Tax reform also offers the possibility of win-win bargains. The basic idea is simple: Shift taxes away from things we want more of and onto things we want less of. Specifically, cut taxes on savings and investment, cut payroll taxes on labor, and make up the shortfall with increased taxation of consumption. Go ahead, tax the rich, but don't do it when they're being productive. Tax them instead when they're splurging--by capping the deductibility of home-mortgage interest and tax incentives for purchasing health insurance. And tax everybody's energy consumption. All taxes impose costs on the economy, but at least energy taxes carry the silver lining of encouraging conservation--plus, because such taxes exert downward pressure on world oil prices, foreign oil monopolies would wind up getting stuck with part of the bill.
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Tuesday, December 05, 2006
Pigou Club founder Greg Mankiw quotes Brink Lindsey on win-win taxes: