海角大神

I do聽like that Senators Wyden (D-OR) and Gregg (R-NH) have worked together in a bipartisan manner to come up with a 聽that lives up to the term 鈥渞eform鈥� (as in 鈥渋mprovement鈥�) by actually broadening the tax base and eliminating some tax expenditures that seem to have little economic justification.聽 But a read through their own 聽suggests how they chose which particular tax expenditures to eliminate and which to keep (emphasis added):

By streamlining and modernizing the outdated tax code, our proposal would eliminate many of the specialized tax breaks that currently benefit one group of Americans over another.聽The changes we propose will create policies that benefit everyone.聽They include: fiscally responsible middle-class tax cuts, business tax breaks to help American companies compete globally and create jobs, and a fairer and simpler tax system for all Americans鈥�

We make fiscally responsible tax reform possible by eliminating many of the specialized tax breaks strewn throughout the tax code. Our legislation maintains the most popular tax breaks like the mortgage interest deduction and the health-care tax exclusion, while eliminating specialized exemptions聽such as a company鈥檚 ability to deduct as a business expense punitive damages resulting from lawsuits.

Our legislation also eliminates tax incentives that encourage American businesses to keep more of their foreign earnings overseas and export jobs聽by repealing the rule that allows U.S. companies to defer taxes on foreign income. And we take a hard line on corporate welfare聽by directing the Congressional Budget Office to examine the roughly $90 billion that the federal government spends to subsidize businesses directly and indirectly each year. These steps not only make the tax code simpler and fairer for everyone, they reduce opportunities for individuals and businesses to cheat the system and avoid paying their fair share鈥�

The pattern is familiar:聽 even in base-broadening tax reform, avoid raising taxes on 鈥渞eal people鈥� and instead reduce tax preferences that currently benefit 鈥渆vil corporations鈥濃�搊r otherwise attack things that seem to fall under the 鈥渨aste, fraud, and abuse鈥� category.聽 Note that the proposal only directs CBO to 鈥渆xamine鈥� tax expenditures, and only the corporate ones at that.聽 Wyden and Gregg make a point of preserving the 鈥渕ost popular鈥� tax expenditures and specifically point out their keeping the mortgage interest deduction and the health-care exclusion.聽 Just because these are 鈥減opular鈥� doesn鈥檛 mean they鈥檙e (economically) 鈥渟mart.鈥澛� The two examples touted are in fact the two single largest tax expenditures in the federal budget鈥搕he mortgage interest deduction costing more than $100 billion per year, and the health care exclusion more than $150 billion per year (each more than the value of all聽corporate tax expenditures combined).聽 Eliminating the health care exclusion alone聽would be enough to get the 2015 deficit down to the Administration鈥檚 goal of 3 percent of GDP and would promote greater efficiency in the health care market by bringing out of pocket prices more in line with the true cost of health care (thus helping to damp down excess demand and ultimately bring down health costs).聽 But any good politician would ask:聽 why would we want to do that聽if it means so obviously raising taxes on real people鈥揺ven if it would聽work to reduce health costs over time?鈥�

And that鈥檚 why it鈥檚 hard to be popular and smart at the same time.聽 And if politicians propose a 鈥渂ipartisan鈥� tax reform plan you can be sure it looks like it gives more away than it takes and probably doesn鈥檛 do as much to truly 鈥渞eform鈥� the tax system as is advertised.聽 The Wyden-Gregg proposal is a step in the right direction, but it鈥檚 not that bold a change and doesn鈥檛 really make any tough choices.聽 It鈥檚 a familiar pattern.

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