Domenici and Rivlin: extend tax code on way to overhaul
June 19, 2012 Leave a comment
Pete Domenici and Alice Rivlin today suggested the current tax code should be extended beyond December 31, 2012, so long as it was done as a part of a process to ensure more fundamental tax reform. The biggest question is how to get such a process underway that will lead to such an overhaul?
Our current tax debate is focused on the 2001 and 2003 Bush tax cuts that have now been extended. This is fairly limited ground over which to fight out tax policy, and more fundamental reform is needed, at least in part to move away from the either/or nature of the current debate.
The tax code we have is almost 30 years old, with many credits, deductions and expenditures added along the way. The current tax code would best be plowed under and completely redone. If we ever got to the point of actually talking about the policy of doing so, the most important tax reform decision/discussion is determining what proportion of the tax code we will collect in federal taxes? This level of tax collection needs to move toward a level of federal spending at some point out in the future. Want lower taxes, then you have to say how you would cut spending. Want higher spending, you have to be clear about the taxes to pay for it. There are many important issues such as fairness and equity to be addressed through tax reform, but I don’t see how you can fully have such a discussion without having a sense of how much tax revenue will be collected overall.
As hard as the actual policy debate and reaching an agreement might be, it is even harder to imagine Congress actually taking this on at all.