SORRY, BUT it's time to start thinking about the bill to increase taxes.
But, you protest, it's been hardly a month since President Reagan and Congress cut taxes. It was, you say, the grand, final cut in the income tax, designed and built to run forever.
How true. You are entitled to a deep sigh. Mr. Reagan and Congress got a bit carried away with themselves. Those income tax reductions are going to grow larger as time passes. Under the new tax law, there won't be enough money to provide both an adequate national defense and a level of public services that most Americans consider a barely decent minimum. Without a tax increase, the 1984 federal budget, far from coming into balance as Mr. Reagan promises, will be running large and rising deficits. Last month's legislation--the tax cut and the spending cuts together--put the budget on a track that, by 1984, in the absence of further action, would produce a deficit around $120 billion. There will be some further reductions in spending before then, but it is hardly realistic to expect them to amount to more than a small fraction of that $120 billion.
What then? If you join us in thinking it important to work consistently toward smaller deficits-- and, not incidentally, toward lower interest rates-- you will want to look at some of the possibilities. In the distance you can already hear the drums beating for a VAT--a value-added tax, in the European style--but that's merely a federal sales tax and not a very inviting proposition. What else?
First on the list is a national severance tax on oil and gas--a percentage of the wellhead price, collected from the producer. It's time to abandon the concept of a windfall, and to make the present oil windfall tax permanent. It's also time to deregulate natural gas, and to tell the natural gas producers that the price for it is a federal tax. In addition to raising revenue, a stiff severance tax would also serve the useful purpose of slowing down the rate at which the gas and oil industries are drawing investment and profits away from the rest of American business.
Another target is the series of wide-open deductions that Congress should have--but did not-- limit when it passed this year's bill. Congress should have abolished the deduction for consumer credit. Why should credit charges be paid in untaxed dollars when the rent and the groceries are not? How about a limit on the mortgage interest deduction?
Why not revive those user charges that Mr. Reagan proposed last March--and hastily abandoned when the private airplane and boat owners squawked? It's not a huge amount of money in comparison with the coming deficits, but it's several billion dollars a year.
All of these suggestions put together do not come to $120 billion a year, or to half that much. But, if pursued promptly, they would buy a little time while the country comes to terms with the implications of the tax bill that has just been enacted.
The tax bill was intended to force further budget cutting and, despite some obvious errors, the present wringing-out of the budget is a healthy process. As Mr. Reagan inherited it, the budget had a lot of slop in it, and most Americans seemed to feel that their tax money was being spent with a good deal less care than it had been earned. But the budget-cutting will reach a point at which voters let Congress know that it's gone far enough. When that moment comes--and it's evidently not far away--Mr. Reagan and Congress will have the melancholy duty of raising taxes to pay for what's left. It's not too soon to start considering which taxes, paid by whom.