Check out Bruce Bartlett on the VAT here. Rather than surrender, as Bartlett does, why not win?
Premise 1 – As our Federal government runs away from the entitlement mess they themselves created, some states are starting to see bankruptcy looming on the horizon. As the left clamors for tax increases to feed the beast, the right sits back and says “no” to everything, ignoring the fact that the left is going to get their tax increases by simple operation of time and demography. This may be good strategery in the short term, but the right is setting itself up for miserable failure, as they will forced to become the “tax collector for the welfare state.”
Premise 2 – The reliance on the income tax as a revenue generator has failed miserably. First, the right, since the 1980s, has been so successful in removing much of the working poor and middle class from the tax rolls. This makes much of the electorate immune to what is now pretty much a siren song for “tax cuts.” This has resulted in dramatically weakening one of the right’s most powerful political tools.
Second, the income tax is a horrible way to collect revenue. When times are good, only the rich now pay, and when times are bad, revenues collapse, as we can see in places that rely on the steeply progressive income tax (CA and National Budget). Add to this fact the negative impact that progressive income taxation has on investment and incentives, and you have a very destructive tax.
Premise 3 – The right, and this includes the libertarian and conservative think tank sector as well as the Republican party, is making a substantial strategic error in ignoring the potential (political and economic benefits) of a massive tax swap. By dissing every proposal for revenue increases (and No, tax cuts aren’t going to work with a $1.4 trillion deficit and a hangover from a 25 year spending/debt/tax cut binge), the right is falling for the trap of arguing for tax cuts for a shrinking class of people while arguing against a superior policy – namely broadening the tax base and making everyone pay for the welfare state that still has substantial political support.
If the above premises are substantially true – and I can make an extended and extensive case that they are – then our “center-right” leadership is failing us in merely saying “no” to all tax proposals, and gambling on the ability to drag this cycle of stupidity around one more time.
The solution is to make the case for a massive overhaul of the tax system, and transition the system from one that relies on income (corporate and individual and Soc. Sec.) taxation to one that relies on taxing consumption (VAT, National Sales Tax, or FairTax). This is a wonderful opportunity for a party of ideas (Republicans, before they succumbed to corrupt Hastertism) and a vibrant think tank community (before they began to resemble an echo chamber of conservo-libertarian apparatchiks promoting stale doctrine) to lay the ground work for a 3rd and 4th “American Century.”
There are even more new ideas (and political and economic benefits) to go along with this new (and superior) tax policy.
Why aren’t we talking about increasingly popular ideas like constitutional spending caps? Why aren’t we lauding the replacement of the the bureaucratic entitlement state with a yearly stipend for every American (see Fair Tax rebate or Charles Murray)?
Instead of fighting against a welfare state that most Americans still support (Soc. Sec., “health care reform,” and public education), why aren’t we framing our ideas as the “individualization” of government assistance through retirement accounts, health savings accounts, and scholarships and education savings accounts?
The question is whether enterprising politicians will run on these better policies, and whether they can get enough airplay to persuade the voters that they are workable (they are). My greatest fear for our nation is that we are already too far gone down the the road of ruin. We seem to be like that obese person who is just old enough and just heavy enough to avoid the hard work of getting back in shape or forgoing that “satisfying” meal.
It just might be that we are already too morally and intellectually lazy to engage in the difficult, but worthy, task of promoting better ideas instead of regurgitating ideological talking points (and I proudly consider myself an ideologue) across a widening political gap.
It’s time to close that gap with an honest airing of ideas, a heated and potentially divisive debate, and a last-ditch attempt at resetting the fiscal course of the nation. Rinsing and repeating another cycle of the last 20-30 years isn’t going to cut it.
I frankly could care less if any or all of this is “politically difficult.” So was ending slavery or defeating Communism. The people who argue for “politically doable” deals are the same intellectually flaccid hacks who got us into this mess.
We Americans pride our selves on being “exceptional” in some way. As some one who agrees with that sentiment, I think it’s clear that we are at a fork in the road. One path (the more difficult one) leads to a renewal of purpose and promise, recreating a nation of self-governing citizens, while the other path (easier) is to succumb to being another ‘Euro-style super state’ that goes from crisis to crisis, adding greater government control of our lives along the way.