Tax To Support Defense And Space Makes Sense, But Lawmakers Will Reject It

Lawmakers won’t back any move to levy a tax dedicated to supporting defense and space programs, because that would commit the legislators to use the money for defense and space when they might wish to divert the money elsewhere.

That was the assessment of Robert D. Hormats, vice chairman of Goldman Sachs (International) and managing director of Goldman, Sachs & Co.

He was asked by Space & Missile Defense Report whether it would make sense to levy such a tax to support vital defense and space programs, so as to shield them from fierce competitive fiscal pressures that will develop as baby boomers retire and spending soars for Social Security and other domestic programs for the elderly. (Please see Space & Missile Defense Report, Monday, June 4, 2007, page1.)

“I’m with you” on the logic there, Hormats said, adding that it would make sense to provide a dedicated revenue stream going to defense and space programs.

But, he said, while it would be a sound move to establish such a tax and revenue flow, that won’t happen for political reasons.

Elected officials like to be able to move funds wherever they wish, and a dedicated revenue flow prevents that, he said. “They don’t want to tie their [own] hands,” he said.

Relatively few federal programs have dedicated revenue flows, such as the payroll tax financing Social Security or the gasoline tax supporting highway programs.