Comments on: The Tax Reform Trap

By: Rob Lewis

Rob Lewis — Mon, 25 Jun 2012 20:17:58 +0000

And of course, it’s been shown that “starve the beast” never works. By hiding the true cost of government, deficit spending makes government benefits look like a bargain, and as a result we get more of them, not less.

No less an authority than William A. Niskanen of the Cato Institute looked at history and found no sign that deficits have ever acted to restrain spending. The way to limit government is to force politicians (and voters) to pay for all the government they use, not to drive up deficits by slashing revenue.

http://www.politicsandcurrentaffairs.co.uk/peak-oil-economics-environment/24261-starving-beast-promotes-govt.html

According to Niskanen, the “magic number” tax level that neither increases nor decreases spending is 19% of GDP. Where are we now?

By: perplexed

perplexed — Mon, 25 Jun 2012 19:52:27 +0000

Now this sounds like a great first step!

NYU’s Edward Wolff estimates the U.S. wealth GINI to be 86.5, (http://www.levyinstitute.org/publications/?docid=1235a) a scandalously high concentration of wealth characteristic of totalitarian dictatorships in 19th & 20th century Latin America (and this is before he updates it with the latest SCF data which will no doubt raise it higher still). If we add adequate wealth and inheritance taxes to your proposed solution we can address the debt, wealth concentration, and income concentration problems simultaneously with minimal, if any, impact on spending. Its gone on long enough, we need to start discussing real solutions!

By: K. Hellauer

K. Hellauer — Mon, 25 Jun 2012 16:54:12 +0000

Let’s try this first.

Neither Congress nor the President does anything about the federal marginal tax rate reversion that will occur on January 1, 2013. Nothing. No meddling, no Simpson-Bowles, nada.

We thus return to the Clinton era rates. That brings in about $3.7-4 trillion in revenues, wiping out most if not all of the deficit. It will also take a nice slice out of the inequality pie, as the money that billionaires and millionaires have had to flood the airwaves with anti-Democratic propaganda goes back to the government coffers.

Once we’ve settled the deficit issue, which is supposedly so pressing, and we have money to get our economy humming again, we can talk about tax reform, but then ONLY as Professor Bernstein suggests it here.

By: Alex Blaze

Alex Blaze — Sun, 24 Jun 2012 21:51:05 +0000

One would almost think that the entire goal of “broaden the base/cut rates” is really to make the tax code more regressive while reducing revenues so that there’ll be a justification for cutting spending in the future.

By: Tom in MN

Tom in MN — Sun, 24 Jun 2012 19:13:48 +0000

They will go after the non-payers in the first step of lowering the tax brackets. Making sure the tax code is regressive is not something they would put off. I think the Ryan budget already has this feature, while it leaves unspecified any closing of loop holes to raise the amount of taxes collected.

Your suggestion makes too much sense to even get discussed.

By: perplexed

perplexed — Sun, 24 Jun 2012 19:11:23 +0000

What gets measured gets done. The entire motivation for “tax expenditures” and reductions on the revenue side is concealment. It only works because we voluntarily go along with it. If economists started with the whole pie (including monopoly give-a-ways) and then showed the distributions of all government largesse, the chafe would disappear and we could then have a real discussion about who pays, who benefits, and by how much. Apparently economists benefit too much from the existing reporting system or they would participate in the clarification instead of the obfuscation of where the “government welfare” really goes.

By: procopius

procopius — Sun, 24 Jun 2012 18:24:17 +0000

I don’t understand why this even needs to be said. It’s so obvious that “Lower the rates, broaden the base” is a flat-out lie that I can’t think why it needs to be discussed. The Republicans do not care about the deficit. That’s a total sham. Dick Cheney expressed it perfectly. They believe “Reagan proved deficits don’t matter,” and I’m sure when they’re laughing over their drinks together at night they think it’s absolutely hilarious that people really believe their screams about how American is broke (it isn’t) and the deficit will destroy growth (it won’t). I can’t believe the Democrats who are playing along with this believe it either. I think they just want cover so they can destroy Social Security and please their paymasters. There is no chance of following this program. This is presented as if we were dealing with people making serious proposals, and we are not. We either are dealing with real lunatics (the Ron Paul pseudo-libertarians) or utterly cynical used-car salesmen who have totally different goals.

By: tom

tom — Sat, 23 Jun 2012 21:14:56 +0000

No they do hope to broaden the base, they are fuming in their britches about the 40-some percent who don’t make enough to pay income taxes, thats their base-broadener. Also, debtor’s prisons.

My suggestion would be this:

a) Choose a progressive distribution of effective tax rates, including EIT etc., preferably one linked to the distributions of income and wealth.

b) Choose the overall revenue target as desired, and modify the overall tax rate without changing the distribution.

By: Tom in MN

Tom in MN — Sat, 23 Jun 2012 19:15:17 +0000

It’s not a trap, it’s a con. They have no intention of broadening the base later.

By: jchaus

jchaus — Sat, 23 Jun 2012 16:29:40 +0000

The addition problem is that even if we follow the script you advocate, future Congresses will add in the same loopholes that exist now. This is what happened after the 1986 reform: rates were cut, loopholes were added later. The first Republican controlled session of 1995-6 was especially bad in this regard. I even remember reading of members of Congress justifying their special tax provisions with the claim that they had to make the code really complicated if there were to be reform. Of course, the giveaways came in the process.