Retooling Budgets, Taxes Current Federal Processes and Codes Should Give Way to Such Innovations as an Employment Tax Credit and `Green Taxes'

Article excerpt

THE November election will likely swing on how to invigorate the ailing United States economy. Both the Clinton-Gore and the Bush-Quayle campaign platforms are faced with a rapidly changing, post-cold-war world and a US economy that no longer fits the old policy maps. The crying need of both campaigns is to reconceptualize the economy and rethink the federal budget and tax code.

As new maps are drawn, surprising new directions can emerge: for example, cutting income taxes and replacing them with more taxes on pollution (so-called "green taxes"), more user fees, corporate taxes and tariffs, and a restructured budget.

This approach may refocus the question: Where is all the money coming from to reinvest in our people, infrastructure, and global competitiveness - while creating more jobs and addressing a pressing backlog of social and environmental problems?

The Clinton-Gore answer is familiar: Raise taxes on the richest, close loopholes, increase some user fees, and emphasize investment over consumption in fiscal policy.

Mr. Bush still believes, despite mounting unemployment and the lowest interest rates since the Kennedy era, that "recovery is on its way." His classical "trickle-down" economics holds that jobs are best created by making investment more attractive to those who can invest (through better capital gains treatment, for example).

Both platforms, so far, embrace incrementalism. They call for more investment tax credits - in spite of a decade of evidence that such credits do little or nothing to increase investments or jobs.

Only an employment tax credit for each newly created domestic US job can rebalance the tax code. Clearly, employers and employees should be taxed no higher than investments in machinery and physical plant.

At present, our tax code overrewards the displacement of employees by machines. Such tax arrangements helped lead to the "part-timing" of the US work force, 30 percent of which are "contingency workers." The resulting over-automation of the US economy yielded little in overall productivity gains but inevitably increased structural unemployment.

Both parties rightly plan to reduce the military budget and cut waste. But according to a forthcoming survey on federal budget options by the Americans Talk Issues Foundation, prepared for the Congressional Institute for the Future, most Americans would cut military spending by $47 billion - more than either party has suggested.

On the issue of waste, a good start would be elimination of some of the $200 billion annually that Consumer Reports (July 1992) says is wasted in our mismanaged health-care system. …