Tax Analysts Blog

Romney Advisor Advocates Tax Hikes

Posted on Oct 2, 2012
The latest "news" from this morning's New York Times is the same old stuff: Senators are considering a bipartisan "grand bargain" deficit reduction plan of about $4 trillion over 10 years. House Republicans will not consider tax increases. President Obama will not consider a deal without tax increases. And some sort of temporary--perhaps 6-month--bridge over the fiscal cliff will be put in place to give Congress time to work out a detailed solution to our long-run fiscal imbalances.

Meanwhile left unnoticed is a plan quietly being advocated (here and here) by former Reagan top economist Martin Feldstein to raise taxes. He proposes putting a cap on everyone's tax benefits from deductions and credits equal to some percentage (perhaps 2 or 3 percent) of adjusted gross income and using the revenue gained for both rate cuts and deficit reduction The idea is not only newsworthy from a political perspective--because it starkly contradicts the Romney campaign' stance against any tax hikes--but also because its guiding concept may hold the key to ultimately getting Republicans to agree to tax cuts.

The idea is simple. Tax expenditures are just government subsides delivered through the tax code. If you hate big government, you should hate tax expenditures. Clearing subsidies out of the code should not be viewed as tax increases but as cuts in government spending. No doubt many right wingers will consider this nothing better than academic voodoo. But Feldstein is exactly correct. If Republicans in Congress can't see the logic maybe the Tea Party will.

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