On the Right -- Wm . F . Buckley Jr . (11/22/91 ) YOU WANT TAX REFORM ?

In this open season on how taxes might be altered one hear s not only from macro types, who wonder what would be the effect o f this tax revision or the other on the Gross National Product, bu t from others who allow themselves to wonder how might a refor m affect -- life in general . In Great Britain, for instance, th e upper middle class (UPM) has been seriously hurt, much more so tha n by the recession in the early eighties . Journalist Henry Porte r writes in The Spectator that he was intrigued by the few words h e could hear being uttered by the wife of an M .P . to his own wife a t an informal gathering . In Britain, the UPM talk almost exclusivel y about schools, jobs, and property . But none of these contexts mad e any sense of what this UPMperson was saying . Curiosity finall y impelled the journalist to edge closer to the conversation : Wha t was going on was an attempt by the MP's wife to sell his wife a water purifier . The UPMperson, like so many others, had gone int o business, to attempt to leaven the impact of the recession . Auberon Waugh will not lose an opportunity to take a free , and iconoclastic view of such dull subjects as the economy, and h e permitted himself to think out loud about tax reform of the kind that might affect even UPMers down on their luck . Not long ago the government abolished the surcharge of 15 per cent on so-calle d "unearned income," which is what comes in from General Motors, whe n General Motors stock pays dividends . Of course before thos e dividends are paid out, the company pays a corporate tax, so tha t the income is taxed twice -- three times, if you remember tha t 1

corporate expansion is financed by after-tax incom e Well, says Mr . Waugh, "There might be a good case for puttin g a surcharge on so-called 'earned' incomes . One could point out tha t we want to encourage investment, and discourage wage-rises, tha t practically no one in Britain does any work for their so-calle d 'earned' incomes anyway ." But, he sighs, "that would be provocative ." Becoming a little more serious, he goes on to propos e that dividend income be taxed at a lower rate than regular income , on the grounds that Great Britain desperately needs mor e investment . "But," -- he more or less abandons hope -- "even thi s would require a sort of soft-shoe shuffle of which I fear th e Conservatives are incapable . " He then comes up with what he thinks a capital idea, namel y to make tax deductible the cost of domestic service . This woul d mean that more British could afford to have gardeners and butler s and chambermaids, and more unemployed would find work, a s gardeners, butlers, and chambermaids . But (always there is a but . . .) "When I put it to [then Chencellor of the Exchequer] Nige l Lawson that he could save the country in this way, he looked craft y and said its effect would be to subsidize those who already ha d butlers and nannies without encouraging new employers . This seem s obviously wrong," Mr . Waugh reflects . "My proposal, which woul d also go some way to remedying the housing problem, is not one t o wave before the electorate, or even to debate with great nois e before the conference . It is one to be discussed quietly in smoke filled rooms over the port, brandy or fizzy peach wine before th e

lights are turned down, clothes are taken off and the seriou s business starts . " In the United States there are inventive proposals, les s droll when one focuses on such as Andrew Tobias's, made in an essa y in Time Magazine . Tobias, who has no inclination whatsoever to coddle the rich , believes in reducing the capital gains tax to ZERO -- his capita l letters . But . . . he would do this only on future investments i n newly issued stocks and bonds : "Such a rifle-shot tax cut would b e a huge incentive to invest in new companies, and to fund th e expansion and modernization of old ones, but at a tiny fraction o f the cost of an across-the-board cut . It would be a boon for Wal l Street, making it that much easier to issue new securities . . . I t would be cheap, it would be simple, and it would do exactly wha t the Administration claims it wants to do : stimulate new investmen t to improve productivity and create jobs . " And no diversionary talk, please, about holding th e securities for a year or three years or whatever before th e investor could realize his profit : "It wouldn't be necessary unde r this rifle-shot plan . Initial investors would have an incentive t o let their gains mount tax free . As for traders and speculators, why impose artificial barriers to the movement of capital? There' s nothing wrong with a fast profit honestly come by . " But creative reforms are unlikely . To borrow from Mencken, a Democrat is someone who can't sleep at night for fear tha t somebody, somewhere, is making money . -END -