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Fiscal Cliff Solution: Tax Problems, Not People

Bill Roth | Tuesday December 4th, 2012 | 3 Comments

The power of sticker price is meaningful to everyone from five-year-olds to CEOs. The solution to our fiscal cliff is a tax code that uses price to help consumers and businesses buy sustainable solutions that will restore jobs, the economy and our health.

For example, we would use less fossil fuels if the cost of global warming, asthma and other respiratory diseases tied to fossil fuel pollution were added to the price we pay at the meter and pump. We would eat better if the cost of our national diabetes epidemic were added to the price of sugary drinks. Industry would hire more American workers if we lowered the cost of American labor by eliminating payroll taxes. Economic growth would be stimulated if we cut everyone’s income taxes. Our tax system should be making problems more expensive and solutions less expensive.

A sustainable solution to the fiscal cliff

The following example of a sustainable tax policy would provide consumers and businesses with price signals for restoring jobs, the economy and health:

Eliminate employment taxes

No more deductions. What you make is what you are paid. This makes hiring an American worker more competitive by eliminating the current tax cost for hiring an American worker.

Eliminate taxes for the 99%

No more income taxes. You get to keep what you earn. This will enable increased spending and savings.

15% tax on the 1%, no deductions

A 15 percent tax rate for people and businesses making more than $250,000 per year. But, no more investment tax credits or depreciation deductions. No more tax subsidies. The old system where a cruise line pays an effective tax rate of 1 percent while a manufacturing company pays 35 percent will be eliminated. Every person and business making more than $250,000 in income pays the same rate and no one gets a special tax deal.

Tax pollution and waste

There are no free lunches, especially in economics and tax policy. Because we eliminated payroll taxes and most of our current income tax revenues, then the tax on problems has to be very high to sufficiently fund the government. That will mean $8 per gallon at the gasoline pump. But, before every consumer screams in revolt they should consider they are no longer being taxed on their paycheck or on their income.

In this system, rather than complaining about high taxes, the consumer can do something about it by reducing how much they use gasoline and diesel by buying a more efficient car, moving closer to work, taking mass transit, etc. For those who don’t want to be part of the solution, then they will end up paying more, as they should.

Another example would be a tax on a computer that glues its battery into the case, making it a likely candidate for a waste dump. Under this sustainable tax code, that computer’s price will be double the price of a computer that is 100 percent recyclable and is, in fact, recycled.

A third important example is the economic incentive for energy efficiency. A Harvard School Of Public Health study estimates the health impacts of coal to cost $345 billion annually. Adding this cost, through a tax to the price of coal-fired electricity, is estimated to raise its price by 18 cents per kWh. That type of price increase will encourage people and businesses to invest in making their homes and buildings more energy efficient. It will also reduce pollution. The result will be lower utility bills and improved health of people and the planet.

“Super Size Me” unhealthy food tax

The only way we will realize an affordable health care system is if we eat food that supports our health. Rather than Super Size Me promotional prices to encourage increased consumption of unhealthy foods, the solution is a Super Size Me tax on unhealthy food ingredients. A Super Size Me tax could work something like this, as applied to sugary drinks:

12-ounce serving
2 cents tax per ounce adding 24 cents to the price of the drink.

24-ounce serving
4 cents tax per ounce adding 96 cents to the price of the drink.

54-ounce serving
8 cents per ounce tax adding $4.32 to the price of the drink.

Super Size Me taxes reduces the consumer’s burden of trying to figure out nutrition labels, suffering through preachy public service advertising or dealing with serving-size prohibitions. Under this system, drinking more sugar costs incrementally more and drinking less sugar saves money.

Taxing ALL products, including imports

A key element of a sustainable tax solution is that it must apply to everything we buy, including imports. Under our current tax code, another country can win a price advantage at our cash registers by not acting responsibly toward their work associates and the environment. Global warming has made this type of behavior a cost for Americans. Therefore, the “tax the problem” policy should apply equally to imports and domestically produced products.

We win

We all win from a sustainable approach to designing a fiscal cliff solution. You will win because you get to keep what you earn. We will win because you will now see prices at the pump, meter and cash register that reflect the true cost of consumption enabling economically efficient decisions. The result of a Super Size Me tax upon unhealthy foods and proportions will be that fresh, good food wins a price advantage. Businesses that are more efficient and generate less pollution will win competitive advantages. The end-result will be the restoration of our jobs, economy and health where we all win.

Bill Roth is an economist and the Founder of Earth 2017 He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues.


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  • Nicholas Palmer

    Would you see all these being introduced in one fell swoop or incrementally, or one at a time?

  • Dave Shires

    I like these ideas a lot. Definitely have to make sure the 15% covers inheritance too.

    I would also make a 0% capital gains for anything under 250k as well, but tax the hell out of short-terms capital gains. Day trading is bad.

  • Catherine Richman

    Idea to fix the Fiscal Cliff — A suggested “Sovereign Tax”
    Any goods made or manufactured outside of the United
    States would have to be subject to an additional “sovereign tax” — the consumer would pay this to the United
    States government and retail stores would have to collect this over and above
    the sales tax.

    A flat 5% tax goods manufactured outside of the United
    States. This would encourag
    e people to buy things made in the USA, not penalize corporations or countries, but rather “encourage people to buy things manufactured in the United States” — Fills the gaps in the fiscal cliff and also will go to the root source of capitalism — the market will want to shift to buying US made goods.
    This is my idea but feel free to share!!!!