Federal, State, and Local governments are facing massive budget gaps and will need to close them with a mix of cost reductions and new revenues. While this is always hard and has a real toll on people who might lose their jobs or have to pay more in taxes, it is also an opportunity to do things that have been hard to do until now. Here are some ideas on the revenue side:
1/ Legalize the cannabis industry and tax it. This has already been done successfully in some states. It is time for it to happen in all states and for the Federal Government to legalize cannabis as well.
2/ Legalize the online betting industry and tax it. This is another thing that has been done successfully in a few states but needs to be done in every state.
3/ Tax carbon. We have a full on carbon crisis and we are not changing our behavior in reaction to it quickly enough. Taxing carbon will not only accelerate the behavior change we need to address the climate crisis, it will also raise a lot of revenue.
4/ Tax unrealized gains that are financed/monetized. There have been calls in state governments to tax unrealized gains. While that idea is unworkable because many people will not have the money to pay for a tax on the appreciation of their home or some other asset, there is a wrinkle on this idea that I like. We can tax the unrealized gain if it is financed or monetized. This happens all the time in real estate and also with stock gains. If those unrealized gains are captured via a loan or some other instrument, they can be taxed like realized gains. This will also have the benefit of reducing the rampant speculation in real estate that has been making real estate so unaffordable for so many.
I am sure there are arguments against all of these ideas, starting with those who are against taxes of all kinds. And we cannot tax ourselves out of these budget messes we are in. We will need to cut costs as well.
But a time of crisis is also a time of opportunity. We should get creative and do new things that have not been possible until now. We need to be open to new ideas like these and others and not just keep doing what we’ve been doing which is not working so well right now.
