Taxes are too low


Great entry by Bruce Bartlett in the Times’ Economix blog about our current tax rate and the absurd Republican talking points on the matter (in case you didn’t know, Bartless has impeachable GOP credentials, but has become an apostate for rejecting the theological doctrine that taxes should always be cut no matter what).  Some highlights:

Historically, the term “tax rate” has meant the average or effective tax rate — that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.

By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.

There’s just no way to spin this as anything but the fact that we have historically low taxes right now.  Not that all these number have stopped Republicans from doing so:

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

The rest of the column basically just shoots down many of the Republican talking points on taxes.  You might want to read it if you ever argue with Republicans over taxation issues.  The conclusion sums things up quite well:

The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment.  [emphasis mine]

Evil credit card companies, part CCLXI

I don’t blog half as much as I mean to about how evil the credit card companies are.  Sure, every business is out to make a profit, but few are so pervasively pernicious.  Anyway, you’d think that credit card companies would want to do something about all that fraud going on– from which we all suffer either directly or indirectly through higher prices, but you’d be wrong.  Why not?  They generally don’t actually pay for the costs of fraud, but pass the costs onto the merchant.  I learned this because my wife’s on-line store is a victim of credit card fraud not all that infrequently.  Even when she does everything exactly as an on-line merchant is supposed to, the credit card companies always decide that she is to blame and must suck up the cost of the fraud/theft.  With passing on costs like that, no wonder they are not eager to spend any money to actually reduce fraud.  The technology to dramatically reduce fraud is already out there and widely used in Europe (my guess is, because they have different laws that put more of the burden where it belongs, on the credit card companies).  From NPR:

U.S. credit and debit card fraud is on the rise. According to one survey, nearly a third of American consumers have reported credit card fraud in the past five years.

And part of the problem, as Andrea Rock ofConsumer Reports tells NPR’s Mary Louise Kelly, is that U.S. card issuers rely on security systems that lag behind measures taken in other countries.

“The credit and debit cards that most Americans use are really surprisingly vulnerable to fraud,” Rock says. “Because, unlike cards in most of the rest of the world, they rely on outdated technology.”…

“The account information that’s needed to make a transaction on American cards is stored, unencrypted, on a magnetic stripe on the back of each card,” she says.

That information is easily copied and reproduced on a bogus card. Rock says that in general, thieves prefer to target debit cards, which allow them to get cash from an ATM, instead of conducting risky transactions in a store.

By contrast, credit and debit cards are much more secure in Europe, Rock says. First of all, the account information is in a computer chip that’s embedded in the card, instead of on an easily read magnetic stripe.

“It’s less easy to copy; the data on it is encrypted; it often includes an identifying code that changes with each transaction,” Rock says…

U.S. credit card issuers, Rock says, “claim that losses due to fraud here don’t yet exceed the cost they’d incur in switching to the new technology. But the merchants say that that’s because the banks shift much of the cost burden for fraud onto them, anyways.”

So, there is a hope for a savior: Wal-mart.

That situation has led some large American retailers, like Walgreens, Kroger and Sears, to push for an adoption of the more secure card technology, Rock says. And chain stores like Best Buy, Home Depot and Wal-Mart are beginning to install new sales terminals that can process the smart-chip cards.

Hooray.  More power to these guys.  The only way things are going to improve is if the retailers big enough to have some actual clout, make it happen.  If Wal-mart decided it would only take cards using the improved technology, my guess is it would be pretty much instantly adopted by the credit card companies.  Why aren’t you doing this Wal-Mart?

Though, here’s the part of this that really bugs me:

First, she says, never enter your PIN number unless you absolutely must.

“It’s better to use a credit card rather than a debit in general,” Rock says.

That means that if a merchant offers the choice, consumers should choose the “credit card” option when using their debit card in a store.

That’s because while most card issuers offer zero-liability policies for losses, “under the law, the liability for unauthorized transactions is greater for debit card holders,” Rock says.

What the article doesn’t mention, is that the law allows the companies to take a way huger bite out of the transaction for credit card, rather than debit.  Choosing credit over debit when you have the choice only serves to further enrich the credit card companies at the direct expense of the retailer you are patronizing.  I would think that unless you have reason to be suspicious of the retailer, go with the PIN.  I always do.

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