New Mexico Taxes the Broadest Array of Services

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Permalink Reply by Lee Kershner on February 8, 2010 at 10:17am

Here's a subject I need help with -- the unearned tax credit. Seems when the average worker could no longer support a family on the average wage, rather than encourage a citizen revolt, the government began subsidizing those families. Can't seem to find much information on the pros and cons. Any leads or thoughts of your own.

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Permalink Reply by Mike Blessing on February 8, 2010 at 12:39pm

I can't see any benefits for the pro-liberty side on this — the best thing to do would be to just not tax people that fall under a certain level of income. The EITC instead makes them fill out a pile of paperwork — that's time they could spend taking care of kids, working, going to school, etc., etc.

The bad side is, as you say above, the government bought off those families in order to co-opt any sort of workers' revolt against the system.

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Permalink Reply by Mike Blessing on February 8, 2010 at 12:46pm

It's easier to broaden the tax base than to hike tax rates say legislators.

And it's easier for government officials to hike tax rates as well as broadening the tax base rather than cutting spending. After all, as libertarian-leaning skiffy writer Jerry Pournelle says:

The purpose of government is to hire and pay government workers, and to collect the money to do that. Having done that it may do other things.

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Permalink Reply by Paul Gessing on February 8, 2010 at 1:57pm

Ironically, New Mexico politicians have actually narrowed the tax base and dramatically raised rates in recent years. In fact, they exempted groceries and raised the overall rate by half a percent a few years back. That was terrible tax policy.

I'm not a fan of the GRT, but if we keep rates under 5 percent (total), the pyramiding impact is less harmful. Unfortunately, it is the rent-seekers who have lobbied government to gain favors for their industries.

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Permalink Reply by Mike Blessing on February 8, 2010 at 3:19pm

I kinda like the idea put forward back in 2003 by Richard Obergfell: eliminate all taxes except for the income tax — that way, people get an idea of the true costs of government when they get their annual tax bill, and will vote accordingly to reduce those costs.

Of course, this requires the elimination of tax withholding . . .

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Permalink Reply by Thomas Molitor on February 8, 2010 at 3:26pm

Is there a country in the world that is doing this?

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Permalink Reply by Mike Blessing on February 9, 2010 at 8:52pm

Probably not — withholding allows the taxing government to spread the tax bill out over time, making it less painful to the taxpayer than if the whole amount was due all at once.

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