Jasper Smith

Commentary on politics, economics, culture and sports.

Archive for the ‘Taxes’ Category

Obama, McCain and the tax code.

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On the topic of the Obama’s and McCain’s views on taxation, Clive Crook writes:

With their fixation on the fate of the Bush tax cuts, both of them are missing the main point: comprehensive reform is needed–and needed so badly it may be unavoidable. The key is to broaden the income-tax base. Income-tax rates are moderate in the United States by international standards, but the income-tax base is narrow, so the total raised is less than you would expect. Raising significant amounts of additional revenue–which is going to be necessary, even if no new spending is undertaken–would push income-tax rates quite high. The country needs to broaden its tax base and simplify the rate structure, and much the best way to do this is as part of a thorough overhaul of the code. A lot of what should be done is neither liberal nor conservative. Ordinarily one thinks of a trade-off between equity and efficiency. At some point, those choices do have to be made, but the United States is not at that point. The current system is so inept, so complicated, and so replete with unintended consequences that it is easy to devise a win-win alternative–fairer and more conducive to growth at the same time. Yet neither Obama nor McCain gives any sign of embracing comprehensive reform. Quarreling over the fiscal legacy of the Bush administration is more to their liking. So much for post-partisan politics.

Although I couldn’t agree more that the country badly needs reform of the tax code, I strongly suspect neither Obama nor McCain is so much “missing” this point as avoiding it, for reasons of politics. Any reform of the tax code that is sufficiently radical to do any real good will require a bloody political fight.

I don’t see much prospect of any decent reform plan getting enacted under a McCain presidency, given the likely composition of the Congress (though you never know, and of course McCain has shown some proclivity for working with Democrats). I reckon Obama is the more plausible agent of change in this regard. If I were he I’d avoid getting into specifics with respect to tax reform ideas if such an agenda were part of my plans (one can only hope tax code reform is part of his plans). Obama displayed admirable unwillingness to pander to the electorate on gasoline taxes — an unwillingness that probably helped him finish off Hillary Clinton. But I don’t think he can count on a similarly happy outcome flowing from the effects of candor on the tax code in general, at least to the extent that any substantive reform cannot wholly ignore the mortgage interest deduction

Written by Jasper

June 7, 2008 at 4:08 pm