By Colin Barr
September 20, 2010

Alan Greenspan isn’t the only one calling for a tax hike.

The Organization for Economic Cooperation and Development said in its annual survey of conditions in the United States that the government will have to raise taxes in coming years to restore the economy to a sustainable footing.

The OECD, the Paris-based policy shop run by its 33 member nations, called on U.S. policymakers to reduce housing subsidies, tax health benefits and consider a value-added tax to raise revenue without harming competitiveness or cutting the incentive to save.

The comment comes a week after Greenspan, a longtime crusader against taxes, urged the government to bow to reality and raise taxes to forestall a fiscal crisis.

The OECD noted that the Obama administration aims to restore the primary federal budget, measuring government spending against tax receipts, to balance by 2015. But it said while this plan is “welcome,” it would stabilize the U.S. debt-to-gross domestic product ratio at twice the precrisis level – which would leave the government little room for maneuver in the next crisis.

The OECD said this calls out for further fiscal reform, which will mean more spending cuts and more taxes. It contends that broadening the tax base by phasing out loopholes should be the “first priority” after the mid-decade rebalancing.

One option for boosting government tax revenue, the group said, is to impose a value-added tax. Doing so would encourage a rebalancing of the economy away from the current consumption-oriented model, which is being tested in the current downturn as U.S. trading partners try to export their problems to us at a time of high unemployment here.

Another casualty of any loophole-closing, the OECD says, should be the massive subsidies showered on U.S. homeowners. The body points to Fannie Mae

and Freddie Mac

, the government-sponsored mortgage buyers, as one well acknowledged problem area.

But the OECD also says the mortgage interest deduction should be “reduced or eliminated” once the housing market regains stability, on the grounds that it does little to encourage homeownership and delivers benefits disproportionately to richer households.

The OECD advocates replacing mortgage interest tax deductions with a homebuyer savings plan in which the feds would match participants’ savings, helping them to amass funds for a suitable down payment.

Regardless of what you might hear from politicians, the OECD isn’t buying the notion that American taxpayers can’t take any more. Americans pay the fourth lowest tax rate among developed nations, the OECD said, even counting state and municipal taxes.

“Modest increases would still keep the overall tax burden at a relatively modest level and not impose excessive costs,” the OECD said.

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