BEYOND THE NUMBERS
Don’t Fall for Tax Reform Trap, Leading Senator Warns
Policymakers can avoid [the tax reform] trap, and make tax reform an important positive force, by setting as the most important tax-reform goal the raising of substantial new revenue for deficit reduction and doing so in ways that maintain or improve the tax code’s progressivity. To pursue that path, policymakers should let the Bush tax cuts for households making over $250,000 expire on schedule, generating nearly $1 trillion for deficit reduction over ten years, and seek agreement on how much additional revenue to provide — alongside significant spending cuts — as part of a balanced deficit-reduction package.
The revenue target should be the only numerical target they set up front. How low the rates are set should depend on how much policymakers will curb real tax expenditures, not be pre-ordained before they start making hard choices on tax expenditures. Policymakers should cut rates only if they can generate enough revenue from cutting tax preferences to meet their revenue target without gimmicks and in ways that will endure.