This seems to be what you hear a lot of conservatives saying.
"Apple and other American multinationals that keep money overseas to avoid paying higher U.S. corporate tax rates are not doing anything wrong, pundits on both sides of the aisle said Wednesday on CNBC. But they clashed on how to change the tax code to encourage companies to bring those funds home.
P.S. Soltas uses a Mike Kinsley style argument for figuring out what counts as investment and what doesn't:
So it's not investment if you enjoy it; there's a clear, unambiguous, criteria. Kinsley thinks we need to feel more pain-not him though. Soltas gives away the game: the preference for supposed 'future consumption' over 'present consumption' is driven by a moral prejudice against enjoying today.
"Apple and other American multinationals that keep money overseas to avoid paying higher U.S. corporate tax rates are not doing anything wrong, pundits on both sides of the aisle said Wednesday on CNBC. But they clashed on how to change the tax code to encourage companies to bring those funds home.
"I don't blame Apple. The tax code incentivizes tax avoidance," Jared Bernstein, former chief economist to Vice President Joe Biden, said in a "Squawk Box" interview."
"Appearing with Bernstein, Ed Lazear, former chairman of the Council of Economic Advisers under President George W. Bush, said: "If you're seeing someone hit too many home runs, you don't tell a guy to bunt. You move the fences out. You got the wrong tax code."
"What you need to do is not vilify Apple for living within the tax code," Lazear continued, "and doing what they should be doing in respect to their shareholders."
"That's where Lazear and Bernstein found common ground. But it didn't last."
"Are there much more efficient ways to raise taxes?" Lazear asked, arguing that "almost all economists think we should move in a direction of a progressive consumption tax. That's the way we should go."
That's what you'd expect from a Bushie: the 'progressive consumption tax.'
Many make this argument. Here's Sumner:
I generally call myself a “pragmatic libertarian” or “right wing liberal” rather than conservative. But if all conservatives were as sensible as Barro and his fellow reformers, I’d be glad to consider myself a conservative. A few comments:
1. I believe fiscal policy can play a role, but primarily on the supply-side (employer-side payroll tax cuts, etc.)
2. I don’t believe the GOP has suddenly become inflation hawks. In 2012 Gov. Perry indicated that he was concerned that QE could help Obama be re-elected. They were silent when inflation was even higher under the Bush administration. If the GOP were in power, the WSJ would be taking the same position that they took when Reagan was running for re-election in 1984, when they criticized the Fed for excessively tight money, despite an inflation rate more than double the level we’ve seen under Obama. I’m quite optimistic that market monetarism can eventually become the standard conservative position on monetary policy.
3. Barro also discusses other issues such as taxes, and cites a post by James Pethokoukis. Both argue for more realism on taxes, and point out (correctly in my view) that the flat tax idea will not sell in America. I’d encourage the reformers to think big. Long term the GOP is in a strong negotiating position, as the Dems will be reluctant to enact a VAT without GOP support. Go for a grand bargain where the GOP gives in on revenues and progressivity, in exchange for replacing the income tax with a progressive consumption tax. The GOP should reject any proposal that doesn’t result in a system where 90% of Americans do not have to fill out any tax forms. Abolish the income tax. Collect revenue with a 20% VAT that exempts the poor (i.e. rebates 0.20X$15,000) and has a progressive payroll tax that starts negative (EITC) and tops out at around 50% to 60%.
Good to see that Sumner thinks the GOP will benefit by deliberately trying to tank the economy during a recession for partisan reasons. The 'progressive consumption tax' is something that's been around for a long time. Evan Soltas is now advocating it:
A new report from the Congressional Budget Office says high earners benefit most from the complexities in the U.S. tax code -- which isn't exactly surprising. The system is a thicket of deductions and credits. Those who can pay for professional help or shift their income around benefit most. The preferential rate on investment income is among the largest of these tax breaks.
Long-term capital gains are taxed at a top marginal rate of 23.8 percent as compared to 39.6 percent for ordinary income. That reduces annual revenue by $161 billion, the CBO found. This is also the most regressive of the tax breaks: 93 percent of the benefits accrue to the top fifth of earners and two-thirds to the top 1 percent.
For many, that's enough to prove capital-gains taxes are too low. Yet there are compelling reasons to tax investment income at a preferred rate. Most tax breaks create distortions. The tax break for capital gains does the opposite: It reduces a distortion. Investment is really deferred consumption. Taxing consumption tomorrow at a higher rate than consumption today -- which is what a tax on investment income does -- encourages people to shift consumption forward in time, and that's inefficient.
I've read some of the literature on the 'consumption tax', particularly Laurence Seidman and I've yet to really be persuaded.
In issues of tax equity, in public finance there are two kinds of equity-vertical, and horizontal. Those who advocate the progressive consumption tax are concerned with horizontal rather than vertical fairness. They believe this is a much bigger problem both on basic fairness and efficiency.
It's not at all clear to me why this is so. The idea that we can't do much about vertical inequality-differences in treatment between different income groups, but that we can and should worry about horizontal difference in treatment within the same income group. I just haven't been persuaded why this is the case and what these egregious horizontal inequities are. What it seems to come down to is that supposedly 'future consumption' is treated unfairly relative to 'present consumption.'
The trouble I have is isn't all consumption by it's very nature, present? This idea that all money not spent now will be spent later was discredited by Keynes.
If Sumner is willing to increase revenues and make it more progressive-if this can be done via a consumption tax by giving low income people tax credits-it'd be worth looking at. Yet at the end of the day I don't buy this idea that we should favor future consumption over present-or if there is any such thing as 'future consumption.'
Of course Soltas admits that this is hard to document empirically.
"In theory, this is a strong disincentive for saving and investment, leading to less accumulation of capital and lower incomes over time. The empirical evidence is admittedly less impressive. Still, this reasoning explains why economists leant towards a preferential rate of capital-gains tax in a recent survey."
To say they "leant" is pretty vague. It could just mean that a bunch of economists were surveyed and that one more said they agreed than disagreed with the question of a 'progressive consumption tax.'
There are certainly many who don't agree with this. If there is no empirical proof that there is a disincentive for saving and investment-why assume there is one? In addition, this is all based on assumptions. All of this is under the dubious assumption that there must be savings prior to their being investment-what about credit? Without credit, as Schumpeter argued and many economists since have also understood, there couldn't the the level of investment needed for a modern, complex economy like ours.
As for the capital gains tax it didn't used to be taxed at a lower level then wages, and yet we had a lot of growth.
What these arugments for a lower capital gains tax, lower corporate tax, and cutting the taxes of companies so they stop parking their money in tax shelters amount to is Gee, if we stopped taxing the rich they wouldn't keep avoiding paying them.
"Another big flaw in the capital-gains tax is that its definition of eligible investment is too broad. It allows the highest earners to enjoy what is consumption in all but name at a preferential rate. Suppose I enjoy vacations at the beach. If I rent a vacation home for 10 years, my spending is taxed normally. If I buy a vacation home and sell it after 10 years, I benefit from the preferential capital-gains treatment -- even though my outlays were as much for consumption as for investment purposes. There are many other examples: jewelry the owners wear, art the owners display in their home and so on. The investment-income tax break shouldn't apply to capital gains realized on assets like these -- assets that provide consumption services. It's a simple test: If you derive enjoyment from it now, it shouldn't count as investment for tax purposes."
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