Marr/Rubin on Tax Reform: Look at the Record

November 13th, 2012 at 7:50 pm

I very much appreciated this crisp little blog post from my CBPP colleague Chuck Marr riffing off of a Bob Rubin oped today.

Two key points: First, this one:

Just like today, critics warned that raising the top rate would wreck the economy and the promised deficit reduction would not occur.  The opposite happened:  economic growth averaged nearly 4 percent annually over the Clinton years, helping turn large deficits into large surpluses.

I added employment as a variable on my version of Chuck’s graph—jobs were up 20 million over those years, compared to about a quarter of that during the GW Bush years under the very supply-side tax cut regime that some are arguing for today.

 

Sources: CBPP, BLS

Point two, as Chuck puts it:

Seeking to avoid raising tax rates, many lawmakers are focused on scaling back tax deductions, credits, and other preferences, which are known collectively as “tax expenditures.”  One problem, however, is that, for the most part, these tax expenditures are not what most Americans would consider “loopholes.”  Instead, they are popular and widely used tax preferences, such as the tax-free treatment of employer-provided health care, the deduction for home mortgage interest, and the deduction for charitable giving.  As a result, policymakers will find it politically difficult to scale back these and other popular provisions to any great extent.

So both the politics (including the election outcome, of course) and the economic results point towards sticking with the President’s plan to allow the upper-income Bush cuts to expire.

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5 comments in reply to "Marr/Rubin on Tax Reform: Look at the Record"

  1. Sue says:

    Just a note that this graph was initially confusing to me, since I DON’T think of a positive deficit as a surplus, and when I see a graph increasing over time for a variable labeled “Deficits” I assume that the deficit is increasing. I know deficits, which are negative quantities, are what people are used to talking about, but I think maybe it would be better to label the left-hand axis “surplus” or have the graph decreasing or something! Thanks.


  2. Vicki says:

    With regard to taxes, no one is talking about the effect of huge amounts of untaxed money sitting in corporations, in hedge funds and in the bank accounts of super rich people. One financial newsletter I read was highly critical of Microsoft for using some of its cash hoard to make terrible acquisitions, and clearly preferred distributing that money to shareholders. Does Apple (or the Walton heirs) really need the billions it has stashed? An argument can certainly be made that after a certain point, that unused money will be mis-spent. Perhaps, it would really be far better to heavily tax all of them and use that money for needed purposes in the Us — such as, but not limited to infrastructure repair, funding for colleges so that students are not weighed down with all of that debt, paying people to go to medical school so we have sufficient doctors around…I am open to additional suggestions.


  3. NP says:

    Not only are the “tax expenditures” popular (and seen to be deserving) the middle class takes a great advantage from them and therefore if they were to be reversed then the middle class would have to re-structure their expenditure and consolidate their debt such that demand would be severely impacted. We would then, almost certainly, be looking at another recession.


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