Rethinking the tax debate

So George Bush has been out of office for close to two years and Barack Obama
has been president for close to two years. So why are Republicans getting
sucked into a debate about the Bush tax cuts? The debate should be on the Obama
tax increases, not the Bush tax cuts.

Sure, it was Bush who signed tax legislation a decade ago that is set to expire
at the end of the year. But Bush is no longer president. Obama is the president,
and he is the one who seems more than willing to allow tax increases to spring
immediately into place.

Republicans need to center this discussion on the broader tax debate. And here
is the debate. Do you think the tax code should be recreated to allow for more
long-term job creation, greater productivity, greater economic growth and
improved American competitiveness, or do you think the tax code should remain
status quo, with tax cuts only going up on rich people?

The Democrats look at the tax code and they lick their chops. They see an
opportunity to get more money from wealthy taxpayers and more campaign
contributions from lobbyists looking to influence tax legislation. They have
done absolutely nothing to change the status quo on our tax laws. They want to
continue the status quo because they like the way tax increases are going to
come, whether they do nothing or not.

Perhaps the biggest failure of the Republicans’ control of Congress and the
White House came with their inability to fundamentally reform the tax code. Worse,
they failed to deal with the ticking time bomb that comes next year with the
estate tax, the tax on capital gains and dividends and the rate increases. They
also failed to deal with the creeping problem of the Alternative Minimum Tax,
which eats up more and more of the income of middle-class Americans.

That wasn’t for a lack of trying. Bush did propose a commission that came up with
a bunch of meaningless recommendations that were ignored by both the Finance
Committee chairman and the Ways and Means Committee chairman.

The tax code has become a real albatross around the neck of economic growth. Its
uncertainty is bad enough (and a pretty good explanation why so much capital is
sitting on the sidelines). But the American corporate tax rate is unnecessarily
punitive to business growth, and the international tax system promotes the
exportation of jobs and makes our products unnecessarily expensive. And the
fact that about half the country pays nothing in federal taxes (the lower half)
creates a troubling dynamic where the tax code is now promoting a direct wealth
transfer from the richer half to the poorer half, which goes against the
American ideal.

The Bush tax cuts that are expiring are now Obama’s problem. He can do what he
wants with them, especially now that he runs the government with wide
majorities. Republicans should not get suckered into a debate about the
efficacy of keeping those tax cuts in place or not. They should instead be
talking specifically about their plans to enact either a fair tax or some other
kind of fat tax scheme that will make America more competitive in the future
and make the American people more confident that everybody is paying their fair
share.

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