Thursday, May 12, 2005

Bartlett is honest again.

Bartlett writes in National Review today.

The topic is taxes and spending. Bartlett concludes that spending isn't going to be controlled unless the GOP tackles Medicare costs, and that tax rates are going to have to go up a lot.

Too many conservatives delude themselves that all we have to do is cut foreign aid and pork-barrel spending and the budget will be balanced. But unless Republican lawmakers are willing to seriously confront Medicare, they cannot do more than nibble around the edges. With Republicans having recently added massively to that problem, and with a Republican president who won’t veto anything, I have concluded that meaningful spending control is a hopeless cause.

Therefore, we must face the reality that taxes are going to rise a lot in coming years. I believe that a VAT is the least bad way of getting the hundreds of billions of dollars per year that will be needed. The alternative is higher tax rates that will be far more debilitating to economic growth.

Bartlett says he'd like a flat tax but getting the tax base right is more important. I agree with Bartlett that we should get the tax base right, but disagree about capital income, which Bartlett would exclude from taxation, favoring instead a VAT tax. I think capital income has to be taxed. A VAT won't get anything from someone who does most of their consumption cruising around the world, and without some taxation of capital, earnings can simply go untaxed for generations. With labor income having shrunk to the lowest fraction of GDP in history, it is unreasonable to say you can broaden the tax base while excluding capital income from taxation.

Bartlett laments Bush's marginal rate increase, saying it paved the way for Clinton's raising the marginal rate again. My recollection is that there was fairly broad support to fix the marginal rate so there wasn't - I forget what it was called, but there was a middle income bracket where the marginal rate was higher than the top marginal rate, I believe because of phasing out of preferences. That was a mistake in the 1986 reform.

Bartlett doesn't directly say so, but I believe he also laments the lobbiest gravy train that drives the annual tax cut bill today. Barlett says he doesn't believe it will be possible to get a real reform and incremental changes to the income tax code are the best likely outcome.

Well, maybe. Somehow, I doubt the current crop controlling Congress, the Senate, and the White House will engage in any sensible reforms, since the gravy train is just too powerful. Also seems unlikely that any conservative movement can push folks like Delay aside. So my sentiments lie with sweeping the bums out. But more power to ya, Bruce, if you'd like to try to reform the conservative movement incrementally.


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