Sense and Nonsense on Tax Reform
By Arnold Kling
We believe these principles should command wide assent as policymakers consider tax reforms, whether incremental or far-reaching:
1. Fiscal responsibility requires addressing both taxes and spending.
2. Rising inequality strengthens the case for progressivity.
3. The tax system should collect the taxes that are owed.
4. Tax reform should strengthen taxation at the business level.
5. Taxes for individuals should be simplified.
6. Social policy can and should often be advanced through the tax code—and it must be well designed.
Some of what they have to say makes sense. For example, they point out that income distribution policy is better handled with taxes and transfers that are based on income, rather than indirectly (through farm subsidies, for example).
Which is why point (4), “strengthening” business taxes, is nonsense. The corporate income tax is merely an indirect, ineffective tool for redistribution. If enough people understood economics, you would not have a corporate income tax. This tax stands as a monument to ignorance of basic economic concepts, particularly tax incidence analysis.