Fred LaSor How taxes influence our habits
Astute readers might have noticed more California cars in Carson City gas stations recently. We’ve always seen a few — some drivers inadvertently let the fuel get low before making it back across the line into California. But more than a few are clearly avoiding the Golden State’s gas tax, currently around $0.58 per gallon. That tax will gradually increase by another $0.12 per gallon by July of next year, meaning our neighbors to the west will be paying approximately 77 cents a gallon in state and federal tax, needed, Gov. Brown says, to raise $52 billion to maintain the state’s freeways, roads and bridges.
So if you think there are a lot of out-of-state license plates in your local gas station now, prepare to see more in the coming year. As California’s gas taxes increase, drivers will be willing to drive farther to fill their tank in Nevada. So much for the liberal belief taxation doesn’t influence consumption. If higher taxes do not motivate consumers to change spending habits, why are drivers willing to travel dozens of miles to avoid gas tax at home?
Of course lawmakers know very well taxes influence buying habits. Why put high taxes on products like alcohol or tobacco, except to discourage consumption of products that are deemed not to have redeeming social value?
Even Gov. Sandoval understands the influence taxes have on consumers and businesses. That’s why he gave Tesla a $1.2 billion package of tax benefits (among other incentives) a year and a half ago. As an aside, ask yourself why he raised the tax on small businesses around the same time.
Was that to discourage them and even put some out of business? And why put an extra tax on marijuana sales, as the governor has proposed? Is that to drive “legal” marijuana purchasers back to their black market dealers?
Given the influence taxes have on economic decisions, let’s consider the tax plan President Trump wants to put into effect. Nancy Pelosi has characterized it as a “wish list for billionaires” and criticized Trump for not specifying how it will be “paid for.” She says that as if the money belongs to the government and collecting less is only a loss to the treasury, not a benefit to taxpayers.
The biggest “winners” under Trump’s tax plan, according to Neil Irwin writing April 26 in the New York Times, would be corporations with high tax rates. Irwin writes their income tax would drop from 35 percent to 15 percent. Liberals say this is money business owners will put in their pocket instead of investing.
Any business that wants to make more money would more logically invest that “saved” tax in additional productive ends, including buying machines and hiring workers — moves that would benefit the labor market and improve the nation’s economy. Many large corporations — Apple, Microsoft, Levi Strauss, Nike, and others, for example — hold as much as $2.4 trillion offshore. A lower corporate tax would prompt them to bring some back and put it to work here, a move that would definitely be good for America.
Ultimately, tax law is written by Congress, not the president. Hundreds of lobbyists thus have 535 senators and representatives to target for special interests. As a businessman, Trump clearly understands the incentives built into taxation, as they clearly influenced his business decisions. I prefer Trump’s approach to taxation over Pelosi’s and other Democrats in Congress. Taxes are not “theirs” to allow us to keep a little of, they’re a major influence on the business and consumer decisions we all make every day.
Fred LaSor pays taxes in the Carson Valley, where he retired two decades ago.