Taxes, especially within the context of our deficit, have become a popular subject these days. The latest person to weigh in was Former Minnesota Governor Tim Pawlenty when he proposed a new tax structure along with his announcement that he’d be seeking the Republican presidential nomination. The plan is simple:
- Reduce corporate taxes from 35% to 15%;
- Tax the first $50,000 of personal income at 10% ($100,000 for married couples), and 25% for the rest;
- No taxes on capital gains, dividends, interest income, and inheritance.
Assuming all other tax deductions and credits were held the same, this would reduce tax revenue generated from individuals and families. The existing tax brackets  tax at higher rates for personal income and there really are no “losers” if the tax structure were to go in this direction. Where I believe the proposal is the trickiest has to do with the corporate tax rate – where companies now have a greater incentive, because of lower tax rates, to recognize income they would otherwise keep abroad. We could generate more revenue because the tax rate is lower. Whatever actually happen is irrelevant, the interesting part of the discussion is what he said  in conjunction with this proposal – The Google Test:
“If you can find a good or service on the Internet, then the federal government probably doesn’t need to be doing it,” Mr. Pawlenty says. “The post office, the government printing office, Amtrak, Fannie [Mae] and Freddie [Mac], were all built in a time in our country when the private sector did not adequately provide those products. That’s no longer the case.”
I think the test may be too simplistic but the idea merits discussion. The USPS’s insolvency  was a topic of discussion here just recently (and I agree with the commenters that said a comparison to UPS/Fedex is unfair because they can cherry pick where they compete – i.e. not on first class letter delivery) but I think we need the same for every service. Do we need Freddie Mac and Fannie Mae to gobble up home loans? Perhaps, but it should be up for debate.