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LETTERS : Tax Reformers Are Writing Prescription for Slowdown

August 03, 1986

I was delighted to finally see Don Conlan's lone voice questioning tax reform ("Is Tax Reform Really Necessary?" July 29).

Conlan raises important questions that need to be considered very seriously. The thrust of his concern with the tax bill relates to the stimulus to consumption and the inhibition to new capital formation that the shifting of taxes from individuals to corporations will induce.

It is true that in the end corporations must shift the tax to individuals. However, during an interim period there will be an impulse for more consumer spending and less capital spending. Do we need this?

Our lack of competitiveness in world markets demands, among other things, a huge infusion of new capital. The so-called tax reform induces just the opposite effect. Furthermore, a great deal of the new capital needed is for modernization of our infrastructure--the social overhead capital that is a precondition for profitable private investment.

Up to this point, we have not devised a way to privatize infrastructure investment; it is traditionally a recognized government expenditure. The direction we seem to be taking in tax revision will make it that much more difficult to raise capital for this sector of our economy. Therefore, in terms of traditional financing needs, we should be increasing taxes, not reducing them. We really want more of those things that always in the past we have paid for by means of a tax.

True tax reform can only be accomplished by finding ways to privatize what we have always accepted as government enterprise and/or devising new ways for raising government revenue without the disincentives innate in present tax laws. The present Senate/House bills don't accomplish this. They are, instead, prescriptions for economic slowdown.



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