I just read Charles Krauthammer's latest op-ed on the possibilities of a "grand bargain" on fiscal reform.
I frankly couldn't believe some of the stuff I was reading. I mean, really, did Krauthammer really write the following about "true tax reform" that eliminates loopholes?
Fairness — because a corrupted tax code with myriad breaks grants deeply unfair advantage to the rich who buy the lobbyists who create the loopholes and buy the lawyers who exploit them.Did he just say that tax breaks that disproportionately benefit the rich are unfair?
My ears are burning!
And then, is it really conventional wisdom among conservatives to push this next line?
Start with the obvious boondoggles, from the $6 billion a year wasted on ethanol subsidies to your Democratic perennials — corporate jets, oil-company breaks, etc. That’s the fun part. Unfortunately, whacking that piñata yields but pennies on the dollar. The real money is in the popular tax breaks: employer-provided health insurance, mortgage interest and charitable contributions. Altering some of these heretofore politically untouchable tax breaks would alone be a singular achievement.Did Krauthammer just admit that he agrees with liberal talking points about the "boondoggles" of tax breaks for corporate jets and oil-companies, not to mention the exemptions from taxation of income spent on employer-provided health insurance and mortgage interest? I have to say that this kind of language is mostly anathema among conservatives. You just don't hear conservatives even acknowledge that there is anything untoward or unfair in any policy, no matter how it comes about or who it affects, that has the end result of exempting personal income from taxation.
I usually find Krauthammer columns to be rather distasteful; but I have to admit that I didn't find myself disagreeing too much with Krauthammer's overall point in this particular column.
He essentially embraces Simpson-Bowles as an acceptable blueprint for fiscal reform. I'm definitely not opposed to that. However, I do have one point of disagreement with Krauthammer, but it's one that's more a matter of degree as opposed to one of principle. And it has to do with his baseline starting-point on revenue neutrality. I could easily find my way to supporting the idea of revenue-neutral fiscal reform as a precursor to a grand bargain in which both raising revenue and cutting spending are both on the table. But where we disagree is what the starting-point of revenue neutrality should be.
Krauthammer's whole argument for revenue neutral reform of the tax code starts under the revenue baseline established with the Bush tax cuts in place. I would argue that revenue-neutral reform to the tax code should begin after the expiration of the Bush tax cuts. Why? Because, as even conservative economist Bruce Bartlett notes, revenue as a percentage of GDP is at its lowest levels since the cuts in 50 years. Revenues currently account for less than 15% of GDP, which is below the 18% historical average that has held from the post-WWII era until 2001, which is when the Bush tax cuts kicked in and then revenue as a percentage of GDP declined significantly. So, I say let's reform the tax code at a revenue-neutral baseline of 18% of GDP, and then have our "grand bargain" debate from that baseline.