After decades of sharp increases in income inequality and dramatic tax cuts at the top, the case for reversing course and raising taxes at the top is overwhelming. That’s especially true given the sacrifices that policymakers will likely ask of Americans of modest means to help reduce long-term deficits. Below are three good first steps:
This series has explained why we need to raise more revenue and why it makes sense to start at the top of the income scale. The budget from House Budget Committee Chairman Paul Ryan goes in exactly the opposite direction — it would cut taxes deeply at the top and raise even less revenue than if we continued all of President Bush’s tax cuts, leading to bigger deficits and worse income inequality.
As this series has explained, our unsustainable budget deficits should remain in the forefront of tax policy discussions. Given the need for more revenue, it is fortunate that taxes are low both historically and compared to other countries.
So the next question is: Where should we look first for more revenue?
Yesterday’s post in this series explained why the nation’s unsustainable budget deficits must be in the forefront of any tax reform discussions. That means we’ll need to raise enough additional revenue to contribute to a balanced deficit-reduction plan.
All discussions of tax reform should start with this chart. Here’s why.
The mantra that tax reform should “broaden the base and lower the rates” — in other words, scale back loopholes and other special tax breaks and use the resulting revenue to pay for cuts in marginal tax rates — is close to conventional wisdom in Washington. All else being equal, it reflects sound economics.