In what was surprising news to many when, yesterday, freshman Rep. Rick Crawford (R-AR) announced that he would introduce legislation that would apply a tax to those with annual incomes exceeding $1 million. The concept has held pretty much exclusively Democratic support, until now that is. Crawford touted the move as a necessary compromise for a path towards reducing the county’s deficits and sky-rocketing debt.
An aide described it as analogous to other bipartisan efforts to reaching a deal, stating:
The Citizens for Tax Justice (CTJ) just released a new report detailing their own estimates of a number of options for raising revenue through eliminating or reducing tax preferences or enacting new taxes. The CTJ argued that many of these tax expenditures were inefficient and revenues could be spent elsewhere in recovery measures or to reduce the federal deficit. They proposed a wide scope of policies, ranging from changes with large revenue impacts to small-change loophole-closers.
As they explain:
The Tax Reform Act of 1986 is often hailed as a major bipartisan achievement, a reform that simplified the tax code and lowered marginal tax rates. Of course, more holes were opened up, more tax brackets were added, and significant complexity was introduced to the tax code thereafter.
Were it not for the growth in spending on Medicare, Medicaid, and Social Security, the United States wouldn't have much of a budget problem. The two biggest programs—Social Security and Medicare—are retirement programs that are extremely popular politically. Both need to be reformed, but they cannot be cut abruptly and they cannot be cut drastically. Consequently, it's hard to avoid concluding that some revenue increases will be needed to solve our fiscal problems.
True to this year's State of the Union address, the Obama Administration released a proposal Wednesday that seeks to lower the corporate tax rate from 35 percent to 28 percent while eliminating many loopholes and broadening the base.
The good folks at the Tax Policy Center have written yet another enlightening report on tax expenditures. This one, titled, "Curbing Tax Expenditures" analyzes the current mess that is the tax expenditure "budget". Tax expenditures -- the various credits, deductions and loopholes that are littered throughout our tax code -- tend to be expensive, regressive, and economically distortionary. Their existence comes at the expense of less debt and lower marginal tax rates.
The New York Times had two interesting op-eds over the weekend on two essential components of deficit reduction: tax reform and health care costs.
First, former CEA chair Greg Mankiw lays out what he considers to be four consensus principles for tax reform. Essentially, these are the principles that he thinks should be followed in order to design an optimal tax code. The principles are:
Alex Brill of the American Enterprise Institute (AEI) recently put out a tax reform plan that focuses on corporate taxes, but includes some individual provisions as well. The aims of his proposal, he says, are to "reduce tax rates for job creators, limit subsidies that promote excessive leverage, and phase out tax policies that encourage larger state and local governments."