Reinvent ‘Monstrous’ Tax Code: Ex-Treasury Secretary O’Neill

August 18, 2012  ·  Filed under: Other Tax Plans, vs. VAT Tax

[Author's note: The following is an article that originally appeared on CNBC.com]:

The U.S. economy needs a simplified and more “progressive” tax code that would abolish income and corporate taxes, while bringing in enough revenues to pay for the government’s obligations, former Treasury Secretary Paul O’Neill told CNBC’s “Squawk Box” on Friday.

“Our tax code proves we are not an intelligent people because no intelligent people would have invented this thing,” said O’Neill, who called the current tax system, often criticized as bloated and cumbersome, a “monstrosity.”

In the context of the overall debate about fiscal reform, O’Neill called for a “progressive…value-added tax” that could help boost economic activity by substituting for corporate, payroll, and individual income taxes.

O’Neill, who was unceremoniously drummed out of his job as Treasury Secretary under former president George W. Bush, described himself as unenthusiastic about either of the major contenders for the presidency.

The former head of Alcoa said he would “like to” support the budget proposals of either President Barack Obama or his Republican challenger, Mitt Romney.

However, he said that “none of the plans on the table would get us a balanced budget again until 2040. I would like there to be a balanced budget in my lifetime.”

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7 Responses to “Reinvent ‘Monstrous’ Tax Code: Ex-Treasury Secretary O’Neill”
  1. Just for the sake of discussion, a 10% VAT could replace all the income tax revenue provided we want to try and tax services. Hasn’t worked anywhere else in the world, but maybe we are smarter than 130 other nations?

    Failing that, a 20% VAT would do about the same thing. Despite the Senate turning thumbs down on a VAT a couple of years ago, I believe we will be hearing more about a VAT soon. Experience does show that a VAT has far less evasion than a national sales tax due to the “self policing” nature of the collection process. And if we want to change the definition of progressive from what we earn to what we spend, I guess O’Neill’s VAT would be progressive. The more we spend, the more tax we pay. But, a VAT as well as a sales tax both hurt the poor. Can anything other the monstrous Fairtax prebate solve that problem?

    Hank Van Gieson  ·  Aug 18, 2012 at 10:05 pm  ·  Permalink
  2. I believe we should have a modest VAT and a simplified income tax system with reduced marginal rates. But a sensible proposal like that would be so easy to demagogue that it’ll never see the light of day.

    Also, I would mildly object to Morph’s phrase that O’Neil was “unceremoniously drummed out” of the Bush White House. That phrasing, without any accompanying explanation, implies that O’Neil was an incompetent Secretary of Treasurer. As the link more accurately describes, O’Neil was actually trying to keep the deficit from exploding and got crossways with the real powers that be in the Bush White House, which were the political hacks who could care less about economics.

    Hayden Kepner  ·  Aug 20, 2012 at 6:43 pm  ·  Permalink
  3. Wasn’t my phrase – that’s a reprint of CNBC.

    Morphh  ·  Aug 20, 2012 at 6:45 pm  ·  Permalink
  4. Let’s see, first Comrade O’Neill wantes a system the was “MORE PROGRESSIVE”. Maybe the top 1% should pay 100% of all taxes. Progressives would still be unhappy – they would start raising that and have the 99% paying negative taxes.

    Bush was already Socialist – he wanted his tax reform to retain progressivity (he fantasized that we could remain ‘just a little bit” pregnant (it just does not ever work).

    Your NRST and VAT’s may not have progressive rates, but they are progressive in the broader sense that the some pay many more doillars of tax than others
    (while having no greater impact on our nation’s common charges.

    “YOUR SHARE” is the right answer (conceptually).

    Stephen C. Eldridge  ·  Aug 22, 2012 at 9:18 pm  ·  Permalink
  5. Here’s the thing: there is stuff beyond VAT and fairtax that needs to be considered as part of the mix. The Clinton/Gore administration seriously considered a “carbon tax” sufficient to meet Kyoto guidelines. Ralph Nader has seriously proposed a tax on assets above $5 Million per family. Both have some significant support among economists. Pollution taxes are thought to make the price system more efficient by taxing a negative externality. Taxes on concentrations of wealth can be justified on the ground very wealthy folks have a “monopoly of scale” and that they got a huge windfall from trickle up effects from the Reagan Bush tax cuts(Ed Wolff at NYU makes the claim the ONLY people to experience significant gains the last 30 years are the top 1% of asset holders-those with assets over $5 Million/family). I understand folks here are biased towards fairtax-but if you want folks to take you seriously you need to be familiar with other stuff that has significant support. Right now, the only group supporting fairtax are economic conservatives that don’t really care much about distribution of wealth-and that just don’t fly politically. I think fairtax has enough broad support the ideas around it deserves to be part of any new consensus-but politics is about compromise and consensus.

    Randall Burns  ·  Sep 29, 2012 at 4:40 pm  ·  Permalink
  6. Randall,

    I will put aside the meaningless morass of carbon taxes (we should instead tax Marxistrs – a head tax.

    So Comrade Nader and some unidentified Marxist economists agree we need a tax on all wealth over $5MM. Why not drop that to $5M.

    Comrade Burns, you propose unrestricted Marxist wealth redistribution. Why don’ you just emigrate to Cuba, rather than destroying this country?

    We don’t need more tax revenues, we need LESS GOVERNMENT SPENDING.

    Randall, we still have a Constitution (i know you Socialist/Progressives don’t believe in it) which severely limits federal spending. Congress is in violation of that Constitution.

    Stephen C. Eldridge  ·  Oct 1, 2012 at 1:07 am  ·  Permalink
  7. Actually, we need to tax federal employees and tax-exempt organizations

    Belinda  ·  Dec 6, 2012 at 12:51 pm  ·  Permalink

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