A Break in the Force?

June 21st, 2011 at 9:21 am

Ezra reports that Republicans who have been stonewalling on tax revenues in the budget deal might be open to cutting some tax expenditures.  These are the $1 trillion or so of “spending through the tax code” that everyone theoretically wants to go after until you start indicating which ones should go.

That’s Ezra’s point: that even if they go there, they’re unlikely to want to “raise serious amounts of revenue.”

I’ve got an additional concern, though.  They may not want that revenue to go to deficit reduction.  The mantra on this aspect of tax policy is “broaden the base, lower the rates.”  But that latter part is dialable, meaning you can lower the rates far enough to give back all the revenue you just gained from closing the loopholes.  In Ryan world, e.g., any base broadening tends to be fully returned to upper end taxpayers through lower tax rates–i.e., it’s revenue neutral, so it doesn’t help with deficit reduction.

So this may be a positive development, but we’re not there yet.

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6 comments in reply to "A Break in the Force?"

  1. Mary says:

    In my opinion, they should get rid of the mortgage interest deduction, as a start. I would also like to see an increase in the capital gains tax.


  2. Artie Gold says:

    Until real tax rates resemble the income curve — until there’s true progressivity in the long tail — we’re, erm, likely to remain in deep trouble as both an economy and a society.

    Unfortunately, neither side in this debate — due to cultural, if not personal financial self interest — is likely to really consider that necessity.

    In the late ‘seventies, during the “stagflation” days, much was made about the need for lower tax rates to enable capital formation to spur investment (this on the heels of distortions created by the oil shocks of ’73 and ’79). Well, that approach has worked — and too well. There’s no shortage of private capital.

    What there is a shortage of demand to spur actual investment of that capital. We have impoverished the localities, effectively capped wages despite productivity increases and diverted ever more money to the top of the economic ladder — where WE DO NOT EFFECTIVELY TAX IT.

    And we wonder from whence our difficulties come? Even for a moment?


  3. Tyler says:

    I’m at the point where when I hear Republicans talk about their concern for the deficit, I just don’t believe them.

    The last Republican president we could count on to keep our deficit under control was Eisenhower.


  4. foosion says:

    When Republicans say that they care about the deficit and refuse to raise rates, why does anyone take them seriously and not just laugh at them?

    There’s no empirical evidence that higher tax rates in the US hurt growth or employment or do much beyond increase inequality.

    Why does anyone accept their framing of the issue? Why do they get to draw lines in the sand, but for liberals to do so isn’t permitted?


    • foosion says:

      EDIT: Why do they get to draw lines in the sand on taxes (an unpopular decision) and liberals are only allowed to draw lines on Medicare, for which they have overwhelming popular support and the fact that cutting Medicare will raise healthcare spending?


  5. Michael says:

    I find the relentless assumptions of good faith on the part of Republicans to be exhausting, though this:

    “In Ryan world, e.g., any base broadening tends to be fully returned to upper end taxpayers through lower tax rates–”

    is reassuring.


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