Strangely enough, prosperity can be as problematic as hard times. In the last year, both Washington and Augusta have debated the disposition of projected surpluses. During tax season, the urge to return surpluses to the taxpayer may become overwhelming. Yet a dose of caution may be in order here. The equity of the tax structure should receive as much attention as the total amount of taxes governments collect.

Federal and state authorities can cut taxes now, but they do so at their peril. However much conservatives may despise big government, most have never met a bomber or a prison they aren’t willing to fund. In addition, most conservatives still support public education and most liberals have rejected any other way of addressing economic inequality. Schools thus are likely to remain an ongoing taxpayer obligation. Even vouchers would cost taxpayer money. Funds will be required even if a recession reduces government revenues. Since the Federal government can issue bonds, it has more room to maneuver. Nonetheless, even for the feds the political consequences of deficits have become more serious.

At the federal level, conservatives desperately want to cut taxes and yet continue to wear the mantle of fiscal responsibility. They have trotted out the old mantra, supply-side economics. Some propose an across the board cut in income tax rates. Other more ambitious sorts have endorsed a national sales tax. Conservative proposals also include further reductions in the capital gains tax and elimination of the estate tax. All such proposals are likely to reduce federal revenues.

Conservative have argued for a long time that cuts in top marginal rates increase incentives to save and invest, but Reagan era experience proved otherwise. Following early eighties cuts, rates of net private investment declined. Even by the end of the Reagan era, savings and investment never reached the levels achieved during the high tax sixties.

Reductions in the capital gains tax face similar objections. They may indeed help further fuel a stock market boom, but almost all stock market activity is the resale of existing securities. It produces no new funds for real corporate investment. Arguments for estate tax reduction are even more tenuous. The inability of a wealthy person to leave all of his or her estate to children hasn’t deterred the pursuit of wealth. What immortality cannot be achieved through gifts to one’s children is now advanced by contributions to charities or the establishment of private foundations.

Most tax proposals advanced by conservatives amount to little more than a further windfall for the wealthy. Three-quarters of the benefits from proposed capital gains tax reductions would go to families with incomes in excess of $200,000. Estate tax elimination would benefit only the wealthiest two percent of families.

There are changes in the tax code that would make the system more fair and achieve at least revenue neutrality. Taxing capital gains at the same rates as ordinary income and lifting the cap on income subject to Social Security taxation would increase federal revenues. These increases could be used in turn to fund necessary tax reforms, including especially an increase in the earned income tax credit.

Here in Maine reductions in the sales tax have already lessened potential state revenues and Maine’s economy is notoriously cyclical. Since state obligations will only grow in the event of a recession, caution is in order and rainy day funds are appropriate. Ideally the state would do well to expand its tax base by broadening the incidence of the sales tax to include services.

Since such genuinely progressive alternatives are unlikely, legislators might aim at least modest relief at our poorest residents, who already bear disproportionate tax burdens. The state could increase the personal exemption for poor and working class families and could set a refundable state earned income tax credit at 25 percent of the federal level. These changes would benefit even citizens too poor to pay income taxes The Legislature appears likely to enact a nonrefundable credit at 5 percent of the federal level, but more is desirable. Combining adequate tax credits and modest increases in personal exemptions would cost the state less than $50 million while targeting assistance to those who need it most.

Such progressive changes both in Maine and nationally would make our economy not only more equitable but more productive. Increases in the top tax rate for the wealthy under Clinton in 1993 and small boosts in the minimum wage in 1996 were denounced by conservatives as the road to economic ruin. But in fact the modest redistribution and relaxed monetary policy have encouraged working- and middle-class consumption and spurred further job creation. Strengthening such policy initiatives may allow more of our citizens to benefit from continued expansion. Since taxes, like death, are likely to be with us for some time to come, we ought to focus as much on their equity as their total amounts.

John Buell is a political economist who lives in Southwest Harbor. Readers wishing to contact him may e-mail comments to jbuell@acadia.net.