Sunday, November 14, 2010

But Somebody Does Care About the Deficit

Following up on Paul Krugman's observation that balancing the budget is a low priority for most people, it's reasonable to note that there's every indication that Krugman himself supports a balanced budget. He pictures that being achieved through estate taxes and a national sales tax.

I'm personally not opposed to estate taxes, although ideally we would see a lower tax rate with fewer chances at avoidance and evasion - fewer ways to avoid the tax, resulting in a significantly lower tax rate while maintaining revenues. Why don't I get into a tizzy about "death taxes"? Because, as they say, "You can't take it with you." Given the choice with paying more taxes while I'm alive or paying some percentage of my estate to the taxman after I die, I'm going with door number two.

I'm not a huge fan of a national sales tax. No, actually, I think it's a bad idea. Even assuming the tax were structured such that the wealthy could not easily avoid it, what do you believe will happen when a future Congress is deciding which tax to raise to help balance the budget? Capital gains, inuring largely to the wealthy? Income taxes, primarily hitting middle and upper SES Americans? Or a national sales tax, hitting everybody but most affecting those who don't have the luxury of saving part, most or all of their income - that is, I find it difficult to believe that the most regressive tax won't be raised first. And I also find it difficult to believe that a significant national sales tax won't affect consumer behavior, largely to the detriment of small and local consumer-oriented businesses.

Krugman speaks of a "modest VAT" - I can see a VAT starting out that way, but I simply cannot imagine it staying "modest". I don't believe that a VAT is necessary to balance the budget, now or in the future, and thus would just as soon not put it on the table.

1 comment:

  1. States already have the right to impose a sales tax, and most do so. A VAT or GST can be structured differently than a standard sales tax, but I don't think the differences are particularly compelling.

    If the feds impose their own sales tax, if you assume a sales tax can only go "so high", they're handicapping the ability of states to generate sales tax revenue.

    Why not have a federal tax on real estate? Or is that something for state and local governments? How is a national sales tax really different, other than being regressive?

    You might be able to convince me to do a swap - replacing all state sales tax with a single federal sales tax, with most of that money distributed back to the states in which the purchases were made. I would share your concern about the rates being raised in lieu of Congress's making cuts or raising other taxes.