John Stossel makes an important point today that those who want tax reform need to focus on spending reform too. Anything spent by the government is going to be taken out of the economy one way or another, and is going to come with a cost. Here’s how he puts it:
The built-in unfairness of the tax system has prompted a range of tax-reform proposals, such as a flat tax and replacing the income tax with a sales tax. These alternatives are better, but they have their drawbacks, too. For that reason, there is something more urgent than tax reform: spending reform.
The true burden of government, the late Milton Friedman said, is not the tax level but the spending level. Taxation is just one way for the government to get money. The other ways — borrowing and inflation — are also burdens on the people. The best way to lighten the tax burden is to lessen the spending burden. If government spends less, it takes less. And if it takes less, the tax system will weigh less heavily on us all.