This new report is authored by Douglas L. Norland and Kim Y. Ninassi, in cooperation with Dale W. Jorgensen.
The authors look at energy taxes, and consider various ways that significant energy taxes might be introduced into the USA while cutting other taxes. The energy taxes they estimate are not based on some arbitrary revenue goal for governmental spending needs, but rather are determined by a principled criterion: the energy taxes should be sufficient to pay for the social costs imposed by energy consumption (environmental and health-related damages such as air pollution and climate change effects), and no higher. The report considers energy taxes in combination with a change in federal taxes from relying heavily on an income tax to a national sales tax, or to a so-called "flat" income tax.
So what's the bottom line in Price It Right? The authors say it themselves:
"This unique work provides policymakers, energy and environmental analysts, and interested citizens with new insights about fundamental and energy tax reform."
It seems that the authors do not regard significant energy taxes as having a serious chance of being adopted in revenue-neutral combination merely with cuts in our current federal taxes -- in fact, the report does not give any consideration to that possibility. Rather, they only consider energy taxes in combination with either of the Republican plans to "reform" the federal tax system, whether through a national sales tax or a so-called "flat" income tax. I interpret this to mean that the publishers asked themselves, what tax plan that has at least some chance of enactment, would be most helped by the addition of a tax shift toward energy taxes? The authors settle on the national sales tax. The package that Price It Right favors is energy taxes and a national sales tax.
This makes some political sense -- it is clear that the Republican tax "reform" plans have been revving their engines loudly yet going absolutely nowhere for two years now. But attach ecotaxes to one of the plans and the landscape alters. Adding a new support constituency, such as the environmentalist community, to one of those plans could move it off square one and set it in motion.
There are some very good things about this document. For one, it is chock full of charts and graphs. Oh sure, there's plenty of heavy going for people who want it, but the visuals do a lot to underscore major points and reveal interesting findings. Any publication that deals with taxes is likely to seem dull, and visual variety can make it tolerable or even pleasant. Price It Right has achieved a better level of visual variety than any other tax document I know of.
A lot of work went into this study and it shows, on every page. Dr. Jorgensen's "intertemporal general equilibrium model" enables intense examination of various tax shifting scenarios and their economic effects.
One should also note the high quality art/graphic design, layout and general presentation of this report.
A few criticisms. On page 43 and again on page 60, the report's authors explicitly say they'll assume that any federal tax change to a national sales tax or so-called "flat" income tax will be followed by the 50 states, because "most states follow the federal system." This is a strange claim for careful researchers to make. We've had a federal income tax for several generations, and the various states still remain a hodgepodge of considerable variety. Several states have no income tax; several states have no sales tax; some states have small property taxes, some large. To base their number-crunching on assumptions that include all states blindly and swiftly following the federal tax system seems wrong-minded. Better to leave the states alone, and base the statistical model on a change in federal taxation only. This might mitigate some of the results, but those results would be more realistic and that is after all the goal. If committed to the pretense that all states will follow the federal system, the authors should at the very least apologize for that flimsy assumption, rather than pretend it is correct.
On page 13 a misleading chart is given -- the only one with which we have any complaint. It shows various sales and income tax rates next to one another. That's a mistake -- one cannot compare apples to oranges in any simple way; different types of things should not be placed onto the same chart. A tax rate just is, fundamentally, the result of dividing tax revenue by the tax base. Assuming the same revenue yield, then of course tax rates will vary according to variations in the tax bases. Are the authors implying that a low tax rate is intrinsically good? Then I expect them to advocate a property tax, which would have a tax rate lower than any they show on their chart. (Did you know that the federal government has levied property taxes several times in history? It's not just a state and local tax.)
Overall? Price It Right is a fine piece of work and a good addition to anyone's collection of policy documents concerning tax reform.
List price is $25. For more information, visit the publishers' web site at www.ase.org