Paul Ryan, the absence of a tax policy debate, and my dental bill

So, Rep. Paul Ryan is chosen as Mitt Romney’s vice presidential running mate.

Predictably, conservative commentators love him – Democratic special interest groups despise every breath he takes.

It would be nice if the US taxpayers sat back and debated the pros and cons of the Republican versus Democratic tax policy issues (or any other issues, around government, for that matter). Unfortunately – many (most?) voters don’t have the time nor the inclination to become more educated on taxes and economics – hence my ‘tax literacy blog.”

Commentators can throw out lines like the ones you see below in bold.  Many people will, with an uncritical eye, accept them as truth (and by the way, Republicans aren’t immune to this, as Sarah Palin’s “death panel” rants pointed out years ago).  So let's look more deeply into some of these claims against Paul Ryan.

“Representative Ryan has made a name for himself in the halls of Congress for tax giveaways for the wealthy and big corporations while proposing to gut vital services like Medicare and education….” – Mary Kay Henry, President of the Service Employees International Union

Really? GIVEAWAYS?  So Ryan is creating tax policy which gives away billions (probably hundreds of billion dollars) to wealthy people and big corporations with absolutely no rationale expectation of any return on those tax breaks – like increased investments, more jobs, productive efficiency gains, etc.?  And he is doing it so that poor old people and young children will suffer?

REALLY?

Who would create a tax policy platform like that?  Why would Ryan do that? Is he mentally ill? On drugs always?  A habitual drunkard?  Is someone (or lots of some “things”) paying him off? Actually to get Ryan (or anybody else) to do that, I suspect corporations would have to pay him at least a few billion… in which case I also have an idea that he would have already converted that to diamonds and gold and fled to a country that doesn’t have a treaty with the US…  and make sure the country has a nice beach too… and certainly not bother running for VP.

“Aligning himself with the poster child for ending Medicare and social security puts to rest any suggestion that Romney has a clue what the middle class needs…” Richard Trumka, President of AFL-CIO

You know, call me a fool – but short of … I don’t know… nuclear war?  I can’t see social security ending… Everyone (Republicans and Democrats) agree it is a program that must be preserved for future generations.  How to get to that point is debatable – but I don’t see Ryan saying “Ah, screw it.  Stop the check printing run for the first of next month to those 50 million old people…”

“By picking Rep Paul Ryan, Governor Romney has doubled down on his plan to gut Social Security and end Medicare as we know it…” – Rep. Harry Reid

Ryan must have a serious dislike of old people…..

You can debate how to fix Medicare – but don’t ignore the actual issue that it needs repair.  Don’t think that you can just raise taxes on every married couple filing joint whose taxable income is greater than $250,000 and generate enough revenue for that and a host of other wants.

Frankly, I like the conceptual idea of vouchers – medical care in some areas needs more competition.

I will give you an example of my dental experience recently.

I needed a bridge put in my mouth.  I got an estimate from a dentist in north Texas - $2900, of which I will pay $2100, insurance pays the rest.  I then went to suburban Detroit, and saw the dentist my dad uses.  He would provide the same services - $2100, of which I pay $1300. 

So even with dental insurance, if I did the work in the suburban Detroit, I save $800.  Since I come home for visits 3-4 times year anyway, I chose my dad’s dentist.

I guess you could wonder why “dental costs” are not universally the same across the US.  I think that might be since General Motors and Chrysler’s bankruptcies, they have cut the dental insurance program for retirees(a lot of whom live in the Detroit area) – hence the demand (and price) of dental work near Detroit is less than it once was.  Of course, that is simply a guess on my part.

Anyway, I liked the idea of being able to compare prices – and chose the one with the lowest fee.  You don’t see that very often in the dental (or medical) business.

I am willing to listen – and not to stopping the check run….

Jim DeMint needs to revisit taxation without representation...

An editorial by Senator Jim DeMint - a Republican from South Carolina, published in the Wall Street Journal a couple of days ago.

http://online.wsj.com/article/SB10000872396390444226904577559414267708728.html

In the article, he argues that internet sales taxes amounts to taxation without representation and it overburdens small businesses.

I would like to take exception to both his arguments.

1) Taxation without representation - in the article, Sen DeMint states "So they'd like their allies in Washington to make it legal for them to tax people who can't vote against them."

Really? Yes, that's true.  On the other hand, have you ever rented a car at an airport in a different state than you lived?  Notice how much in "taxes" you pay on the rental car fee?  In some cities, it can be over 30% of the total.

And then you drive your rental car to a hotel.  Ever notice how much you pay in taxes on the hotel room?  12% to 20% would not be unusual.

It called "tax exportation" and is in hundred (probably thousands) of state and local laws through the US.

Why?  Because EVERY STATE IN THE US has state congressman who want to tax people who can't vote against them!  And those state representatives and senators realize the vast majority of people renting car and staying in hotels don't live in those states.

And since every state does it, effectively you have widespread "taxation without representation" already going on...

 -- Just as an aside, if you have ever gone to Disney World in Florida, you will notice they charge sales tax "built into" the admission ticket.  Generally, you don't charge a tax on services (think haircuts, car washes, etc).  But in this case, the state of Florida allows it.  Any guesses why? --

2) DeMint also states:

"A 2006 PricewaterhouseCoopers study found that tax-compliance costs for small businesses (those having $1 million to $10 million in annual sales) are nearly 2.5 times greater than those of larger firms. For businesses under $1 million in sales, those costs explode to 16 cents on every dollar of revenue."

That would be true of nearly every fixed cost - it is called economies of scale.  As a business gets bigger and bigger - certain costs which are fixed (or nearly fixed) decline on a per item basis.  This isn't something "new" to just tax compliance costs or internet sales taxes.

For example, in some states it is required that a business pay a fee (say $100) each year for doing business in the state.  If you sell only 100 items, the fee is $1 per item.  If you sell a million items, the fee become incredibly small.  That's simply how businesses incur fixed costs and the incentive that businesses have to "grow bigger."

The more important point DeMint should be focusing on is that tax compliance costs have decreased dramatically due to the widespread availability of the internet over the past 15-20 years, and that beneficial effect has been particularly felt by small businesses.  No longer must calculations and forms be filed out by hand and mail and state tax laws are now widely accessible over the internet (and do not need to be physically mailed to a business).  In hindsight, tax compliance in 1990 looked like the Flintstones (with chisels and stones)!