I largely agree with Steven Tele's critique of Michael Lind's tax plan: Big thinking on liberal tax reform should substantially change the tax code, and more to the point, simplify it. Extending credits to payroll taxes may be good for equity, but it's making the system ever more byzantine. This alternative proposal from Mike Graetz, however, is rather interesting:
a) Eliminate the income tax entirely for families earning up to $100,000, indexed for inflation.
b) Impose a flat rate tax on income above that level, at a rate of 20-25% (I lean strongly toward the upper end of the range).
c) Impose a VAT tax at a 10-14% rate.
d) Lower the corporate tax, aligning it closely to the new, lower income tax rates (while also forcing corporations to use the same accounting standards when they deal with the IRS and the SEC).
e) Mike would deal with the EITC's elimination by providing a refundable offset to the payroll tax. I think that my suggestions above could do roughly the same thing, or we could establish some compromise between what I want and what Mike wants.
I'd alter this substantially, noting that taxes would be done automatically for those making up to $100,000 (April 15th will be just another spring day, as the righties like to say), making the rates above $100,000 substantially more progressive, not lowering the corporate tax, and keeping the EITC as is. So maybe I don't much like Graetz's idea. But I do like VAT's, particularly of the sort that exempt the goods the poor buy the most (i.e, food). And more generally, Democrats need to get better at making the case for dedicated taxes, like a 4% VAT that pays for health care. Taxes shouldn't be giving money to the government for unspecified purposes. They should buy things.
