As long as politicians keep squabbling about what to do about the Bush era tax cuts, we are doomed. There will be no serious deficit reduction. There will be no tax reform. There will be nothing but the same old partisan arguments. Don’t believe me? Just listen to the chatter coming out of the failed deficit super committee.
That’s why it is time to reframe this debate. Rather than bickering endlessly about whether what they are doing is a tax cut or a tax increase compared to a law first passed a decade ago, lawmakers should start talking about what a fair and economically efficient tax code should look like. They ought to just decide how much tax revenue they need and then figure out how to raise it.
Much as I’d love to take credit for this brilliant new insight, it is hardly original. The chairmen of the 2010 White House deficit reduction commission, Erskine Bowles and Alan Simpson, proposed rewriting the entire tax code from scratch and fixed a revenue target for the new law of 21 percent of Gross Domestic Product. House Budget Committee Chairman Paul Ryan (R-WI) did much the same thing when he called for a bottom’s-up tax reform that produces 18 or 19 percent of GDP in federal taxes.
Of course, pols will—and should– argue loudly and often about what the right revenue target should be. But unlike the pushing and shoving over the 2001/2003/2010 law, that debate might actually lead somewhere. Besides, the public might be able to understand it, in contrast to Washington’s current incomprehensible incantations over current policy and current law baselines.
An editorial in the Washington Post, for example, contained the following description of one of the plans proposed in the super committee: “Some Republicans began the process of accepting the need for new tax revenue, offering up a package that would total $300 billion more over the next decade than would be collected if the Bush tax cuts remained in effect.”
Does any normal human being have any idea what that means?
Without an agreed-upon revenue goal, tax reform is impossible. In 1986, reform happened only after President Reagan and both parties in Congress agreed the new tax law would raise neither more nor less revenue than the code it was replacing. Similarly, lawmakers will have to agree this time on how much they want to collect before they can decide how they want to collect it. Not a change relative to somebody’s favorite baseline, but how much money they want to raise.
Will reframing the tax debate in this way break the logjam? I honestly don’t know. But I do know that endless wrangling about the Bush era tax cuts got us nowhere in 2010 when, after much angst, Congress and President Obama extended the law for another two years but resolved nothing. It got us nowhere during the hideous debt limit battle last summer, and it got us nowhere in the super committee that fell apart over the same old argument. Remember the definition of insanity: Doing the same thing over and over again and expecting a different outcome.
I get the politics of all this: The existing formulation allows Democrats to accuse Republicans of wrecking the economy to protect the tax cuts of their fat cat pals. And it lets Republicans claim Democrats are raising taxes on “job creators” and heartlessly throwing millions on the unemployment rolls. I get it. But I’m tired of it.