Is It Time for a Consumption Tax?
I don't agree with every line of it, but David Brooks's column today is really very good. In particular, his framing device -- that we're moving from an era defined by leverage to an era defined by the unwinding of that leverage -- strikes me as exactly right. And so do most of his policy prescriptions. In particular, this doesn't get enough attention:
The U.S. is going to have to move toward a consumption tax, to discourage spending and encourage savings. There’s also a crying need for tax reform. As economist Douglas Holtz-Eakin points out, the tax code is rife with provisions that encourage leverage and discourage investment. The government will have to spend less on transfer payments and more on investments in science and infrastructure.
The U.S. doesn't "have" to move to a consumption tax. You can certainly imagine the country surviving atop the income tax. But it probably should move to a consumption tax. And I'd urge people to read Cornell economist Robert Frank's excellent article outlining how we can build a post-consumption boom economy that will actually make us better, rather than worse, off. There's been a belief, I think, that the next few decades have to be miserable. They don't. But they will be if we spend them trying to recapture the last few decades.
June 12, 2009; 3:31 PM ET
Categories: Economic Policy , Solutions , Taxes
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