The Tax Reform Trap, WaPo and NYT Editions

October 2nd, 2012 at 7:50 pm

A nice editorial in this AMs WaPo makes a point I’m always looking to amplify around here: when tax reformers talk about broadening the base and lowering the rate, be very careful.  You might well end up with the lower rates, the same tax base, and thus larger budget deficits and more pressure to cut spending.  Add to this the reality, as Larry Summers presses here with what seems to me to be air-tight logic, that the demands on the spending side of the government ledger are only likely to grow in coming years–by demographics alone, though Larry mentions other factors in play–and you see the urgency with which we must avoid the tax reform trap. 

The NYT weighs in with its own elucidating dive into the tax shelters employed by the wealthy that also put downward pressure on revenues, and thus pose a further challenge in the sense Summers notes re future revenue needs.  I recently heard NY State’s AG Eric Schneiderman give a talk and he stressed the following, which made a lot of sense to me (this guy always makes a lot of sense, btw–not only does he very strongly speak truth to power, he seems to really relish doing so…and if you look at the cases he’s prosecuted, he doesn’t just talk-the-talk).

The very wealthy who carefully manage their tax returns so as to shield income from taxation don’t want to hide what what they’re up to because it’s illegal.  They want to hide what they’re up to because it’s legal.  Once you start learning about the kinds of practices the Times documents this AM, I challenge you to defend them on the basis of economic efficiency versus dynastic preservation.

 

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3 comments in reply to "The Tax Reform Trap, WaPo and NYT Editions"

  1. save_the_rustbelt says:

    Schneiderman is doing the work Eric Holder should be doing – why can’t Obama fire incompetent cabinet members? Or….Did Wall Street buy protection with those $38,500 a plate dinners?

    And why hasn’t Jon Corzine been arrested?

    That the tax code is a mess is hardly news, and it is not likely to change.


    • Michael says:

      If only the Tsar knew!

      Dude, seriously, Holder isn’t incompetent. He’s doing his job as his boss spelled it out for him.


  2. pjr says:

    Steve Pearlstein at the Washington Post, in his “manifesto for the entitled,” includes: “I am entitled to have the company pay for breakfasts and lunches, a luxury car and private jet travel, my country club dues and home security systems, box seats to all major sporting events, . . . .” He forgot vacations (errr, I mean trips to conferences) and other items, but my question simply is what’s the tax rate applied to these forms of compensation to owners/executives of businesses?


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