Six policies economists love

Theo Francis at NPR writes:

Tuesday’s show presented the common-sense, no-nonsense Planet Money economic plan — backed by economists of all stripes, but probably toxic to any candidate that might endorse it. …

One: Eliminate the mortgage deduction, which lets homeowners deduct the interest they pay on their mortgages. Gone. After all, big houses get bigger breaks, driving up prices for everyone. Why distort the housing market and subsidize people buying expensive houses?

We don’t have that in NZ, but we did use to allow depreciation to be claimed despite house prices appreciating.

Two: End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

Health insurance is not tax deductible here. Many argue it should be, but the evidence tends to be that it doesn’t help more people take up health insurance, it just provides a tax dodge for people who already have it.

Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that’s good. Don’t tax companies in an effort to tax rich people.

Owners would still be taxed on dividends, but a zero company tax rate would get investment flowing.

Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.

I doubt we’ll ever eliminate income tax, but generally it is better to tax consumption and land than income and capital.

Five: Tax carbon emissions. Yes, that means higher gasoline prices. It’s a kind of consumption tax, and can be structured to make sure it doesn’t disproportionately harm lower-income Americans. More, it’s taxing something that’s bad, which gives people an incentive to stop polluting.

Which we already do, to a degree.

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

Very true.

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