A Careful Look at Issues

There was a micro-story in the news this week about a new tax imposed on tanning salons. The 10% tax is supposed to generate $2.7 billion over ten years to help pay for the Obama health care legislation. Why tax tanning salons? Because tanning is related to skin cancer, so it ought to be discouraged by taxation. Everyone knows that whatever is taxed is discouraged, right? But when the revenues from the tax are calculated, the assumption is that there will be no effect, so revenues will be reaped as if no one is deterred. That’s the way tax revenues are usually calculated, which explains why there are usually shortfalls. These days, having computers and such, revenues ought to projected taking tax avoidance into account.

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With the State of the Union Address and President Obama’s chat with the Republicans there is an ocean of … well, call it stuff to sort through. In the mix is the idea of building a high speed rail system to both create jobs and strengthen the country’s infrastructure. The pundits who have been feasting on Obama’s pronouncements have largely come up short on this subject. In my view, high speed rail is (1) a wondrous thing, (b) expensive, © best suited to densely populated countries, and (d) perhaps impossible to implement here. If it can be done at all, jobs would probably be a decade away.

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I think it is possible for government to compete fairly with private enterprise, although I cannot think of an instance where it has happened. When the question is posed, what first comes to mind are subsidies by taxpayers to the government operation. That’s true, but there are also issues of access to and the cost of capital, costs of building market share, equatable rules of competition, and the risk of failure. All of these factors must be taken into account when considering if there is level playing field. I’m here to help.

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