December 22, 2002
WHO PAYS?:
New tax plan may bring burden shift: Poor could pay a bigger share; rich could benefit (Jonathan Weisman, 12/16/02, THE WASHINGTON POST)As the Bush administration draws up plans to simplify the tax system, it is also refining arguments for why it may be necessary to shift more of the tax load onto lower-income workers.ECONOMISTS AT the Treasury Department are drafting new ways to calculate the distribution of tax burdens among different income classes, which are expected to highlight what administration officials see as a rising tax burden on the rich and a declining burden on the poor. The White House Council of Economic Advisers is also preparing a report detailing the concentration of the tax burden on the affluent and highlighting problems with the way tax burdens are calculated for the poor.
The efforts would thrust the administration into a debate that until now has lingered on the fringes of economic policy: Are too few wealthy Americans paying too much in taxes for too many, and should the working poor and middle class be shouldering more of the tax burden? [...]
[T]o some conservatives, the shift is long overdue. Rep. Jim DeMint (R-S.C.) has argued for two years that the nation is entering a dangerous period in which the burden of financing government is falling on too few people. In such an environment, the masses will always vote for politicians promising ever-more-generous social programs, knowing they will not have to pay for such programs, DeMint warned. [...]
DeMint and his allies have called for a national sales tax to replace the income tax. For those below the federal poverty line, sales taxes paid would be refunded, but under the system, at least they will have seen the cost of government, he said. The working poor would accept a higher tax burden because they would be relieved of the need to file a tax return.
Even if the policy is sound, this is a dangerous fight for the GOP, one they should only even undertake once they have the votes to pass a drastic simplification--whether a VAT or a Flat Tax. Posted by Orrin Judd at December 22, 2002 8:13 AM
One problem with VAT is exactly what DeMint is warning against. It hides the cost of government from the average citizen, who has no idea how much of the cost of what he buys is attributable to the tax.
Posted by: David Cohen at December 22, 2002 8:43 AMI don't think the income tax is going away - many Americans are loyal to progressivity, many politicians are loyal to its flexibility (ability to gin up preferences for special interests), and it does force Americans once a year to confront their tax burden. It also makes possible tax credits which are one avenue to migrate government activities into the private sector (keeping gov't funding but shifting control to the private sector).
Posted by: pj at December 22, 2002 9:29 AMpj:
One interesting irony is that Democrats bitch endlessly about lobbyists and the money in politics, but the best way to reform that would be to simplify the tax code.
BTW, leftist blogs are already attacking Republicans for even considering these changes -- e.g. here
.
Slate's "Today's Papers" noted this article the other day and slightly mischaracterized it, which I noted here
.