The Corner

Tax Reform

Ramesh (and other econ policy guys): I understand that raising taxes is bad in most cases according to “conservative” economics (I use quotation marks so as to include all of the various subgroups on the right when it comes to economic theory).

But it seems to me as a matter of both politics and theory that raising tax rates in exchange for tax simplification shouldn’t be ideologically verboten. The obvious argument is that by closing loopholes, reducing the corrupting power of politics in tax policy, eradicating inefficiencies and rationalizing the whole system you will make the economy more efficient and productive. Therefore if the price of achieving this comes in the form of marginally raising rates, it might well be worth it. For example, I would gladly pay, say, $500 dollars more a year — even above what I might save from firing my accountant — in exchange for removing the worry and hassle of tax time.

I do understand that since tax simplification would — in theory — boost economic productivity and therefore boost tax revenues it wouldn’t necessarily be, uh, necessary to raise taxes in exchange for simplification. But politically it might be. In order to get some Democrats to agree, they might demand a hike in tax rates for the top 1% or some such.

Anyway, I guess the question is, is there an accepted answer about where the tradeoff point lies? What’s the conventional wisdom on the cost-benefits? What say you Ponnuru?

Note: For the record, I think Ramesh hates it when I ask him these questions publicly in the Corner. But I’m just trying to create a dialogue as the college administrators say.


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