Dec 292008

For years — maybe even decades — I’ve been talking up the idea of a net-zero gas tax. Except I didn’t know it should be called “net-zero” until I read Charles Krauthammer’s article in the January 5 issue of The Weekly Standard. And it hasn’t been until recently that I’ve decided in my own mind that the countervailing tax reduction should definitely be in the FICA tax.

For most of these years it has been like talking to a brick wall. LeftLiberals don’t like the idea, because for the most part they don’t really care about the environment. What they care about is growing the government and increasing the opportunities for power and corruption, all of which can be accomplished much better with CAFE standards and carbon-trading schemes (and more recently, with big bailouts). Conservatives until very recently haven’t liked the idea because their heads have been stuck firmly in the sand. Libertarians don’t like the idea because of the word tax and because it requires government action. They can’t get it through their heads that you can’t have free markets without government action. (LeftLiberals also sneer at the idea using the same words: “What? I thought you people were against all government regulation.” But that of course is not the reason they oppose it.)

It has been in just the past few weeks that I’ve been reading a few articles here and there in which conservatives have been talking up the idea. And now Krauthammer has explained the case in full.

I would add just one point to Krauthammer’s suggestion of reducing the FICA tax to pay for it: I would take Barak Obama up on his idea to expand the FICA tax to include all income; however, it too should be a net-zero increase. This would really give lower income people the tax cut that he talked in favor of during his campaign, and it would remove a regressive tax from our system. Obama probably didn’t mean to keep his campaign promise, but let’s pretend that he really did and let’s hold him to it.

One additional reason is that the Social Security system is underfunded, much like the Madden Madoff system was. There will be a temptation to enact a big gas tax with countervailing reductions in FICA, and then to increase FICA to pay for Congress’s fraudulent promises on Social Security. Maybe that will have to happen to some degree, but I want all the wealthy, influential people to have a stake in that decision, and not to be sitting out the issue because it doesn’t concern their own pocketbooks.