For the Love of the Money (or alternatively, fiscal responsibility)
The New York Times – as is its wont – has a pretty good editorial on the need for higher taxes in the age of Obama:
But, sooner than he may prefer, Mr. Obama will have to face up to what he has so far avoided: the need to raise taxes broadly to rein in deficits.
The deficits are not of his making. Some two-thirds of the $9 trillion shortfall resulted from policies that predate his administration; most of the rest is the cost of policies that both parties consider necessary, like continued relief from the alternative minimum tax.
But when he inherited the burden of the budget mess, Mr. Obama also inherited the responsibility to clean it up. Neither economic growth nor spending cuts will be enough to fix the projected shortfalls. Nor is there enough to be gained by confining tax increases only to families making more than $250,000 a year, a campaign promise that Mr. Obama still says he will keep. […]
The question then is not whether taxes must go up, but when, how and how much.
I’ve made this point several times here and on my own blog, but it’s worth reiterating: fiscally, our current path is completely unsustainable without either significant cuts in spending or significant increases in revenue. Seeing as how the former isn’t particularly likely (and seeing as how I’m pretty much on board with an expanded welfare state and more comprehensive benefits), the only real option we have – at least in the short term – is to raise taxes. And while I understand that a significant revision of the tax code is a near political impossibility (though there might be some hope for a progressive consumption tax), there is quite a bit of low-hanging fruit with regards to ways we can raise revenue. Here are a few of the more obvious ones:
- “Infinite tax brackets”. I kind of elaborated on this on my own blog a little while ago, but basically, the idea is that you can use computers to adjust the tax rate for every marginal dollar past a certain point. So, for instance, if incomes of $500,000 are taxed at 45%, each additional dollar after $500,000 is taxed at 45.00001%, 45.00002%, etc. etc. I don’t think it’s a stretch to say that you could raise enormous amounts of revenue this way, and rhetorically, it sounds much more palatable than a single 70% marginal tax rate for the super-wealthy. You’d have to change the name though.
- Standardizing alcohol taxes. Here’s the National Journal: “In the same report, the CBO suggested that standardizing federal taxes on alcoholic beverages to 25 cents per ounce of alcohol would increase revenue by $60 billion over 10 years. Currently, different types of alcoholic beverages are taxed at different rates: 21 cents per ounce of alcohol in distilled spirits, 10 cents per ounce of alcohol in beer and 8 cents per ounce of alcohol in wine.” What’s more, as Matt Zeitlin points out, a sin tax targeted at alcohol would significantly reduce consumption among heavy drinkers, which in turn, could reduce the assault rate by as much as 20%.
- “Soda taxes.” Broadly, these would simply be taxes on any beverage containing a certain amount of sugar per ounce, and could be expanded to include food as well. Here’s the National Journal again: “According to a Congressional Budget Office report released in December, a national excise tax of 3 cents per 12 ounces of sugary beverage — that’s 3 cents for a can of Coke or 5 cents for a 20-ounce bottle — would yield $50 billion over 10 years, while potentially reducing overall health care costs because of the link between sugar intake and health conditions like diabetes and obesity.”
Even ignoring the first point, these minor changes in taxation would yield well over $100 billion over ten years, which would put a healthy dent into the cost of health care reform. I know that most of you aren’t particularly amenable to tax increases, and would prefer to see smaller government. But, to put it bluntly, that simply isn’t going to happen. Conservatives as well as liberals have been fairly enthusiastic about expanding the scope of government, and I don’t expect that to change anytime soon. The real question, in my view, is how do we make government work as effectively as possible? Especially, as seems to be the case, if we’re going to have an expanded welfare state as well as a substantive presence on the international stage. And the obvious first answer – I think – is that we need government to be fiscally responsible, and to have that, we simply need more revenue.
Also, I love Soul Train.