Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, July 5, 1990                   TAG: 9007050177
SECTION: EDITORIAL                    PAGE: A-9   EDITION: METRO 
SOURCE: RAY L. GARLAND
DATELINE:                                 LENGTH: Long

WITHOUT DISCIPLINE TO CAP SPENDING, TALK IS OF TAXES

Which is no longer true, of course. A great many taxpayers - perhaps a majority - receive more in direct and quantifiable government benefits than they pay in taxes, making no allowance for such unquantifiable benefits as the national defense. This helps explain a considerable appetite for higher taxes.

It is the nature of all socialist systems to advance the idea that the efforts of individual citizens exist - indeed, only have value - as they serve the "public good." But we do not have to guess as to the end of that particular road, for it is a road that many have traveled. The point was made in a recent article by a Russian economist purporting to demonstrate that a laborer in the United States commanded more goods than a member of the "professional class" in the Soviet Union.

Still, this generation of Americans has no moral right in a time of relative peace and prosperity to be incurring massive debts that will have to be carried ad infinitum at 8 or 9 percent interest. Whatever it is that we believe we want or deserve, whether it's a B-1 bomber or a hip replacement for a citizen nearing the end of life, we ought to be prepared to pay for it now.

It is a certainty that each new generation will have its own needs, crises and perceived priorities. We of this generation should not in our greed presume to preclude their right of choice. Excepting only such dreadful times as the Civil War and the Great Depression, every previous generation of Americans conceived a duty to pay as they went.

It is not a lack of revenue that has landed us in the soup, but a lack of fiscal discipline to cut our coat to fit the supply of cloth. Federal tax revenues have increased by 100 percent since 1980. Had the increase in spending been kept slightly below the growth in tax revenues, there would be no problem now or a very manageable one.

If Social Security is to be taken "off budget" - and it will not be until young people revolt - we have a $200 billion problem. An abrupt balancing of the federal budget absent the use of surpluses in the Social Security trust fund would require an across-the-board 20 percent increase in taxes, or a corresponding decrease in spending. Either would wreck the economy.

As for spending cuts, dream on. Even as the headlines proclaimed the president's willingness to consider new taxes if the Congress would consider spending restraints, the House of Representatives was putting the finishing touches on a variety of appropriations bills for fiscal year 1991. Members were busily adding billions to what Bush had requested, happily oblivious to the empty threat of a gigantic "sequester" under Gramm-Rudman for failing to meet their own deficit-reduction targets in the current fiscal year. A floor amendment making a 2 percent across-the-board cut in spending for the departments of State, Justice and Commerce was easily defeated.

The reality behind the "everything-is-on-the-table" rhetoric is that Democrats want to increase the income tax while Republicans look longingly at excise taxes. Some of the larger frauds among the Democrats will say for the record that "entitlements" such as Social Security are on the table. But even the dumber Republicans are wise to this old trick.

What is really being looked for is $50 to $70 billion a year in new revenues, or an average contribution in the range of $250 a year from every man, woman and child. That would pacify the capital markets and might persuade the Federal Reserve to push interest rates down a peg, which might stimulate enough economic growth to offset the reduction in consumer spending and saving that the tax increases would cause.

According to the Congressional Budget Office, a doubling of the federal cigarette tax will produce $3 billion a year. A 20 percent increase in the tax on distilled spirits would generate $4.5 billion. Another 12 cents on a gallon of motor fuel would bring in $12 billion. So much for the bonanza of "sin" taxes that everybody puts first on the table. Now for the hard part.

Here are some big-ticket items having little or no chance of passage at this time, despite some persuasive tax-fairness arguments in their favor. Eliminating the deductibility of state and local taxes on the federal return would produce $32 billion. Taxing employer-paid benefits as income would get you $25 billion. Raising the premium on Medicare Supplemental insurance to cover half the actual outlays would generate $19 billion. Limiting the deductibility of mortgage interest would give you $15 billion.

Ever since the Tax Reform Act of 1986 established only two federal income-tax rates, 15 and 28 percent, demagogues have been harping upon an apparent inconsistency that taxes some income at 33 percent before the rate drops back to an across-the-board 28 percent on all income for those earning above $162,000. There is, however, a simple explanation for this: The 33 percent rate is imposed to "take back" the benefit of the 15 percent rate on the bottom portion of income.

Increasing the top rate from 28 to 33 percent would generate $44 billion a year, and translate to a total tax burden, typically, of close to 50 percent. Those not in such a bracket might ponder the fate of all tax schemes, which is to keep reaching down.