My idea is to replace the tax on business payrolls and the corporate income tax by a 14% VAT, earmarked for Social Security. & to have an 8% individual payroll tax with no cap, earmarked for Medicare. If SS & Medicare are 2/3 of the federal budget, it makes sense to reform taxes to pay for them, first—-and such a SUPPLY SIDE tax reform would reduce inflation & increase growth, too. If the Fed tightens now to reduce inflation caused during Covid 19 shutdowns, how will supply chains recover? It seems to me that revenues dried up during Covid 19 shutdowns—-which put many people out of work and business. Government increased spending during the pandemic to compensate for lost wages and revenues from the shutdown, for testing, for masks, for all that Covic spending pushed by Trump. Government had to borrow money to pay for this spending. The Fed bought up all this necessary new debt so it didn’t get dumped onto the bond markets and drive up interest rates. The Fed was trying to prop up the housing market and stock market during the Covid19 shutdowns so panic didn’t spread to financial panic. We are paying the price for that now with inflation, as things return to normal and unemployment rate falls below 4% again. But it’s crazy to worry about “runaway inflation” and kill the lending/borrowing environment for supply problems affecting prices before the economy has healed. People still need access to capital to fix what was broken. The way out of inflation is GROWTH, which is why Reagan used tax cuts and deregulation. GOP needs to get serious about balancing the budget again. but what we do NOT need now is another Fed-caused recession and crash.
What I fear is the Democrats creating new entitlements, regulations,and anti supply side tax changes that kill growth and healing and lead to more inflation, because they put a drag on the economy.
What happened in the 1970s is that fiscal and regulatory policy strangle economic growth and competition and innovation……and the Fed was tasked BY LAW to pump money into the economy to get growth and more jobs…..but all that money led to inflation, not growth. But when Trump cut the corporate income tax and deregulated, we got more competition, innovation, investment, business spending that drove up productivity and wages….and inflation fell.
The problem with that is that the more you cut taxes on the wealthy the more they vote Democrat. Just look at the media and Wall Street as well as upper class suburbs and urban areas and you will see that they are now the problem.