Small Fixes that Make A Big Difference - 1

Cheap, quick tweaks to help fix monster problems.

A great many contentious issues are currently being thrown around our political scene.  Republicans and Democrats don't seem to be able to agree on much of anything because most of the ideas are coming from politicians, lobbyists, and special-interest groups with a particular axe to grind.  It's been decades since the government succeeded in truly solving any problem anyway.

In the spirit of proposing simple solutions based on realities on the ground, we've put together a grab-bag of relatively small solutions that would effectively address some of the more pressing problems of our day.

Free Emergency Room Care

Our health care system, at 1/6 of our economy, is about the size the entire Soviet economy was when communism collapsed.

Despite having vast natural resources and a clever, industrious people, the Soviets were utterly unable to manage their command-based economy effectively.  In contrast, our market-driven system generated enough tax revenue to fund Mr. Reagan's Star Wars program which the Soviets couldn't match.

Our bureaucrats aren't any smarter or any more motivated than the Soviets were.  It's ridiculous to assume that our government can micro-manage an entity as large as our health system.

Instead of trying to solve the entire problem, we'd suggest solving just one small piece of it.

Many people use hospital emergency rooms for primary care.  This is quite expensive, in part because of all the paperwork and potential liability when you're treating someone who quite literally could have anything wrong with him, from the sniffles to black plague.

There was a time when firefighters worked for private companies.  If your house didn't have their medallion, they'd happily let it burn down as an advertising example.

The problem was that your neighbor's house might catch on fire, and be one of theirs; fires are best extinguished sooner than later.  Fire fighting is now provided for "free" out of taxpayer funds.

In the same spirit, we propose that a town be permitted to set up a free emergency clinic system with a few rules:

  • Walk-in only - if they have to go get you, someone has to pay.
  • No overnights - if they have to check you in, someone has to pay.
  • No paperwork or billing - this cuts costs by 30-50%.
  • Nurses have far more authority than in hospitals - making decisions with lower-cost people would save vast sums.  Don't like it?  Go somewhere where you're paying the bill.
  • No lawyers, under sovereign immunity you can't sue the municipality - this cuts costs by another 30-50%.
  • Paid for entirely by local tax dollars.  If local taxpayers want to fund a free walk-in clinic to help their neighbors, by all means they should do so; but they shouldn't try to pass off the cost on Everybody Else.  That way, both power and accountability will be kept at the lowest possible level of government.

This won't solve the entire health care problem - but it isn't intended to.  It's meant to put a dent in the problem and try something that might help from which we can learn.  Trying to solve the entire problem all at once in one massive piece of legislation simply isn't going to work; it never does.

Capital Gains Taxes and Job Creation

There's been huge debate about capital gains taxes - some see low capital gains taxes as essential for job creation, others low taxes as loopholes for the rich.  To oversimplify a bit, a capital gain is defined as the amount by which an asset's selling price exceeds its initial purchase price.  In other words, it's the profit you make when you buy something and sell it later for more than you paid for it.

"Capital gains taxes" apply when you sell an asset that you held for a long time, as opposed to "inventory" which a store intends to sell quickly.  Under current law, any profit on any asset held for a year or less is taxed at ordinary income tax rates whereas anything held for longer than a year is taxed at the lower capital gains rate.

The terms of the debate are quite simple and both sides have a valid point.  On the one hand, liberals don't like speculators to be able to flip, say, houses in a rising market and get capital gains treatment on profits from what they see as short-term speculation.  On the other hand, conservatives don't like seeing investors who patiently create a business whose employees pay income taxes for many years have all their profits taken away by a combination of inflation and high tax rates.

Both sides have valid points.  The solution is simple:

  • Set the capital gains tax rate to zero, as in many countries.
  • Change the definition slightly.

Here's how we suggest changing the definition of a capital gain to satisfy both sides - split it up:

  • If you hold an asset less than a year, any gain is taxed as ordinary income as at present.
  • If you hold it less than two years, 10% of the profit is a capital gain, the rest is ordinary income.  You pay no tax on 10% of the gain, and 90% of the gain is taxed as ordinary income.
  • Hold less than 3 years, and 20% is capital gain, 80% is ordinary income.
  • And so on each year.  If you hold the asset 11 or more years, which is what long-term venture capitalists who create the most jobs end up doing, 100% is capital gain which is not taxed at all and 0% is taxed as ordinary income.

A speculator who flips houses every year will have 90% of his profits taxed as ordinary income, whereas a patient investor who creates jobs over the long term won't have his profits taxed at all.  This both encourages long-term job creation and deters rapid speculation.

Now isn't that simple?

Thus far, in one article, we have been more helpful and productive than the entire 111th Congress... but wait, there's more!  In the next article, we'll present another three simple fixes.

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Economics.
Reader Comments
Damn, why aren't you guys running for congress? Just kidding. I know why.
However these make too much sense to be implemented.....hopefully I'm dead wrong/
September 16, 2010 9:04 PM
How about we cut spending down to levels so low that the whole argument about taxation is moot?

As has been said before: If your spending is out of control, it doesn't matter what your tax system is.
September 17, 2010 8:49 AM
I think its time we start making things in America again. Raise tarifs, stop taxing factorys, and give incentive for American companies to make things HERE, not China, Tiwan, South America, or anywhere else.
September 20, 2010 7:17 AM
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