Sunday, 14 September 2003

Krugman talks sense; news at 11

Paul Krugman, in an apparent effort to rehabilitate his image in the blogosphere prior to the publication of his interview with Kevin Drum, had his research assistants write pens a ten page NYT Magazine article on tax policy. Robert Prather and Matthew Stinson have reactions, while Markus has a roundup of other reactions too. I think Prather is on to something when he writes:

That’s why I’m not bothered by the current “starve the beast” phenomenon; I know we will raise taxes in the future and am not bothered by it as long as it is accompanied by reform. The current system puts a $200 billion burden on the U.S. economy and is itself debilitating.

Matthew’s reaction concentrates on Krugman’s attempt to compare the U.S. tax situation with Alabama’s (a specious comparison at best; by all accounts, Alabama’s tax system is even more regressive than that non-income tax states like Florida and Texas, resembling Mississippi’s in its apparent progressivity coupled with absurdly generous deductions for itemizers), and notes that national conservatives’ meddling in Alabama will be counterproductive in the long run:

National conservatives attacked Riley and his tax referendum hoping this would become another Prop 13 moment of anti-tax consensus. This was wrong-headed and dare-I-say destructive to the Republican cause over the long term in Alabama. Think about it: the middle class people who voted down the tax increase, who, inexplicably, were going to have their taxes lowered by the referendum, are the same people who demand the kinds of government services that the tax increase was designed to pay for—education, law enforcement, and infrastructure. When Gov. Riley has to make cuts in these essential services, the fickle voters (Are there any other kinds?—ed. No.) will turn against Republicans in favor of moderate Democrats who will promise to restore funding.

That being said, one possible reason for Riley’s plan’s failure was that the new tax system proposed in the referendum wasn’t constrained with an effective check on the legislature’s ability to increase taxes at its whim in the future. If the root cause of a lot of middle class discontent with the plan was a (probably well-earned) distrust of the Alabama legislature, the failure to include a Taxpayers’ Bill of Rights or some other device to check tax increases was a major oversight in the plan.