Monday, May 05, 2008

Two Short Policy Ideas

Repeal agrisubsidies and install a flat tax.

Posner covers agrisubsidies this week, echoing the frustration I feel when considering the issue:

"The deregulation movement passed agriculture by, leaving in place a series of government programs that lack any economic justification and at the same time are regressive. They should offend liberals on the latter score and conservatives on the former; their firm entrenchment in American public policy illustrates the limitations of the American democratic system."
- Becker-Posner Blog

This week I've also been thinking a lot about the Flat Tax. My main objection to the Flat Tax is its regressive nature, greater tax simplicity seems like an obviously worthwhile goal. (Seems like you could easily achieve a progressive but simple tax by slipping one logarithmic function in the tax calculation, or hanging on to income tables while dropping all the peculiar exceptions.)

Recently, Freakonomics mentioned Warren Buffett's realization that his secretary pays a much higher percentage in taxes than he does. He wagered $1 million that the average tax rate of all Forbes 400 members is lower than that of their secretaries, but so far no one has stepped up to claim the money. So our tax system is not only complicated, but being used to shelter the wealthy. This being the case, maybe a flat tax would be a step forward, at least until we can figure out that simple log function we're looking for.

UPDATE: Fareed Zakaria adds opening our borders and adopting the metric system to the list, in an article well worth reading, The Rise of the Rest.