Editore"s Note
Tilting at Windmills

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April 6, 2005
By: Kevin Drum

HIGHER TAXES?....Conservative economist Bruce Bartlett has been inching toward support for tax increases for a while, and today in the New York Times he finally drinks the Kool-Aid:

In the 1980's and 1990's, I thought it was possible to restrain the growth of government by cutting taxes. This would "starve the beast," as Ronald Reagan used to say, and force government to live on its allowance. And after Republicans got control of Congress in 1994, I thought the means had finally come to make a frontal assault on the welfare state.

I have been sadly disappointed....Deficits are no longer a barrier to greater government spending. And with the baby-boom generation aging, spending is set to explode in coming years even if no new government programs are enacted.

Needless to say, I don't share Bruce's disappointment that his hoped for "frontal assault on the welfare state" never came to pass. Regardless, though, we've both come to the same conclusion: neither party is interested in serious cost cutting; healthcare and retirement costs are going to balloon in coming years no matter what we do; and we can't finance this with ever higher deficits. This is simple reality, and it doesn't matter whether you approve or not.

But if we have to bite the bullet and raise taxes, how should we do it? Bruce proposes a European style VAT, which is sort of a sales tax on steroids. I'm not so sure, myself. VATs have some advantages, but they're also fairly regressive and would require an entirely new administrative mechanism. My preference would probably be for things like higher gas taxes and inheritance taxes combined with higher top marginal income tax rates, broadening of the tax base, elimination of the preferential taxation of dividends and capital gains, and a serious assault on high end tax shelters and corporate loopholes.

In other words, pretty much all the stuff Bruce hates. However, I haven't given this a huge amount of thought and I could certainly be talked into changing my mind. The first step, though, is for the Republican party to climb back out of their rabbit hole and face reality. Then we can all start arguing.

Kevin Drum 2:02 AM Permalink | Trackbacks

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