Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 18, 1993 TAG: 9301180362
SECTION: EDITORIAL PAGE: A8 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
HOW TO RAISE TAXES, REPAIR GOVERNMENT
NOTWITHSTANDING the nation's continuing bout with taxophobia, fed by timid and irresponsible politicians over the past decade and before, there are two legitimate sides to deficit-reduction. There is budget cutting; there is also revenue-raising.A useful reminder of this lost knowledge came recently from the Organization for Economic Cooperation and Development, based in Paris. It published a report noting that Americans enjoy the lowest tax burden of the 23 richest Western nations. Indeed, the United States could cut its budget deficit to a relatively trivial level and still be more lightly taxed than all its primary industrial competitors.
Most Americans are probably unaware of this fact. But surely it should inform the debate about taxation, if it can be called a debate.
President-elect Clinton has proposed to raise the income tax for the wealthiest Americans, which is fine and overdue, if only to redress by a little the unfairly imbalanced effects of tax changes during the 1980s. Such a tax hike, though, won't make much of a dent in the deficit.
Also needed is a hefty increase in the federal tax on gasoline. Paul Tsongas and Ross Perot during the presidential campaign proposed adding 50 cents, which sounds about right. Clinton favored an oil import fee, a bad idea in part because it is protectionist.
Clinton also worried about a gas tax's effect on the poor, a legitimate concern. But this could be addressed with income-tax credits or a cut in the Social Security tax.
The fact is that Americans pay less for gasoline now, adjusting for inflation, than at any time since the 1973 Arab oil embargo. The gas tax in Japan, Germany and Britain is several times what it is in America.
Raising the gas tax here would promote conservation, cut pollution and related costs, reduce reliance on oil imports and stimulate development of alternative energy sources. More to the point, every 1-cent increase would yield $1 billion in annual revenues to help cut the deficit.
A value-added tax - a sort of national sales tax - should be considered, too, as a way of shifting from investment to consumption what we target for taxing. Allowances would need to be made here, as well, for regressivity and the impact on the poor.
But tax hikes are only half the story. Extra revenues will be swallowed up, with little effect on deficits, if spending priorities aren't reordered. Which is why a covenant is needed: higher taxes, but only with reforms.
Clinton himself has suggested that government should emphasize programs aimed at the future (such as education), while reducing spending growth for past obligations (such as interest) and current consumption (such as entitlements).
Generally speaking, the government also should spend more on preventive measures offering savings down the road. It should emphasize incentives or disincentives (such as tradable pollution permits) that encourage desirable results in the private sector, over government's heavy-handed attempts to produce results itself.
To cut administrative costs, productivity innovations effective in the private sector are available. Among the ideas Clinton has discussed are a focus on results rather than rule-making; and efforts to decentralize authority, increase flexibility and accountability, and measure outputs. Civil service should be reformed to better reward job performance - with incentives to find savings.
The question is: Can Clinton implement such ideas within the resistant bureaucracy? If he can, appropriate tax hikes tied to government reforms would fulfill his mandate for change - and shrink the deficit.