A couple brief stories:

1.
My mother was once on a plane with James A. Baker, who was serving as Secretary of Treasury at the time. He was approached by someone who had an idea for easier taxation. The man said that everyone should have to pay for things with what today are called debit cards (but were not as prevalent at the time) and a portion of each purchase should just go straight to the government. Baker was polite (one suspects that he got ideas on taxation from strangers often) and explain, "Yes, that would make it simpler to collect taxes and a lot simpler to raise them."

2.
A left-of-center friend and I were getting gas on our way out of town for a road trip. Gas prices were abnormally high at the time and there was an ongoing debate as Republicans were pushing for them to be lowered. My friend saw a sticker on the pump that explained that fifty-three cents of every gallon was going to pay for local, state, and federal taxes. "Why do they do that?" he complained, "it's like they want to blame the government for the high gas prices."

I responded that if the government was responsible for fifty-three cents on the gallon, it's more than fair to say so. It's like when stores don't include sales taxes on their prices.

Turns out he also had a problem with that.


Charles Kuffner links to a report on taxes in passing that caught my interest. It explains the good and bad ways that states tax:

Of course, the burden a tax system must carry varies from state to state. There is no such thing as a perfect structure, no template that all, or even most, of the states could use. One of the glories of the American system of governance is that states are free to offer different degrees of service to their citizens. The main commonality is that they must raise whatever revenue they need to meet their chosen level of service. Raising money to meet irresponsible spending doesn?t make for a good tax system. But utilizing well-balanced streams of revenue and avoiding unsupportable tax cuts are critical, regardless of whether a state wants to have a Cadillac government or a Chevy.

Fair enough. I am generally in favor of balanced budgets, so tax cuts that create massive deficits are undesirable to me (though much more desirable than spending that creates deficits, which is why Democratic criticisms of Bush ring hollow to me, but that's an aside).

The question is what makes a taxism more or less fair than another? After all, a balanced budget is balanced whether the revenues are generated via sales, income, corporate, or property taxes. There's always the question of who is getting taxed. Income taxes are usually favored by liberals and sales taxes favored by conservatives since the former can be aimed at the wealthy and the latter are less likely to be targetted. There is also the question of what the taxing promotes and penalizes, conservatives arguing that the progressive income tax penalizes work, many arguing that property taxes discourage home ownership, and so on. But the report doesn't really explore these issues.

It's primary concern is making taxation as psychologically untaxing (pun intended) as possible.

States with unbalanced tax systems are particularly ripe for misinformation and misconception. In Texas, sales and property taxes are high because there is no income tax. Even though Texas ranks near the bottom in tax burden ? per capita or otherwise ? its citizens ?think of themselves as overtaxed,? reports Judith Stallmann, a professor at the University of Missouri.

This kind of veracity vertigo wouldn?t be such a bad thing if complaining about high taxes were like complaining about the weather. But politicians who want to stay in office regularly disregard their better instincts and follow their citizens on a path to misbegotten policies. Tennessee?s tax structure, with its over-reliance on high sales taxes, is, for instance, famously dysfunctional and inadequate to state needs. Well-informed observers have long argued in favor of adding a state income tax to the mix. ?Many in the legislature believed the income tax was the right approach to funding government,? says Bill Fox, a nationally known tax expert and professor at the University of Tennessee. ?But the percentage who was willing to vote for it was different.?

Damn those voters! Always complaining about taxes! Except their complaints get in the way of bigger government!

I'm being hyperbolic, but I get a whole lot of that in Texas. Over and over again I'm told how low our state taxes are compared to other states and how if we're really going to be able to pay our bills, we're going to have to incorporate a state income taxes. Whether or not we should have a state income tax is, of course, open to debate. But I don't want to sign on to more taxes and more government in Texas because taxes are higher elsewhere. If the current taxes are "inadequate," as they presently are, they we either need to pare down state government to the point that they are adequate or raise current rates to meet our needs. How we raise rates is statistically insignificant as long as the money actually comes in.

That last part is important as in recent history states (including Texas) have pursued quick-fixes in the forms of state lotteries that have promised more revenue than they've brought in. But the article states as clear as day that income taxes are just as susceptable to the ebb and flow of the economy as are sales taxes and so on. So really it's not so much pushing for a state income tax.

What it is pushing for, though, is diversified taxation. In other words, a little taxes everywhere (income, sales, corporate, and property) so that people are less inclined to notice or be deeply psychologically scarred for life by the government taking its chomp out of our wallets. Hyperbolic again, but you get the point. What they're getting at is a desire to make taxes easier and less noticeable.

That's where I just can't agree. I want taxes to be noticeable. I hate counting out pennies because of sales taxes, but that reminds me that $8.25 of every $10 goes towards the government. When Pasadena raised their sales taxes from .075 to .0825, I didn't notice some macroeconomic manner of mildly increasing prices, I noticed that something $20 costed a buck and a half more. Black and white. Cut and dried. As it happens the people of Pasadena voted for the tax increase and that's perfectly fine. I'm sure they're happy with it. The buck-fifty isn't the point. The point was that taxes went up and people were made immediately aware of it.

Truth be told, I might not mind a state income tax if it were institution in place of, instead of in addition to, the current structure. Like the federal income tax, it wouldn't be hard to determine exactly how much bite of the apple the government is taking. It'll make voters think twice before that next tax hike. As someone who is generally anti-tax, I consider that a good thing. That's why I don't consider psychologically painful taxes to be such a bad thing: they keep us from getting to economically painful tax rates.

On a last note, there is one area on which I do agree with the report.

the golden rule of tax equity: collect the lowest possible rates on the widest possible base of taxpayers.

I call this the "divide and conquer" strategy. Tax hotels because theoretically (but not actually) those are paid for by out of towners (and some of those in-town hotel guests would just assume no one know that they... ahem... frequent hotels). Tax cigarettes cause smokers are a minority and you can add a moral dimension to it. Tax every concievable vice, and we'll all end up paying in the end, but we'll all have our barrels pointed at different taxes and they'll be much more difficult to fight.

The article calls that form of taxation the most "fair." While I maintain that the difference in fairness is marginal, I would call that taxation the most likely to be passed and the least likely to be reversed, so Ima ginnit.