Sunday, October 12, 2003

Kari, Kari on the net, which is the fairest tax you ever met?


Hello Ms. K:

You've seen from the inside the budget process in the Federal government and you've seen state and local government as a reporter, my question to you is this: what are the relative merits of each type of taxation?

In California, the Arnold faces some huge problems to close the budget deficit.

I figure this post might serve as a discussion starter for the whole question of what is the best ways to raise revenue.

Here in California, I believe the big revenue generators are income tax (I hear there are several states that don't have it?), sales taxes (to the tune of 8.25%), car registration fees (recently tripled), gasoline taxes and property taxes. There are undoubtedly many other revenue streams which would fall into the realm of user fees (university tuitions, park entry, fishing/hunting licenses, etc.) and other things (fines for speeding and other minor non-jail punishments and so forth, lottery participation, etc.). At the national level, there is always buzz about capital gains taxes. Certainly, with the internet bubble burst, that revenue stream fell and it probably hit California hard since that industry is a big part of my state's boom times.

Each tax has its pros and cons. Since I know of your libertarian leanings which I have some alignment with, I'd be curious to see what you think. I know their general view is that the government that governs best is the one that governs the least. Hence, they would prefer lower taxes as one way to restrain the size and reach of government. However, since some functions of government still exist even among libertarians, what is their view on which method of raising revenues least hinders free markets?

Wonk wannabe,
Rene

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