Smith Faculty Opinion Article
The 30 Seconds Outlook
August 1, 2011
“Obama’s obsession with higher tax rates on the rich is not helpful.”
- Robert Barro, Wall Street Journal, July 27, 2011
Barro believes the report of the National Commission on Fiscal Responsibility
and Reform provides useful guidance to the government in finding rational
solutions to its fiscal problems:
1. Growth in entitlements means government revenues
will have to increase. This will require tax reforms in addition to economic
growth.
2. Set corporate and estate tax rates to zero.
These are inefficient taxes and generate little revenue.
3. To provide more efficient allocation of capital,
gradually phase out tax preferences for home mortgage interest, state and local
income taxes, and employee fringe benefits. And, lower marginal tax rates across
the board.
4. To raise additional revenue, a broad based,
flat-rate consumption tax should be adopted. To offset the danger these taxes
will encourage larger government, it will be necessary to reduce the long-term
path of entitlement spending.
5. Sharp reductions in wasteful government spending
is also required, including ethanol and farm subsidies, wasteful spending on No
Child Left Behind, high-speed rail, and growth in Medicare and Medicaid.
6. The Republican effort to reduce wasteful
spending programs without increasing marginal tax rates is sensible.
7. There is no way a default on U.S. government
bonds has to happen. Additional federal revenue is available to make payments
due on government bonds.
John A. Haslem
