The Only Fair Way To Raise Taxes
Economist Richard A. Musgrave has sounded a sober warning: it is not enough to conclude that taxes should be raised to cope with the budget deficit; the only fair and flexible way to do it is to raise personal income taxes.</br></br>Musgrave, considered the dean of public-finance economists, has been a guiding force in American economics for more than 50 years. And what he advocates is a restoration of the progressivity in the upper tax brackets that was lost via the Tax Reform Act of 1986. That means a higher top rate-say, 40 percent.</br></br>That is not the message that politicians want to hear. For the moment, they are happy with low income-tax rates and President Bush's "no new taxes" pledge. But increasingly, there is the suspicion that Bush's "read my lips" commitment may be good for 1989 only.</br></br>In that case, the game will focus next year on what kind of taxes should be raised. Musgrave knows that politicians of either party, when pushed to consider taxes at all, tend to look for ways of hiding or disguising the effects, through so-called sin taxes on tobacco and liquor, or possibly higher gasoline taxes.</br></br>He said in an interview that he doesn't like such taxes-or value-added taxes-because they hit lower-income groups too hard, although for environmental reasons, he could be talked into boosting gasoline taxes.