Rates or Base? The Main Sticking Point Re Cliff Negotiations

November 28th, 2012 at 9:41 pm

At this point, I’m pretty convinced that the lynchpin issue to be resolved on the fiscal cliff–the one from which all else will flow–is whether to raise the new tax renvenue that both sides now agree is needed from either higher rates or broader base.

The ultimate outcome might involve some measure of both, but that still means R’s will have to accept rates going up the top 2% of households.

So you may be thinking: since revenue is revenue, does it really matter whether we get it through higher rates or a broader base?  It does…and that’s the subject of a piece I wrote yesterday for MSNBC.com…check it out.

My old colleague Peter Orszag makes similar points today in a Bloomberg oped.

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5 comments in reply to "Rates or Base? The Main Sticking Point Re Cliff Negotiations"

  1. readerOfTeaLeaves says:

    Raising rates is so simple that it does not require an acronym. Anyone with a reasonable 8th-grade education can grasp the concept.

    The simple, understandable nature of this proposal surely poses a threat to the number of billable hours that lobbying and P.R. firms can extract from the whole ‘fiscal cliff’ drama.

    On the other hand, the whole ‘base broadening’ whinge appears to offer a surfeit of opportunities for billable hours. Ergo, it surely has a powerful constituency: located inside the Beltway.

  2. Christopher C. says:

    Roll it all back… Raise the rates *and* treat all income the same (gets rid of carried interest loophole).

    I’d be interested in your thoughts on how to deal with high frequency cheating, I mean trading. I’ve heard two ideas – a transaction tax and a time-scaled income tax. I like the time-scaled. Basically, if you hold the security for less than 1 minute, tax is 95%, less than an hour is 90%, less than a day is 80%, a week is 70% and so on down to the current tax level.

  3. dougfir says:

    eliminating the limit on Social Security contributions would be a “broadening of the base” without raising rates that would solve the SS deficit.

  4. dougfir says:

    I also find myself wondering why all the desperate ranting about the alleged cliff. Are we not going back to the tax rates in effect prior to 2001? As I recall, the nineties were a time of dropping deficits, fully funded government activities at the end, and general economic growth. Allen Greenspan was giving dire predictions of the disaster that would befall us when all US debt was paid off. People had jobs, businesses were making money, life was reasonably good. Of course, we were not randomly invading sandy countries for no reason but that is another issue.