海角大神

I wish I had even a fraction of the talent that Jon Stewart and Stephen Colbert鈥搕he 鈥渟anity ralliers鈥濃�揾ave in explaining tax and budget policy in engaging ways. The is my latest favorite, but here鈥檚 a great one by In my Tax Notes column this week on 鈥淓volved Tax Policy,鈥� I argue that as our economy grows and changes shape over time, so should our tax policy. Why should we use our experience in the past to guide our policymaking more than our hopes and expectations for the future? How do I wish tax policy would better 鈥渆volve?鈥� Here are a few ways I listed in my column (see the 鈥揻or more details):

Here are some forms of tax policy evolution we could use right now:

1. recognizing that expanding the economy via tax policy isn鈥檛 as simple as cutting taxes and that tax cuts involve costs as well as benefits;

2. allowing smart tax policymaking to at least occasionally trump clever tax policy politics;

3. acknowledging that Wagner鈥檚 Law 鈥� which holds that the public sector is a luxury good 鈥� may apply, suggesting that the optimal size of government and hence the optimal level of revenue/GDP grow over time with the economy; and

4. realizing or recognizing that because part of that growing role of the public sector may be the redistributive role, especially if wealth income inequality increase with aggregate income growth, the progressivity of the tax system may need to increase over time to partially compensate.

What is an example of how we鈥檙e NOT 鈥渆volving鈥� on tax policy? The fact that proposals for 鈥渇lat taxes鈥� seem to be back in vogue. Take Republican presidential candidate A reporter called me about it, which was the only reason I went to the Cain website to check it out for a few seconds, which was all it took to 鈥済et鈥� what his proposal is basically about: (i) switching to a consumption-based tax system that exempts income from capital鈥搘hich on its own is 鈥渞egressive鈥�; (ii) switching to a single (鈥漟lat鈥�) marginal tax rate schedule鈥搘hich on its own is (also) 鈥渞egressive鈥�; and then (iii) switching to a not-just-double-but-triple tax of consumed income (instead of saved income) through the 9 percent business tax (exempting capital income) and the 9 percent sales tax (which naturally exempts savings) that are layered on top of the 9 percent income tax (which exempts capital income as well)鈥搘hich means all that regressivity I already listed is tripled! Where did the 9 percent rates come from, I was asked by the reporter鈥揳nd would it be revenue neutral? My response: 鈥減robably because 9 is one digit long鈥� and theoretically, yes, it鈥檚 possible that a triple tax on consumed income with no or few exemptions which has an effective rate of 9+9+9 or 27 percent could indeed be revenue neutral. (From Cain鈥檚 description of the 999 base, it鈥檚 not clear what is exempt other than charitable deductions鈥搊h, and all of capital income, of course.)

I don鈥檛 know if I鈥檒l feel compelled to say anymore about the Cain tax plan unless the candidate actually seems to have a decent chance of getting the Republican nomination, but on the way to seeing if that happens I hope people recognize how insane his tax plan is (without needing any detailed analysis). This is one plan where my biggest reaction to the plan is not that it doesn鈥檛 raise enough revenue. Like I said, theoretically it could, but why would we ever want to do it that way?

It鈥檚 sort of an example of what I called 鈥淣eanderthal tax policy鈥� in my Tax Notes column. So please don鈥檛 take it seriously. Yeah, I know鈥搃t鈥檚 hard to believe I can say you should take the guys from Comedy Central鈥揓on Stewart and Stephen Colbert鈥搈ore seriously than some of these presidential candidates when it comes to their wisdom on tax policy. But you should.