Sunday, December 24, 2017

We need to reserve hotel rooms like we reserve airline seats

The Trivago television ad says that if we use their website we will find the identical room at the best price.  But it is not necessarily the full truth.  We aren't getting the "identical room" but are getting the same "class" of room.  We all know that there are very few actual truly identical rooms.  Some rooms are a little closer to the elevator, some are a little further from the noisy ice machine.  Some units have good views, others may have views that are partially blocked by trees, etc. Some units are near the dumpster that gets emptied at 6AM, while another is near the parking lot or pool.  We have found when we've used discount sites such as Groupon to reserve rooms, we may get the same "class" of room, but typically in a location within the hotel that is somewhat less desirable. Hotels know the individual value of their rooms.  But when we reserve a room, we are only renting a certain type of room.  The hotel reserves the right to move us around to any room within that class.
When we now reserve a flight, we get a certain seat on that flight.  The airlines also recognize that each seat has a different value.  Center seats are less valuable than aisle or window seats.  Bulkhead or exit row seats are so desirable that the airlines charge extra for those seats.  Most airline seats are sold "non-refundable." -- and to exchange flights we have to pay a fee.  Hotels now have non-refundable reservations, but we cannot select our room.  There is no price differential between a room that is next to a noisy elevator or one at the quiet end of the hallway.

Monday, January 30, 2017

It is Time for US to have a Value Added Tax

Almost every major country in the world has a Value Added Tax (VAT) except the United States. (see this link for countries and rates).  A VAT inherently discourages imports, while reducing the cost of a countries exports.  It is easy to administer and is somewhat "self-auditing."   President Trump has proposed to increase tariffs on imports, but there is a fear that selective tariffs could trigger a devastating trade war. If, however, the US, as part of a tax overhaul, added a VAT tax while reducing personal and corporate income taxes, our trading partners would be unable to claim we were unfair since they have been doing the same to us for many years.  Liberals have generally fought against the idea of a VAT because they are concerned that a VAT will tax lower income citizens at a higher percentage of their income than richer citizens.  However, if a VAT were implemented at the same time personal income taxes were decreased (and maybe earned income credit increased) the effect of the VAT on lower income groups would be neutralized.  If we plan a Government revenue-neutral tax reform, adding VAT and reducing corporate income taxes, corporate income "stranded" overseas may be repatriated to the US.
There are other advantages of VAT other than international trade:

  • By increasing prices, it tends to discourage consumption and encourage saving.
  • It taxes the underground economy which could be as large as $2 Trillion or 12% of US GDP,   Drug dealers and prostitutes don't pay income taxes, but everyone has to buy stuff.
  • The huge baby boom demographic is retiring.  The ratio of tax-paying workers to retirees is falling.  By taxing consumption, we reduce the burden on workers. 
I wrote Senator Dianne Feinstein, Senator Kamala Harris and Congressman Darrell Issa the above suggestion.