More taxes

Robert J Samuelson in the Washington Post:

The truth is that we can’t afford any tax reduction. We need higher, not lower, taxes. What we should be debating is the nature of new taxes (my choice: a carbon tax), how quickly (or slowly) they should be introduced and how much prudent spending cuts could shrink the magnitude of tax increases.

To put this slightly differently: Americans are under-taxed. We are under-taxed not in some principled and philosophical sense that there is an ideal level of taxation that we haven’t yet reached. We are under-taxed in a pragmatic and expedient way. For half a century, we haven’t covered our spending with revenue from taxes.

Of course, there are times when borrowing (that is, budget deficits) is unavoidable and desirable. Wars. Economic downturns. National emergencies. But our addiction to debt extends well beyond these exceptions. We have run deficits with strong economies and weak, with low inflation and high, and with favorable and unfavorable productivity gains.

Since 1961 — and I admit to having reported this fact before — federal budgets have been in surplus in only five years. And these surpluses have invariably coincided with long economic booms that swelled government tax revenue: 1969, following the long boom of the 1960s; and 1998 through 2001, reflecting the “tech boom” of the 1990s.

We resist the discipline of balancing the budget, which is inherently unpopular. It’s what Eugene Steuerle of the Urban Institute calls “take-away politics.” Some programs would be cut; some taxes would be raised. Americans like big government. They just don’t like paying for it.

Borrowing is easier. It’s largely invisible to most Americans, creating the illusion of “something for nothing.” This liberates Republicans to peddle more tax cuts. Their tax cut would add $1.5 trillion to the debt over 10 years. A more realistic figure is $2.1 trillion, claims the Committee for a Responsible Federal Budget.

Democrats are little better. They advocate more entitlement spending, despite CBO’s estimate of $10 trillion in deficits under existing policies over the next decade.