I understand how George Will could have been taken in by the “replace all federal taxation with a national sales tax” scam. After all, he’s an economic illiterate who believed in — or pretended to believe in — “supply-side economics,” and couldn’t be expected to know how full of holes the National Sales Tax idea actually is. (E.g., are home purchases going to be included? What about the impact on the elderly, who will be taxed again as they spend money they were already taxed on when they earned it? If we take away the one progressive element of the federal tax system, just how regressive will the overall national tax system — which includes lots of highly regressive local property and excise taxes — become?)
Naturally, none of this would occur to George Will. But what’s Jane Galt’s excuse? Yes, as she says, Will makes it “sound pretty good.” But since when is “sounds good” good enough for the University of Chicago Business School and The Economist?
Corrected to fix an error in the description of the Linder plan: as proposed, it would in fact eliminate the payroll tax. Thanks to a sharp-eyed reader for the correction.
Note that I’m not opposed in principle to a graduate consumption tax of the USA Tax variety. It has some advantages to go with its disadvantages. What’s offensive about Will’s column is its unabashed free-lunchism. Any actual tax system has disadvantages and complexities. Anyone who doesn’t start out by acknowledging that isn’t thinking seriously about the problem.
While we’re on the subject: My own strong conviction is that we ought to get as much of our revenue as possible from taxing scarcity, pollution, congestion, and vice. An oil import fee, for example, mostly winds up confiscating OPEC rents, and a system of time-of-day-adjusted freeway user charges is the only promising way to deal with the rush-hour traffic problem. Add a carbon tax, a particulate tax, and a buck a drink on alcohol, and you’re talking about real money, and real efficiency miprovements from pricing external costs.
But I’m not going to pretend that the design problems involved aren’t horrendous, or that moving in that direction would put K Street out of business.