Wanniski, Bartlett, Starve the Beast, and Tax Reform

     As I mentioned in previous posts I'm currently reading Wanniski's They Way the World Works and Bartlett's The Benefit and the Burden-about tax reform. 

     http://diaryofarepublicanhater.blogspot.com/2013/07/jude-wanniski-on-difference-between.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

    http://diaryofarepublicanhater.blogspot.com/2013/07/jude-wanniski-way-world-works-and.html

    http://diaryofarepublicanhater.blogspot.com/2013/07/bruce-bartlett-on-tax-reform_12.html

    I'm reading them both because I read Wanniski's book to and from my telemarketing job on the bus, while I read Bartlett on my-online-Kindle player. By the way, I didn't buy this kindle. Basically when you buy  a kindle book from Amazon it lets you read it in a Kindle reader on the website itself. So it's basically free.

     Wanniski-and Laffer-really was the bridge for Republicans. Before them, the GOP actually would fight tax cuts. They're stated position which they maintained for close to 30 years was that you can't cut taxes until you cut spending. Wanniski made the point that if that's the case you'll never get the tax cuts. 

     Wanniski himself never argued for deep spending cuts. He didn't necessarily have a hysterical view of deficits either-though of course he believed in teh conventional idea that spending-or a tax cut-today means tax hikes in teh future. 

     From his interview with Alexander Cockburn during the Reagan election:

      AC/JR: Will welfare and social programs be cut?

      "No. Social programs are left in place. "The safety net," we call it. Government spending is reduced via economic expansion that makes people ineligible for welfare, unemployment, food-stamp benefits, etc., by virtue of having good jobs and good incomes."

      http://diaryofarepublicanhater.blogspot.com/2013/07/jude-wanniski-laffer-curve-and-battle.html

      I'm not sure how much this was his design-though it probably was Laffer's-but this morphed into starve the beast pretty quickly. After all, while you can't cut spending before cut taxes, after you cut taxes you have to cut spending as you're left with huge deficits. The beauty of a stacked deck. 

      While Wanniski did give the GOP the winning hand on taxes, he was not the partisan Republican that Laffer remained. In 1992 Wanniski was already talking about a Democratic President. 

     http://diaryofarepublicanhater.blogspot.com/2013/07/wanniski-on-democratic-partys-chances.html 

    Bartlett makes a great point that tax reform basically has not liberal takers these days. For the last 30 years it's been a conservative game. Indeed, Jared Bernstein recently warned liberals about drinking the Koolaid on tax reform, and I agreed with him. 

    http://diaryofarepublicanhater.blogspot.com/2013/07/tax-reform-1986-and-better-mousetrap.html

     However, in the 60s and early 70s, it was the Dems who were pushing tax reform-they're basic goal though was to prevent the wealthy from avoiding paying their fair share via loopholes. 

     For conservatives it's always been largely about cutting taxes. Reagan passed lots of what counts as 'tax reform.' Yet, the impact of both his huge tax cuts and his tax reforms was quite regressive. He raised the payroll tax for Social Security while cutting benefits. He ended both the sales tax deduction and the credit card interest deduction. 

     He did make on major concession to the liberals in exchange for the 1986 deal-that was as close as we've come to a flat tax with just a 28% and 15% rate-by allowing the capital gains rate to be the same as the income rate. 

     To a large extent then 'tax reform' is the means rather than the end for both liberals and conservatives. Having said that, I will offer conservatives some tax reform and see if maybe I've misjudged them-maybe they really do want 'tax reform.'

     If tomorrow I offered them the a cut in corporate taxes would they agree with making the payroll taxes much more regressive? Of course, this 'tax reform' might not work as far as being revenue neutral. 

     A solution then could be to change the way payroll taxes are raised. Take off the cap for the payroll tax and cutting the rates of the nonrich. This could be worth a significant corporate tax cut-or maybe even the elimination of the capital gains tax-something that some liberals like Minsky also favored. 

    Anyway, let's see how serious the conservatives really are. Let them prove they aren't in favor of only regressive tax cuts. 

    P.S. Cutting the corporate rate-much less eliminating it-could be problematic as the government gets $200 billion dollars per year from it according to Bartlett. I'm not sure how much revenue we'd raise by taking off the payroll cap. However, it would have the benefit at least of giving us some tax relief-the payroll tax is the tax that really takes a bit out of our paychecks-75% of Americans pay most of their taxes through the payroll tax.