Tim, I would be willing to give some on taxes as part of a comprehensive deficit reduction strategy.
Taxes aren't really my main focus either, but I'd put spending ahead of the deficit. I'm most concerned about the spending, whether you tax it, borrow it (which means you tax it or inflate it away later) or inflate it away, government spending pulls resources from the private sector, and causes more economic decisions to be made politically. Also with lower spending taxes can be lower, and deficits will likely be lower.
All else being equal I'd also like lower taxes. But right not I don't see any scope for near term tax cuts. The deficits are just too high, and even in the most optimistic scenarios it will take too long to get control of spending.
My concern over deficits is variable, the higher the current deficits and the higher the government debt levels, the more concerned I am about deficits. So in the past couple of years I've become very concerned about deficits, at the expense of a smaller concern about having tax cuts. (I say smaller concern about having tax cuts, rather than the simpler "less concern about taxes", because while my desire for tax cuts in the near term is reduced, the prospect of tax increases has become much more severe.)
One point about deficits though. Assuming a constant deficit, we are much better off with lower taxes. With lower taxes you will tend to get higher growth (in this case you don't have the counterbalancing effect of more borrowing). Also with lower taxes you have more scope for tax increases to reduce the deficit should they become necessary. If you raise taxes and keep deficits about the same (as Pelosicare is supposed to do, its supposed to decrease deficits by a tiny amount, I think it will increase deficits, but for the sake of argument I'll go with the assumption of a small decrease), then you harm the fiscal situation of the country. You will have reduced economic growth a bit, plus you will have used up at least some of the "low-hanging fruit" in terms of revenue. The higher the tax rates are, the more serious deficits become an enormous problem, since you've used up a lot of your ability to deal with the deficit. (Yes you can reduce spending, but actually reductions in spending, as much as I would support them, are politically difficult, also you've gone from having two tactics you can use to one, you've used up half of your reserves for the battle.) |
