For all the talk of radical tax reform in Washington, there’s a basic question that the politicians and experts have somehow missed. The leading proposals, whether Democratic or Republican, are justified by what they wouldn’t tax — capital gains, interest income, etc. — not by what they would tax. Purporting to encourage savings and investment, these proposals would all tend to shift the burden of taxation in one way or another from income onto work — that is, onto the folks who, in Sen. Phil Gramm’s apt phrase, “pull the wagon.”
There’s a better way, one that doesn’t penalize the things — work and enterprise — that America needs most. Instead of taxing the creation of wealth, the government ought to tax the depletion of it. The federal government should be moving toward elimination of payroll and income taxes and toward taxation of the use of finite natural resources and the pollution that results. Instead of using taxes simply to raise revenues, the government could raise revenue in a way that helps reduce the need for both government and taxes.