Taxing Visionaries

GEWEN, BARRY

Winters & Writing TAXING VISIONARIES BY BARRY GEWEN Herbert Stein begins Tax Policy in the Twenty-First Century (Wiley, 324 pp., $24.95), the collection of papers and speeches he edited from a...

...the young prefer levies on the money made by money...
...His new book, The Economics of Chaos: On Revitalizing the American Economy (Dutton, 402 pp., $22.50), is as much a diatribe against his own profession as a prescription for what ails the U.S...
...The tax consequences of these projections, as certain as any statistical predictions can be, are enormous...
...and that taxpayers should be aware of the main possibilities...
...As a number of contributors point out, there are precedents...
...But, he goes on, the Treasury issues bonds that won't mature until well into the next century and the Pentagon is buying weapons today that will still be in use after the year 2000...
...I found, to my surprise, that in this period of high budgets and high taxes the economy has grown as rapidly in total GNP, per capita GNP, and productivity...
...Nations seeking to lure capital and jobs will be tempted to offer the giant firms an array ? f incenti ves, and the result could be not only a regressive shift in tax burdens but also a cutthroat competition among governments...
...Paul Craig Roberts offers an apologia for supply-side economics, and James A. Baker, then Secretary of the Treasury, comes to praise Reaganomics, calling for a worldwide crusade to lower taxes...
...Summers ison hand representing Michael S. Dukakis' wing of the Democratic Party, that is to say himself, but there are no strong voices for greater progressivity or redistribution, for capital controls or soaking the rich (nor, possibly because Philip Morris Companies Inc...
...Because it has modest goals and addresses an audience presumably already armed with the requisite degree of skepticism, this interesting little volume should accomplish precisely what it sets out to do—"to open the minds of policymakers to some important facts...
...The first concerns demographics, what one contributor calls the " shark in the fiscal water...
...Janeway complains that America hasn't been throwing its weight around enough, that it is being suckered by shrewd Europeans, Japanese and other foreigners...
...Were one to construct a legislative agenda from the accumulated recommendations in this book, it would include lower corporate and personal income taxes...
...In his Introduction, Stein pinpoints two of the elements most likely to affect policy...
...One of Janeway's solutions is to barter food for oil, despite the fact that Saudi Arabia and Canada, two of the top three oil exporters to the United States, cannot use the food, and that a barter system would sink Mexico, the number two exporter, deeper into a hole...
...The problem is that an unencumbered affection for government intervention, especially in today's internationalized arena, can drift too easily into a contemporary form of mercantilism...
...Since the growth of the labor force will come mainly from blacks, Hispanics and Asians, an ugly racial component could be added to the brew...
...This was an all-time high, yet by the turn of the century the average is expected to reach 36.3 years, and projecting forward (admittedly risky), 40.8 years in 2030...
...Our objective here is to recognize that tax systems will undergo major changes...
...Well known as a gadfly, Janeway fits into a dissenting stream that dates back to the late 19th century, when the ayatollahs of the campuses decreed that the only sound economics was free-market, laissez-faire economics (plus ça change...
...We may now be at the bottom of the valley," says Stanford G. Ross, a senior partner at Arnold and Porter...
...Barring unforeseen upheavals, the global economy will continue to expand, enhancing the ability of multinational corporations to move their production facilities around the world as they search for the best available deal in tax breaks, low wages, and a "pro-business environment...
...Stein need not have bothered to explain...
...This idea may not be as Utopian as it sounds...
...There seems little doubt," says one writer, "that a reduction of the very high tax levels will have a favorable effect on the rate of technological progress, on employment, and on economic growth...
...Everyone understands that economists are our century's oracles and magicians, even if their prognostications usually prove to have scarcely more value than readings of sheep entrails...
...Holy writ consisted of the revelations of Adam Smith, David Ricardo and other members of the British School...
...His arguments are not helped by an immodest style bordering on arrogance, nor by a penchant for naming every powerful friend he has in Washington...
...It is advice to warm liberal hearts...
...Thus the strains between the generations, already evident whenever Social Security financing is discussed, are likely to worsen...
...All those who examine the issue agree that serious changes are on the way...
...Then, in a caution that will not endear him to his conservative colleagues, he says: "This suggests to me a certain warning against drawing weighty conclusions about the performance of the economy as government grows...
...higher consumption taxes, particularly a Value Added Tax...
...There are some ideas worth pondering sprinkled in among Janeway's vanities, but with so many faults parading on the surface The Economics of Chaos may not even persuade the persuaded...
...the taxation of workers' fringe benefits...
...So at least considering whether anything useful can be said about taxation in the 21st century seems worthwhile...
...A reader might well begin to wonder whether top-quality schools and a modern infrastructure are assets or liabilities...
...Orthodoxy was challenged by young progressives such as Richard T. Ely, Simon Patten and Janeway's personal hero, Thorstein Veblen, who helped lay the foundations for the modern welfare state...
...funded the conference, for higher excise taxes on cigarettes...
...One economist who continues to fight on after many years is Eliott Janeway...
...Foreign tax credits, for example, are a mechanism employed by most countries, while bilateral revenue treaties date back to 1834...
...reduced rates on capital gains...
...Most of these thinkers took their inspiration from Germany, where economic and political ideas were more tightly linked than in Britain...
...One writer firmly expects the taxes of older citizens to "increase dramatically" in the next century...
...Pension and medical costs will climb at the same time that the working portion of the population shrinks...
...In 1986, the United States declared war on conventional conceptsof international tax law...
...In a closing Summary, he tells how he compared the U. S. economy in the 40 years before 1929, a low-tax era, with the 40 high-tax years after 1945...
...it will now have to work itself out of its present position....' Other pieces concern revenue policy in Europe, in Japan and in the Third World, and the impact of new technology on tax collection...
...Underlying most of the arguments is the free-market assumption that a trade-off exists between efficiency and equity, that a state cannot pursue broad spending programs for social goods if it wishes to compete in today's global economy...
...According to the Census Bureau, the median age of Americans in 1982 was 30.6 years...
...The trade deficit, for instance, has nothing to do with impossibly low wages in Third World countries undermining American standards or superior products coming out of Japan...
...Battles may have been lost, but the war is not over...
...Winters & Writing TAXING VISIONARIES BY BARRY GEWEN Herbert Stein begins Tax Policy in the Twenty-First Century (Wiley, 324 pp., $24.95), the collection of papers and speeches he edited from a Washington conference held in October 1987, with an explanation...
...One cheer...
...Baker's piece indicates the primary shortcoming of Tax Policy in the Twenty-First Century, its conservative political tilt...
...and additional breaks for business...
...The logical solution is some kind of international agreement that produces compatible tax systems among countries...
...Fortunately Stein, though a prestigious conservative economist who was chairman of Richard M. Nixon's Council of Economic Advisers, hasapuckish quality andknowshowto raise subversive questions...
...As Jack F. Bennett, a senior vice president of Exxon, declares in his essay (with both eyes fixed longingly on the vision of lower corporate rates): "Whether we like it or not, we are in serious competition with foreigners and our nation's tax system can severely handicap us...
...Others find a prototype in the General Agreement on Tariffs and Trade (GATT...
...Meanwhile, when the baby-boom generation begins retiring early in the next century, the percentage of pensioners in the total population will start to soar, from less than 10 percentin 1970to almost 14 per cent in 2010 to 21 per cent in 2030...
...that governments should try to influence the direction of these changes deliberately, rather than inching along shortsightedly...
...Since politicians and economists alike hardly appear capable of thinking about tax policy for the following year, it might appear "bizarre" to attempt to say something intelligent about developments 25 and 50 years from now...
...LawrenceH...
...The population as a whole is getting older...
...The attorneys Arnold H. Weiss and Ferenc E. Molnar affirm in the title of their article that "International Cooperation Is Possible," and proceed to plot out a three-step process toward it, beginning with bilateral pacts, moving on to "harmonization" along the lines of the Common Market, and finally reaching "integration," with the Law of the Sea as a model...
...The other key factor is internationalization...
...It is simply a question of illegal (under GATT) dumping...
...as it did in the period of much smaller budgets and lower taxes...
...The elderly tend to favor taxes upon wage and labor income, rather than upon savings or capital gains...
...And against the eager, model-building computer addicts currently being churned out by the universities, Janeway emphasizes that economics can never be a pure discipline like mathematics: "The fundamental cycle to which the economy is subject is not economic at all, but political and military...
...Although the optimists outnumber the pessimists in this volume, several contributors observe that the tax reform of three years ago, so widely hailed within the U.S., overrode existing treaties and was actually a step away from international tax compatibility...

Vol. 72 • May 1989 • No. 8


 
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