moderation and federalism in both areas.
13. I voted on a new electronic machine last week. It printed a paper record when I recorded my vote. It was very neat. Paper ballots would not be an improvement.

Enact this change and there will not be a private defined benefit plan in the US in 5 years.

Wouldn't break my heart. But the defined benefit/ defined contribuion distinction is interesting here. Why *should* there be one class of pension system that's dischargeable with bankruptcy and one not? (In a DC system the cash has already become property of the worker.) If companies are keeping DB systems because of the possibility of defaulting on the obligation... well, that seems like a bad reason, doesn't it?

Corporations already have a fiduciary duty with respect to their pension funds; and some of them have played fast and loose with this duty. I don't know that rejiggering the bankruptcy rules is a desirable or efficient solution to this problem (I'd never heard the idea before yesterday). Maybe the new monitoring costs would be vastly disproportionate to the benefit of improved compliance. But, since at worst the compliance costs could be minimized by switching to bankruptcy-immune DC systems, I still don't see a terrible downside here.

I agree with you on everything except CAFE standards. Sure, higher gas prices are better at encouraging conservation, but the money goes to Iran, Venezuela, Russia, and Saudi Arabia. The best solution is gas taxes that keep a $3 floor on prices. But there's no chance.

'Tax progressivity tends to make the tax code more complex."

Sorry, but this makes no sense. Its like saying that tax cuts make the code more complex (there have been a lot of tax cuts in the past 25 years, and the code has gotten more complex).

Truth is, that the two issues, though they can be linked, need not be linked. Progressivity can be implemented through the tax brackets that apply to the bottom line, the AGI. How you get to the bottom line is a whole 'nother matter. There need be NO complexity at all when figuring out what your taxable income is. Then you can apply a regressive rate structure, a flat rate structure, or a progressive rate structure without adding any complexity whatsoever.

As others have said, but simpler:

Increasing the incentive to find loopholes does not cause problems if the loopholes simply aren't there.

And given the opportunity to save x dollars by finding loopholes, it doesn't matter how large a portion of your tax burden x dollars is. People will save it.

Jacob: A defined contribution plan (think 401K) usually does not result in bankruptcy claims because the payroll deductions are supposed to transmitted to the plan trustee forthwith. Even if the employer goes bankrupt, the trustee still has the investments which belong to the employees not the employer and cannot be reached by the bankruptcy court. If employer stock is a plan investment, its value may be impaired by an employer bankruptcy, but this will impact all stockholders equally.

A defined benefit plan (the old fashioned pension plan) defines a benefit based on a formula, e.g. a pension equal to 2% multiplied by the employees number of years of service and his final average pay over the his last three years of employment.

For active employees the employer must estimate the present value of this obligation. That in turn requires estimating at least four values that are not fixed -- future service, future pay, future life expectancy, and interest rates. The employer must amortize this obligation by payments to the plan trustee.

The problem is that the most dramatic variable, interest rates, is outside the employers control. A decline in the interest rate increases future obligations of the employer and the required contributions. Because contributions are tax deductible, the IRS, which is most interested in collecting more tax, required corporations in the 1990s to use higher rates, which decreased estimated liabilities and contributions.

When rates dropped over the last few years to historic lows, obligations and required contributions increased even though the plans had not changed. A lot of plans that were overfunded in 1990s, became underfunded, because o market rate declines.

Bankruptcy priority was proposed by Dick Durbin at the behest of the unions a few years ago. It provoked a fit of hysteria from bankers and lawyers. It is a real dog of an idea.

Tano: Tax progressivity is the source of much of the IRC's complexity. Since different taxpayers have different tax rates at different times, the code has a great many rules to prevent shifting income from person to person and time to time. E.g. the kiddie tax rules, the marital tax splitting rules, partnership rules, etc.

AKH: "Tax progressivity tends to make the tax code more complex."

Tano: "Sorry, but this makes no sense. Its like saying that tax cuts make the code more complex (there have been a lot of tax cuts in the past 25 years, and the code has gotten more complex)."

Let me give you an example: the college loan interest deduction, which I claimed some years ago. I recall that it took something like eleven lines of calculations to figure the sum of the deduction. Why not just one line for "enter the amount of college loan interest here" and then move on? Because those eleven lines of calculations are designed to reduce the dollar amount of the deduction for people in higher income brackets.

There's a lot of these kinds of targeted tax cuts in the tax code. Of course, they target more than just the "rich.".

Complexity also comes by way of the sheer number of taxes. Cigarette taxes. The infamous 1991 luxury tax. Estate taxes. VAT taxes in Europe. "Mutual county assurance fee" for ambulance rides. And so on.

Progressivity could go hand in hand by simply rewriting the tax tables, and getting rid of legions of deductions instead of making them all a bunch of Rube Goldberg contraptions. But without those deductions, how would the left bribe the lower and middle class?

answered in full on my blog.

On the faith based thing: THe question demands discrimination against religious organizations, then demands no religious discrimination. Does that mean that programs that cannot be served by relious organizations should be cancelled? Along with those that can?

"Increase the minimum wage and index it to the CPI"...

Hmmm, I guess those who do think this particularly silly idea are willing to fork over the extra money out of their own wallets, right?

In re 3, the answer seems to be "prefers a system of regulations that often requires doctors to devote a third of their staff to dealing with bureaucracies." This looks to me like dead-weight loss, but maybe I'm just thinking like an economist.

In re 4, I presume Dan's real answer is "ditch CAFE" as more consistent with presumed libermatarian principles. As it stands, though, his answer is "keep ineffective regulations", which is neither libermatarian nor pragmatic.

And in re 10, the current answer "allow companies to underfund contractual pension obligations" seems at odds with Dan's opposition to corruption.

Progressivity could go hand in hand by simply rewriting the tax tables, and getting rid of legions of deductions instead of making them all a bunch of Rube Goldberg contraptions. But without those deductions, how would the left bribe the lower and middle class?

How about the right ? The mortgage tax deduction is probably the biggest deduction, and a lot of it is aimed squarely at good old fashioned Republican voters. The right has its own pieces of social engineering written into the tax code.

Since different taxpayers have different tax rates at different times, the code has a great many rules to prevent shifting income from person to person and time to time.

hardly. The complexity involved in those is de minimis. And if we didn't have S-Corps, it'd be even smaller. For me, the most complex part is the treatment of options, basis, capital gains, income and the like. This has nothing to do with progressivity (and given that flat-taxers want to not tax capital gains and dividends at all, this is likely to get worse under a flat tax regime).

YOu can have a very simple code that is extremely progressive. The two are totally orthogonal.

The mortgage deduction is intended to help make the "American Dream" of homeownership a reality for a greater number of citizens than otherwise possible. That issue resonates strongly with conservatives.

The mortgage deduction has a built-in "limit the benefits to the rich" celing based on property value. Both conservatives and liberals like the deduction because it helps potential homeowners. Liberals like the ceiling because, unlike conservatives, they see decreasing the tax burden on the rich as inherently harmful. Conservatives do not see the ceiling as necessary, but will compromise in order to get the best deduction possible in the political climate.

For the sake of clarity, I'm not defending the mortgage interest deduction. The original topic was progressive taxation, something that is sought by fiscal liberals but not by fiscal conservatives when structuring the income tax code. Deductions are one type of complexity, deduction ceilings are another.