December 12, 2010

DEMOCRATS ARE FINALLY BECOMING SUPPLY SIDERS JUST AS THE ANGLOSPHERE TRANSITIONS TO NEOCONOMICS:

Tax Cutters for Truth: Decoding a strange bipartisan deal. (Ezra Klein, 12/11/10, Newsweek)

It’s still Ronald Reagan’s world, at least when it comes to taxes. The Sturm und Drang over tax cuts for the rich obscured the Democrats’ massive capitulation on tax cuts for everyone else. Even the party’s liberals had accepted Obama’s argument that the cuts for incomes under $250,000—which include the bulk of the Bush tax cuts—should be permanently extended. Another way of saying that is, Democrats had agreed the Clinton-era tax rates were too high. If you put it to most Democrats that way, they’d protest vigorously. The economy boomed under Clinton, and the Democrats are proud of the efforts they made to balance the budget. But they’re so terrified of being accused of hiking taxes that they’ve conceded to the Bush tax rates for 98 percent of Americans.

We need tax reform, now more than ever. The result of this deal is going to be an even weirder tax code than we have now—and the one we have now is pretty weird. We’re extending old tax cuts and tax credits and adding new ones. Some may yet be extended further. Businesses won’t want to see the deductibility of investments expire, workers won’t want to see the payroll-tax cut expire, and the super-rich won’t want to see the tax exemption for estates up to $5 million expire. There are so many constituencies fighting for so many breaks that the only hope we’re going to have when we actually need to reduce the deficit—which isn’t yet, but will be soon—is to start from square one on the tax code.


One of the unspeakable political truths of the deficit reduction mania is that if we're serious about it we need to make the tax code less "progressive." After all, if you pay nothing for government why would you want less of it?

Posted by Orrin Judd at December 12, 2010 9:11 AM
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