Robert Frank in today's Economic View in the New York Times:
Given the political risk of proposing painful tax increases in an election year, many fear that the [fiscal] crisis will remain unresolved. Yet a simple remedy is at hand. By replacing federal income taxes with a steeply progressive consumption tax, the United States could erase the federal deficit, stimulate additional savings, pay for valuable public services and reduce overseas borrowing—all without requiring difficult sacrifices from taxpayers.
Under such a tax, people would report not only their income but also their annual savings, as many already do under 401(k) plans and other retirement accounts. A family’s annual consumption is simply the difference between its income and its annual savings. That amount, minus a standard deduction—say, $30,000 for a family of four—would be the family’s taxable consumption. Rates would start low, like 10 percent. A family that earned $50,000 and saved $5,000 would thus have taxable consumption of $15,000. It would pay only $1,500 in tax. Under the current system of federal income taxes, this family would pay about $3,000 a year.
As taxable consumption rises, the tax rate on additional consumption would also rise. With a progressive income tax, marginal tax rates cannot rise beyond a certain threshold without threatening incentives to save and invest. Under a progressive consumption tax, however, higher marginal tax rates actually strengthen those incentives.
Now more than ever a consumption tax such as the FairTax makes economic and fiscal sense. Senator John McCain, GOP presidential candidate, endorsed the FairTax last Thursday:
If the FairTax crossed my desk, I’d sign it. If a flat tax did, I’d sign it.
[The tax code] has to be made simpler and fairer.
Back home, in the Boston Globe, Edward Glaeser on fixing the AMT:
The AMT is terrible tax policy, both because it targets the wrong deductions and because its unpredictability gives lawmakers too much ability to misrepresent the future.
Indeed. But the professor continues:
I am also unenthusiastic about eliminating tax preferences for larger families. Most people seem to think that giving tax relief to bigger families is a matter of simple fairness. As an economist, I lack standing to make proclamations about fairness, but there is another reason to subsidize larger families. When parents decide to have kids, they are creating a massive benefit for their children. As much as parents may love their children, they are unlikely to reap all the benefits those children will offer during their lives. Economists often think that it makes sense to subsidize behavior that generates big "external" benefits for others: parenting seems like a particularly natural example of such behavior.
Whoa, slow down. Dr Glaeser is comparing the value of birth versus the value of not, but how are we to assess the value of the unobservable? Let's fix the AMT, but leave that particular policy prescription out of the mix.
Linux System Programming is devoid of discussion on taxes or economics of any sort, but full of treatment on system programming on Linux. And what does the book use for examples? Pirates.