The editors of the New York Times come out in favor of a series of tax reforms including raising the marginal tax rates of those earning higher incomes, increasing the taxes on foreign earnings of U. S. corporations which would place us even farther out of step with the other OECD countries than we already are, and imposing a VAT. Anything that would remove money from the private sector:
Real reform would honestly confront the fact that in the next decade we will need roughly $4.5 trillion more revenue than currently projected to meet our existing commitments without increasing the federal debt as a share of the economy. Even more would be needed if the government were to make greater investments to lift productivity and living standards through education, infrastructure and scientific research. Real reform would do this by diversifying methods of taxation while targeting individuals and sectors best able to pay.
I wouldn’t have a problem with tax reform that would reduce deadweight loss or that made the U. S. competitive with other countries in a revenue-neutral way, e.g. bringing corporate taxes into line with OECD norms while raising marginal tax rates on the richest to make up the difference.
Spending increases on the things that government at all levels has been spending money on, i.e. health care, education, and pensions have far outstripped increases in national income. Our fiscal problem is obviously not inadequate taxation but the lack of spending discipline. And make no mistake: extracting money from the private sector is a sure formula for decreasing private sector economic activity and will inevitably be regressive in its effects.
Did someone in the editorial room forget it’s a republican congress and a republican president right now?
They’re putting down a marker. Trying to lay out the progressive position.
My problem isn’t its political possibility or impossibility. My problem is its economic effects. Every single one of their proposals would be a disaster.
A prebated consumption tax as an alternative to the present system of taxation would be a very good idea. A VAT on top of an income tax would be an economy-killer. A carbon tax kills everything except the businesses that keep New York functioning. Increasing the corporate income tax doesn’t improve our fiscal position; it just incentivizes inversions. And so on.
No disagreement there.
I do wonder how increasing the tax on foreign profits would work? No tax actually gets collected because everyone keeps the money offshore, increasing the rate would do nothing. Actually collecting it would tank the profitability of a whole bunch of companies including all the ones that power California and donate 90%+ to democrats – I honestly enjoy seeing that type of bravery.