Should the U.S. Tax Like France?

The U.S. has a deficit crisis on its hands because government has grown quicker than tax receipts. So Washington can either shrink the size of the government, raise taxes, or both. It's as simple as that.

But if politicians continue to embrace big government as they have over the past few decades, then somebody has to pay for it. Since you can only tax wealthy Americans' incomes so aggressively until the rates begin to appear puntative, a greater burden will likely have to eventually fall more on middle- and lower-income Americans. Indeed, a value-added tax would work in precisely this regressive manner.

University of Chicago economics professor Casey Mulligan worries about this problem and compares the effective tax rates of France (a nation where taxes make up 43% of GDP) with the U.S. (where that portion is just 26%):

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In his accompanying analysis, he explains that big government eventually must turn to more regressive taxation by necessity.

Read the full story at Economix.