Brad DeLong has a warning:
I am Cassandra.
I am here to warn you that on taxes America has, over the past generation, gotten itself onto the wrong track.
A generation or so ago, we had a federal tax system which was roughly one-third social insurance taxes on wages, one third taxes on businesses, and one-third progressive taxes on individual incomes.
Over the past generation we have shifted to a system in which (a) taxes on corporations have become much smaller--less than half as large--and riddled with loopholes, and (b) taxes on income have become much less progressive.
This is not good for America.
This is not good for America for two reasons.
First, the market has handed us in this generation a much more unequal distribution of income that it did a generation ago. Therefore it is now extremely good policy to have not a less but a more progressive tax now than we did then--and taxes on businesses are by and large progressive.
Second, over the past generation our our economy has shifted in directions--toward education and toward healthcare--where the private competitive market is much less effective. As a result, a good society now would have a significantly larger role for government than a good society then. And it is thus bad policy to drop any of our sources of revenue to fund government.
This finishes my warning.
Our tax system is on the wrong track.
We need to pick it up, carry it over, and put it back onto the right track.
We need to do this now.