Here’s Megan McArdle in The Atlantic:
This is one of the reasons that we can’t fix all our budget problems with higher taxes on the rich–if we do that, revenues are going to collapse dangerously every time there’s a recession.
What I said. Michael Hiltzik, the pathetic excuse for a business columnist in the LA Times, disagrees.
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I still agree that we need to fundamentally change the tax system. Simplify, reduce taxes, and also all (or nearly all) deductions.
But there’s alot of reasons why we won’t do this. Neither side wants to debate the purpose of taxes, or argue in public for the loophole they’ve so generously written. And there are alot of interested parties in keeping the system (and their returns) complicated.
But I think some sort of progressive tax system makes the most sense. In order to collect money, they have to have some in the first place. Taxing the poor isn’t going to create any revenue.
I would also be in favor of removing the IRS in favor of a federal tax on all non-food items. This would naturally increases the taxes of people who buy more stuff. (of course, this would discourage consumerism, but I think owning a little less junk on our credit cards (per capita) would be a good thing).
Marc, the link to your earlier (early aught’s)musings about tax structure is no longer live. If those thoughts are still current, could you repost?
The Legislative Analysts piece is interesting, linking volatility to the portion of income linked to the stock market boom and real estate boom.
The fact that revenue will fluctuate with the economy seems pretty obvious. The added volatility introduced by stock market and real estate bubbles is an interesting twist, and as we’re seeing in California, presents a real problem.
None of this obviously suggests that we shouldn’t increase the tax burden on million dollar incomes, or do away with loopholes that have GE pay no taxes.
I take it by “removing the IRS†you mean repealing the Sixteenth Amendment and the income tax?
I tend to favor replacing the income tax with a sales tax but that too can be subject to gamesmanship such as exempting certain items (e.g. food), taxing different items at different rates (e.g. sin taxes on alcohol and tobacco, special tariffs on imported goods, special credits for “Green†technology, etc.) and taxing “goods†while exempting “services.â€
I’m not saying that the gamesmanship is going to be as pervasive with a sales tax over an income tax but just that once you go down this road once, it’s going to get easier for the various SIGs and PIG to each demand their special carve out just like they did with the income tax.