Tax Loopholes, the Legend and the Reality, by Roger A. Freeman (American Enterprise Institute and Hoover Institution on War, Revolution, and Peace, 91 pp., $3). Tax reform, anyone? We all recall George McGovern’s campaign claim, “Money made by money should be taxed at the same rate as money made by men,” in criticism of the current practice of taxing capital gains at half the normal rate. Enter economist Freeman. He argues that the issues are not so simple. He notes that the beleaguered capital-gains provision serves to stimulate investment; for this reason, Germany and Japan do not tax capital gains at all. Also, the much criticized oil depletion allowance fosters the development of needed reserves, very helpful in our energy crisis. Similarly, Freeman warns against “soak the rich” proposals. The United States’ tax structure is more progressive than other industrial countries’; effort and success are thereby discouraged. Further, well over 99 per cent of high-income families pay taxes but millions of low-income people pay no taxes at all. Freeman writes: “Growing numbers of citizens . . . benefit from government programs but do not have to foot any visible part of the bill.” The danger is that these people will clamor for more welfare programs—at other people’s expense. So perhaps tax reform is needed after all but in different directions from those suggested by Sen. McGovern.
M. PETERSON
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