Do We Need a Special Tax for the War on Terrorism?


I have this cousin who is a real national security hawk. When he pays his federal income taxes every year, he writes on the check–on the "for" line in the bottom left-hand corner–exactly what he wants his tax dollars spent on. One year he wrote, "B-2 bomber." Another year it was "Strategic Defense Initiative." I couldn't help thinking of him when I heard Sen. Joseph Lieberman suggesting that Congress should consider creating a tax to fund America's war on terrorism. During a Senate hearing yesterday, the Connecticut Democrat said:

I think we have to start thinking about a war-on-terrorism tax. I mean, people keep saying we're not asking a sacrifice of anybody but our military in this war ... When you put together the [Pentagon] budget and the homeland security budget, we need to ask people to help us in a way that they know when they pay more it will go for their security.

In his new budget proposal, President Bush is asking for more than $200 billion to fund the wars in Afghanistan and Iraq through 2008, bringing the amount of money appropriated for the conflicts to $662 billion. And there will surely be many more years of additional security spending beyond that. Should there be a Lieberman terrorism tax to help foot the bill for a global "long war" with jihadism that experts say could take many decades? Three thoughts on this:

1) The war on terrorism costs a lot, but Uncle Sam makes a lot. Additional defense spending so far has added only a few tenths of a percentage point to the budget deficit as a share of our nearly $14 trillion economy. Of course, if you think the war on terrorism is a waste of time, even a few tenths of a percent is a waste of money.

2) One reason Lieberman thinks a terrorism tax might be a good idea is that it will help shield domestic spending programs from future budget cuts. Yet nonsecurity spending has hardly been given short shrift of late. According to a report from the Heritage Foundation, nondefense discretionary outlays–adjusted for inflation–surged by 34 percent between 1999 and 2005. That is the largest six-year expansion since the 1970s. It's out-of-control healthcare spending that really endangers other domestic spending programs.

3) Then there is the fairness issue. Is it equitable to pay for wars through deficit spending, thus passing along a financial burden to future generations? That's one way to look at it. Another way is this: Is it fair to ask much-wealthier future generations help pay for a military conflict that is intended to make their lives safer and better? In World War II, after all, the government ran up mind-boggling budget deficits as a share of gross domestic product: 14.2 percent in 1942, 30.3 percent in 1943, 22.7 percent in 1944, and 21.5 percent in 1945. The projected deficit for 2007 is less than 2 percent of GDP.

What lawmakers might want to consider instead is what if anything they can do to keep economic productivity high–or even boost it to greater heights. Robust worker output is why the U.S. economy has been as strong as it has been in recent years. According to new data out this morning from the Labor Department, worker productivity rose 2.2 percent in 2006, continuing a string of strong annual gains starting in 1998. Yet the increases in 2005 and 2006, though solid, were more than a point below the increases seen from 2000 through 2004. Getting productivity back to those levels is a goal both Republicans and Democrats can agree on.