The Obama Administration seems to realize we have a revenue problem and may have to rethink our tax policy strategy to go beyond which parts of the Bush tax cuts we want to keep and which we want to let expire. From a front-page story in today’s Washington Post (by Lori Montgomery, my emphasis added):
White House budget director Peter Orszag reacted favorably to the Senate blueprint, saying it would “fulfill the president’s objectives” on health care, education, clean energy and deficit reduction. Orszag acknowledged that the Making Work Pay credit may be lost, but said the administration has “two years to figure this out” before the temporary version of the credit — established in the recent economic stimulus package — expires.
In the meantime, Orszag said, Obama is launching a comprehensive review of the federal tax system that aims to simplify the tax code, unify myriad individual credits, reexamine the corporate tax structure and identify ways to collect the billions of dollars that chronically go unpaid by individual and corporate tax dodgers. A special panel of economic advisers headed by former Federal Reserve Board chairman Paul A. Volcker will lead that effort, Orszag said, and report back to Obama by December.
“The only constraints are no tax increases for families earning below $250,000 a year and no tax increases in 2009 and 2010,” when the economy is likely to be weak or emerging from the recession, Orszag said.
I think the Obama Administration realizes that with those “only constraints” (pretty darn big ones), you can’t afford to leave all those holes and other inefficiencies in the federal tax system if you expect to be able to both pay for your new spending and get deficits back down to sustainable levels.
So it will be interesting to see what the Obama Administration comes up with by December. And I hope it gets a better reception on Capitol Hill than the report of President Bush’s tax reform panel did.