Mismatch

Here’s the peroration of George Will’s latest Washington Post column:

America has an aging population and an entitlement system (principally Social Security and Medicare) into which 10,000 baby boomers retire daily. It has a political class ideologically quarrelsome but operationally united by a shared incentive arising from a shared understanding. The class understands there are only two ways to finance government, present taxes and future taxes. The class has a political incentive to enlarge as much as possible the latter’s role in fiscal planning.

America cannot, however, forever fund the government it has chosen to have with the tax code it has, the domestic promises it has made and the defenses it needs. In fiscal 2019, taxes raised revenue equaling 16.3 percent of gross domestic product, and the government spent a sum equal to 21 percent of GDP. Higher tax rates and/or new taxes (e.g., on carbon) are coming.

The Democratic Party and an American majority believe the wealthy should pay higher taxes. The Republican Party believes . . . well, whatever today’s president says it believes. In its current plasticity, will it stand athwart this majority yelling “stop”? Wyden has a proposal, and patience, and plastic opponents.

Most of the preceding column is devoted to Sen. Ron Wyden’s tax proposal which is to earmark a tax on wealth to fund the coming shortfall in Social Security. My concern about any wealth tax is that it will, at the margins, reduce investment which in turn means growth in productivity that is insufficient which in turn means stagnant wages.

I don’t think that we need a wealth tax. European countries might but we don’t. What we need to do is to definancialize our economy so that more investment goes into primary and secondary production which will result in increasing wages.