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Politics : Bill Clinton Scandal - SANITY CHECK
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To: Lizzie Tudor who wrote (5208)9/24/1998 5:43:00 PM
From: dougjn  Read Replies (1) of 67261
 
Michelle, there tend to be two goals behind U.S. backers of consumption taxes. One arguably noble, the other I think less so. (In Europe a major reason for consumption taxes is simply to augment the total government revenue stream, without making any one source too obscene.)

The first reason is to organically exclude from taxation income which is spent on investment. The argument being that such investment increases the productivity of the entire society, and that freeing it from taxation would boost its level. Economists tend to think there is much truth to this.

The second is to organically create an absolutely flat tax. The arguments publicly advanced for this involve simplicity. The true motivation is to avoid progressive taxation of the rich and high income earners, and some redistribution of income. As a high income earner, I think this is not just.

Which doesn't mean I think unrestrained progressively is just either. A perfectly reasonable and just argument can now be made for rolling back at least some of Clinton's tax increase on high earners (you know, those add on rates above 28% federal that go as high as a whisker under 40%, effectively). It was a necessary political move at the time (I thought) to help balance the budget, not only through its direct revenue impact, but also by creating a political sense that budget cuts should then proceed, since the pain was being shared between the rich and the middle class, and poor. I also thought that the market benefits to investing high income people (never mind the dividend collectors) would handily exceed the costs.

Doug
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