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MAX SAWICKY: I would like to see less economic inequality than we have now. A bigger revenue system is a better revenue system if one is focused on inequality. I also admire David Bradford's work, and that's how I got into writing about the cash-flow version of the consumption tax, with a few bells and whistles that would make it aggressively progressive, such as defining bequests from estates as consumption. That leads me to the idea of a lifetime income tax, which simply taxes all income once when consumed and finally when it is transferred, at death or through gifts. And I agree with Dan that the tax should be territorial. What that means is, there would be a rebate of taxes on exports and full tax on imports.
RENWICK: There can be great debates on the national level as to what to do with tax reform, but often they fail to take into account the consequences for state and local tax systems. The current tax proposals in Washington are an example. The proposal to exempt dividends from taxation would have disastrous effects for New York State and turn its $9 billion deficit into a $10 billion deficit because it would make it very difficult for the state to tax dividends. We struggle at the state level trying to capture the income of corporations. I would like to see a movement toward combined reporting, in which corporations have to report on all their activities in all their affiliates, where you would be able to look at corporate income and allocate it across the 50 states. Each state would then have the right to tax it and capture the taxes on the income that is made in its borders.
PHILIP JEFFERSON: I would definitely want the consumption tax to be progressive. I would apply higher marginal tax rates so that those who have a higher level of consumption would be contributing proportionately more in taxes. The implication here is that we want to encourage savings. I would also want to provide generous exemptions for low-income individuals and households.
TIME: How do we get there?
JEFFERSON: One proposal that has been put forth by David Bradford is that there would be a transition when we would basically fill out both types of returns, and early in the transition you would pay 80% of the income tax and, say, 20% of the consumption tax, gradually increasing the amount paid under the consumption tax until it's 100%. That would lead to quite a bit of confusion because you would have a period in which households would be filling out two types of returns. That strikes me as a nightmare. I would favor some type of cross-section phasing, where you would draw random samples of the population each year and let those people make the transition in that year.
BRADFORD: Can I make a pitch for my transition scheme? I propose simply a new schedule in the income tax. Call it Schedule X. The information is really simple for the Schedule X tax base. You put in, for your business, the receipts from sales and subtract purchases from other businesses. Then you subtract your payments to workers. All that is information, basically, they have to have for their present tax returns. It just includes it in the new Schedule X. For individuals it is even easier. You enter your earnings from your employer.
TIME: You all seem to favor some version of a consumption tax.