America is under-taxed - and being irresponsible about it

Washington

WE Americans are having the wrong debate. Almost all the arguing over the Trump administration's proposed tax cut centres on two issues: Will the tax reduction stimulate faster economic growth? And is the proposal too generous toward the wealthy and too stingy toward the middle-class and poor?

Interesting questions, to be sure, but mostly irrelevant to the nation's long-term well-being.

The truth is that we can't afford any tax reduction. We need higher, not lower, taxes. What we should be debating is the nature of new taxes (my choice: a carbon tax), how quickly (or slowly) they should be introduced and how much prudent spending cuts could shrink the magnitude of tax increases.

To put this slightly differently: Americans are under-taxed. We are under-taxed not in some principled and philosophical sense that there is an ideal level of taxation that we haven't yet reached. We are under-taxed in a pragmatic and expedient way. For half a century, we haven't covered our spending with revenues from t…