Ben Franklin may have been right when he said that “…nothing is certain but death and taxes,” but America is not so confident when it comes to reforming the tax code. With so much uncertainty, I appreciated yesterday’s blunt discussion on tax reform with a host of experts from around D.C. I especially valued the input from Bill Gale, a Senior Fellow at the Brookings Institution and Co-Director of Urban-Brookings Tax Policy Center, who bluntly pointed out where federal funds are spent. Seventy percent of all federal spending goes to:
- Social Security
- Net Interest on National Debt
The most refreshing thing I heard from Mr. Gale was that even if you eliminated the National Parks, the Department of Education or an assortment of other programs—just eliminate them—it still wouldn’t make a dent in federal spending. And yet we continue to have so many officials saying we have to cut or trim so many programs that have nothing to do with such a large portion of the federal budget.
As Mr. Gale explained, there are two reasons we have taxes—to finance government spending and to correct externalities in the market. Externalities include those from the traditional energy market, energy that is often cheap and dirty. One woman in the audience posed the question, “So why don’t we raise taxes on dirty energy? Maybe the market would adjust itself so alternative energy became more attractive” The answer is that yes, that is a great idea! BUT, it wouldn’t be the politically expedient thing to do. This is a frustrating answer. I care little about what is politically expedient, but I do care about encouraging smart ideas that make America a safer and cleaner place to live.