Yesterday (on “Tax Day”) NPR’s Scott Horsley was wondering about the prospects for doing something better about the Bush tax cuts this year. He got a similar reaction from me, NYC Mayor Michael Bloomberg, and the Tax Policy Center’s Bob Williams–although I got to pull out an expression I believe my mom first taught me, “benign neglect.” (My mom is going to have to remind me in what context she would throw out that term, frequently.) From the transcript (please go to NPR site to hear the full audio):
The tax cuts championed by President George W. Bush a decade ago, and extended in 2010, are due to expire at year’s end. That would mean higher taxes at every level of income, as well as higher taxes on dividends, inheritance and capital gains.
“The biggest hits would be on the very wealthy,” says Williams. “Those are the people who’ve benefited most from the Bush-era tax cuts. But people at the very bottom would be hit as well.”
All of this will happen automatically unless Congress and the president act in concert to prevent it.
“It’s the do-nothing option,” says Williams. “If Congress does nothing, taxes go up automatically.”
Not everyone is alarmed by that.
New York Mayor Michael Bloomberg told CBS last month that taxes have to go up for everyone in order to put a dent in the federal budget.
“Most of this country is middle class. And that’s where most of the tax revenue is. So if you want to raise $4 trillion over the next 10 years, which gets you halfway — only halfway — to a balanced budget, everybody’s taxes have to go up,” said Bloomberg.
Action, Or ‘Benign Neglect’?
Economist Diane Lim Rogers of the deficit-watchdog Concord Coalition agrees that stemming the tide of red ink will require more tax revenue. But she sees some problems with letting the Bush-era tax cuts expire all at once.
“It wouldn’t be the worst thing that could happen,” says Rogers. “I think economists would prefer that instead of things happening out of benign neglect, that better things could happen out of good policymaking.”…
I don’t know why I said “economists” would prefer; heck, everyone should prefer that, as long as we have some faith in the role of government to promote the public good. I had elaborated to Scott that the economists’ problem with just letting the tax cuts all expire is that we have other options to raise revenue that economists would consider more efficient and just as or more fair.
I go on to talk about my second favorite tax topic after the Bush tax cuts: tax expenditures and the need to reduce them as a way of cutting government spending in a progressive manner. I am still hopeful that after we go through all the other possible ways to reduce the deficit and realize we won’t accept much of them or that they don’t work, we’ll come back to the goal of pursuing sensible tax reform.