Tax Analysts Blog

State of the Union: Stasis or Progress on Taxes?

Posted on Feb 11, 2013

Fresh from the Democratic retreat in Leesburg Virginia, Rep. Chris Van Hollen of Maryland, ranking member on the House Budget Committee, appeared in a C-Span interview this weekend. Twice he repeated the line we have heard recently from other Democratic leaders--including President Obama and New York Senator Charles Schumer--that Democrats want what Republicans want: to close tax loopholes. Here is one version:

    We heard in the last presidential campaign from Mitt Romney and Paul Ryan that there are all these tax breaks and loopholes that disproportionately benefit very wealthy people. Speaker Boehner himself said he could come up with $800 billion through a tax reform plan. So we are simply saying to our House Republicans we want to do what Speaker Boehner said he could do and use some of that revenue from closing loopholes to reduce the deficit.
Even though they have no intention of reducing tax rates, Democrats call their approach "tax reform." This infuriates conservatives, like Krauthammer, Breitbart, and the folks at the Washington Times.

As an olive branch to the Republicans, the President in his Tuesday night State of the Union Address could offer to put the full force of the Treasury Department's expertise and the political power of the White House behind a sincere effort to broaden the base and reduce the rates. This would not settle the fundamental dispute between Republicans and Democrats about the level of taxes, but it would be encouraging to Republicans AND it would come at little cost to the President. After all, how could the President object to--and what would the problem be with--a tax reform effort that was revenue- and distributionally-neutral?

But don't hold your breath.

Read Comments (1)

amt buffFeb 10, 2013

Distributional neutrality at lower tax rates would have been a lot easier to
achieve before Obama moved the baseline on January 2. The recent increase in
top rates essentially killed Bowles-Simpson style reform unless proponents are
willing to accept decreased progessivity or unless Congress is willing to vote
for a "reform" which retains high rates. The latter is what Obama wants, but I
don't believe he will get it until a fiscal crisis is upon us.

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