Morning Must-Read: Peter Orszag: Toward a Progressive Tax Policy

Peter Orszag: Toward a Progressive Tax Policy – Bloomberg View: “A progressive consumption tax… already embraced by many conservative[s]…

…because it is, compared with other types of taxes, economically efficient. But it is efficient in no small part because it imposes a tax on wealth…. As William Gale and Benjamin Harris of the Brookings Institution have pointed out, the efficiency benefits from a consumption tax occur from a combination of effects… imposing a one-time tax on existing wealth [during the transition]… ‘is a major component of the efficiency gains because of the creation of a consumption tax’. The dirty little secret about consumption taxes is that their putative benefits come largely from Piketty’s core idea: a tax on wealth. The inherent problem with a [flat] consumption tax, though, is that it is regressive…. The solution to this dilemma is a progressive consumption tax…. David Bradford… wages are subject to a progressive tax, and business cash flow is taxed at the highest wage-tax rate. The result is a consumption tax that imposes larger proportionate burdens on high-income families than on low-income ones… promoted by the conservative American Enterprise Institute, whose economists are most unlikely to embrace a simple wealth tax….

Another idea to address growing concentrations of assets that would be more practical in the U.S. than a global wealth tax would be to shift the U.S. estate tax to an inheritance tax…. Neither a progressive consumption tax nor an inheritance tax may be politically viable in the U.S. at the moment, but everything in life is relative. Compared with a global wealth tax, they seem eminently doable.