Conservatives Debating Whether to Raise Tax Rates

My thanks to Bruce Bartlett (a true fiscal conservative) for emailing a link to something he rightfully calls nonsense. That the ultra-conservatives at the Institute for Policy Innovation are opposed to any form of tax increase does not surprise me. IPI claims that we can reduce Federal spending to an amount between 10% to 15% of GDP:

What Frum is missing is the work I and other conservatives have done over the years in developing entitlement reforms that would successfully address this coming crisis of big government. Key to that is personal accounts for Social Security. The Ryan-Sununu bill alone would reduce Federal spending as a percent of GDP by 5 percentage points. Later expanding the accounts to disability and survivors benefits would reduce Federal spending by another 1.5 percentage points of GDP. Later expanding the accounts to Medicare would again sharply reduce Federal spending relative to GDP. The second big idea is block granting the remaining welfare programs back to the states, as in the highly successful 1996 reform of AFDC. Such reform now needs to be extended to the other big Federal welfare programs, particularly Medicaid, but also Food Stamps and housing programs.

What IPI seems to be suggesting is to eliminate our Social Security benefits so what we thought were payroll contributions have been transformed to employment taxes. That’s not a tax increase? IPI is also suggesting that we cut off Federal revenue sharing with the states, which would either mean that state taxes would have to go up or transfer payments would have to be slashed. Excuse me – but someone’s net taxes would be increased.

But the goods news here is that David Frum has finally figured out that someone’s taxes have to be increased:

The federal government today consumes about 20% of national income. If left unchecked, the cost of paying for the boomers’ retirement will push that burden up toward 30% in the not at all distant future. If conservatives can halt the growth at 25%, we will have done brilliantly well. But it’s inescapable: The federal government will need more revenue, lots more revenue, and very soon. How is it to be raised? If we leave the job to the Dems, it will be raised in the most economically destructive ways, by taxing work, saving, and investment. If we want to lighten the load on those beneficial activities, we must find something else to tax instead. Bruce Bartlett has proposed an across-the-board value-added tax. I prefer a carbon tax ie, a tax on all forms of energy except wind, solar, and (yay!) nuclear.

While this is progress for Mr. Frum, he failed to tell us how high his tax rate on energy would be or how much revenue he expects it to generate.