"An Expanded Safety Net is More Important than Soaking the Rich"
Clive Crook says it’s all well and good to pursue comprehensive health care reform, but Obama shouldn’t try to pay for it with higher taxes on the rich. Instead, he calls for a broader-based tax like a VAT. Jon Cohn kicks that around here and here.
Readers may recall that I’m somewhat sympathetic to Crook’s point. But rather than saying what he said, I’ll instead say this. Government spending on effective social welfare programs is very progressive. The main thing to do, from an egalitarian point of view, is to have a lot of it and to pay for it through whatever taxes are politically viable. Compared to Europe, the American tax code is toward the high end of progressivity, though not off the charts. The big difference, though, is that our overall tax revenues are lower, and a much larger share of our revenues goes to the military. Whatever you do to shift spending from defense to domestic priorities, and whatever you do to increase revenue, is a step in an egalitarian direction.
It may be that it’s easier to raise revenues through taxes on the rich, because they bite fewer people. Beyond that, there are concerns about growth. Certainly I think it’s clear that restoring Clinton-era taxation won’t kill the economy. But over the long run we’ll need even more revenue than that. So I think some consumption taxation may be necessary. And I think it’s smart to look at taxes that have some direct benefits—taxes on pollution or public health hazards in particular.
Either way, the key point is to get the programs in place and pay for them somehow or other. The exact mechanism is not especially important from an egalitarian point of view unless you were to really propose something hideously regressive like a poll tax, which I think nobody is doing.