One more substantive post before the Christmas holiday, this one on tax policy. Here, from the Wall Street Journal, is John Cochrane on What Genuine Tax Reform Looks Like. Excerpt:
The first goal of taxation is to raise needed government revenue with minimum economic damage. That means lower marginal rates—the additional tax people pay for each extra dollar earned—and a broader base of income subject to tax. It also means a massively simpler tax code.
In my view, simplification is more important than rates. A simple code would allow people and businesses to spend more time and resources on productive activities and less on attorneys and accountants, or on lobbyists seeking special deals and subsidies. And a simple code is much more clearly fair. Americans now suspect that people with clever lawyers are avoiding much taxation, which is corrosive to compliance and driving populist outrage across the political spectrum.
What would a minimally damaging, simple, fair tax code look like?
What the tax code should look like is simple, and the plan laid out here encompasses most of it:
- Tax consumption, not income or wealth.
- Eliminate corporate taxes
- Eliminate deductions, credits and deductions
But Mr. Cochrane gets one thing wrong, and that is “decoupling” the massive Imperial subsidies from the tax code. Elimination of subsidies can, should and indeed must be a part of any substantive tax reform. The massive Imperial web of subsidies is intrinsically linked to the tax code. Everything from corn to solar panels has been the benefit of some kind of Imperial subsidy or another for decades now; a real, comprehensive reform has to address the spending side as well as the revenue side, and let markets, not governments, choose winners and losers in the economy.
But, let’s be honest – this is all speculation, and will never be anything else. Not one pol in the Imperial City will actually vote to deprive themselves of all the power they currently enjoy over the citizenry’s economic choices.
All that aside – Merry Christmas, True Believers! Tomorrow’s post will feature some totally gratuitous Christmas totty, the Saturday Gingermageddon will happen as usual, and we’ll return Monday.