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35 Tax Foundation's Tax Review 1 (1974)

handle is hein.tera/tafoutaxt0038 and id is 1 raw text is: Tax Review January 1974 Vol. XXXV, No. 1 Tax Changes for a Healthy Economy By Paul W. McCracken The title listed on your program would suggest a discourse on tax changes needed to re-vitalize and stabilize our economic system. Our tax system could do with some re-focusing in that direction. Since I do not profess any competence as a tax expert, how- ever, my own remarks will range more broadly, but they are addressed to matters that should be of some concern to this Association. Indeed, the major implication of my remarks is that what the tax sys- tem and the nation both need most now is a slower rise in public spending. While that conclusion seems self-evident, the case leading to this conclusion is not so obvious. Nineteen seventy-three is not a leading contender for going into the annals as a banner year for the American economic system. With this assessment there would be a wide measure of agreement, though only superficial reasons would often be cited. High on most lists would be such facts as that the price level has been rising at the rate of 82 per- cent per year, a rate which would slice in half the purchasing power of a dollar in just over 9 years, or that the unemployment rate will have averaged about 5 percent in spite of the strong inflation. In what might be called the technical sense our economic performance during 1973, in fact, has been fairly good. Real output will have shown an increase of just under 5 percent, and this is a strong performance for an economy whose basic capacity to produce is growing at the rate of not over 4 per- cent annually. Approximately 3 million new jobs will have been created in an economy whose basic work force is enlarging annually by about 2 million only. Even the relatively high unemployment rate is of diminished significance when we note that the rate for married men closed out the year at about 2 percent, suggesting that at its core the labor force is now quite fully employed. This is sensed by the public generally when they put unemployment far down in their list of worries. And even our inflation, while far too high, still means that our price level performance this year will compare reasonably well with that for the industrial world generally. Rates of inflation elsewhere in the industrial world have ranged up to 17 percent per year in Japan. Nineteen seventy-three leaves one uneasy about the economy in a deeper sense. Events this year have raised the more fundamental question about This Issue in Brief Dr. McCracken discusses the convergence of three major forces that threaten to im- mobilize our liberal economics system. He interprets recent events as showing growth in skepticism about the effectiveness of free and open markets, in social concern over the inequities in distribution of the sys- tem's rewards, and in pressures for increas- ing the size of gevernment. To counter these trends, he suggests a generalized income maintenance program to replace bureaucratic welfare empires, Con- gressional budgetary reforms to restore fiscal discipline, and more diversity and competi- tion in the realm of ideas. Copyright 1974 by Tax Foundation, Inc., 50 Rockefeller Plaza, New York, N.Y. 10020, Judson 2-0880 1