Politics vs Economics

I was interested in the idea of six economic policies that economists across the spectrum support and politicians across the spectrum oppose. It’s not that I am surprised that there are big ideas that make perfect sense from an economic perspective which are politically unpopular – after all, doing what has been deemed to be politically possible has led us to a dire economic position. Once I read the six policies I found my reactions to be interesting.

1. Eliminate the mortgage tax deduction, which lets homeowners deduct the interest they pay on their mortgages. I have to admit that is one deduction that I have always wanted to keep but the fact is that it is not economically beneficial overall. The people who benefit the most are those who least need the deduction.
2. End the tax deduction companies get for providing health-care to employees. This is one that I have long felt should be enacted. Many people are unaware of this deduction but I think if they understood how it works and what effect it has on our health care costs they could realize that it should be eliminated.
3. Eliminate the corporate income tax. Completely. I can easily see why this one is politically unpopular but, like the deduction for providing health care for employees the net effect is to remove capital that would otherwise be used to create jobs or increase wages.
4. Eliminate all income and payroll taxes. All of them. For everyone. I can easily see why this is politically unpopular but the logic is the same as eliminating corporate taxes. I especially liked their explanation on this one: “Taxes discourage whatever you’re taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs.” For those who are squeamish about this they go on to encourage the creation of a progressive consumption tax to replace it – this isn’t simply a starve the government proposal.
5. Tax carbon emissions. This is the first of their proposals that I am not sure I support. I recognize their justification for the policy but I’m not sold yet. This is really just a new version of a tobacco tax and I’m not sure that taxing tobacco has really accomplished what proponents might have hoped. Also, I consider that such a tax might distort the market in adverse ways that we have not yet considered.
6. Legalize marijuana. I’m not a fan of the war on drugs but like the carbon tax I am not prepared to jump on board with this idea yet. I have heard the arguments and I recognize a certain amount of logic behind it but I am dragging my feet for now. I figure that to be intellectually consistent anyone pushing such a proposal should at least include taxing marijuana like we tax tobacco and like they are proposing to tax carbon.

So there they are. Six proposals and I really like at least four of them. The other two would take some convincing.