Wednesday, February 1, 2012

A New Taxation System- Part One

So I've been mulling over our tax system for awhile now, which isn't surprising given the attention given to the recently released returns of Mitt Romney and the kerfuffle about his only paying an effective 15% -or-so tax rate.

And I was thinking, "I agree. That's unfair." Yeah, I know he paid like $6 million in taxes, which is (more or less) $6 million more than I paid in 2010. And it does seem unfair to increase taxes on people already paying a gigantic percent of total taxes collected. Though not as unfair as expecting poor people to pay a bigger share.

But then I thought of a possibility. What if your tax bracket was not determined by how much money you make, but by what you do?

Instead of having people who make more than X paying Y% in taxes, we would give tax breaks to people whose jobs make the world a better place, and those who have jobs that don't really help anyone would pay more in taxes.

So, like, everyone in the service and retail industries (at the service level) would pay like no taxes. Same with people in call centers, or janitors. Currently, the market doesn't seem to have a way to account for the fact that people in those professions have to take shit from random people, and sometimes have to literally clean other people's shit from the walls (ask anyone who's worked at any kind of restaurant or store. There's been shit on those walls at some point).

Normally, you would expect that the "free market" would see wages increase in jobs where you have to clean shit from walls, because there's not tons of people that are willing to do that. However, the evidence suggests that people are willing to do just about anything for $8.75 an hour when they've been unemployed for 10 months. So wages never go up, and thus prices at McDonald's don't go up, so the societal costs (externalities) of abusing people and being a jerk is never borne by me, the jerk.

The market needs to correct for the fact that I can spit in an employee's face at Burger King and leave with a cheap burger. This is one way to do that.

People who work in non-profits would get a tax break even up to the top, because non-profits do good things and people often take a pay cut (compared to what they could get in the private sector) to work for a charity. This is a way that non-profit salaries can become more competitive without taking that money from donors or from the cause.

So, to my mind, it's easy to come up with several professions that would get a tax break under my system. The next post will have to do with who would take a pay cut and pay higher taxes. It's harder to determine. But that's for another post. Today, what professions do you think should pay less in taxes regardless of how much an individual makes?


  1. I agree with your sentiment, but I'm not sure that it would really make much difference. Firstly, the $8.75 burger flipper is not terribly likely to actually be paying much in taxes in the first place. Secondly, I'm not sure I agree with the logic behind tax cuts for non-profit workers because non-profits do 'good'. Some do good, for sure, but I'm not sure that is a universal truth.

  2. Well, since non-profits have to go through a pretty rigourous process to get their tax exempt status, and have to do detailed filings every year showing that all of their expenditures are for exempt purposes, it would be easy to apply this at that level. For local non-profits that don't bother with the IRS exemption application, it'd be more difficult, but since they're mostly functioning outside of where they need to be legally that's probably not a big concern... having tax breaks for 501(c)3 employees would incentivize them to actually get their filings in.

    Though there is the issue that there are tons of basically political organizations (like the one I work for) that are 501(c)3 but are definitely not doing the kind of good that a soup kitchen is (or at least its debatable). And I think that we could make it so burger flippers get a credit in addition to getting a refund (and not just EITC, an actual like burger flipper credit). :)