This year, tax policy makers need to work together to achieve revenue goals, and never lose sight of the long-term.
Congressional Budget Office
In my column in this week’s Tax Notes–in which Grover Norquist has been named 2011 “tax person of the year,” by the way (more on that later)–I list a few new year’s resolutions for tax policy (emphasis and brief descriptions added):
[Here are] some New Year’s resolutions for those who make, study, and care about U.S. tax policy: (1) don’t view tax policy in a vacuum [recognize the interaction of tax policy with the rest of the federal budget and government's role in general]; (2) plan ahead for expiring provisions [look ahead to what's coming due in the next year, and start the policy debates and analysis now rather than in the 11th hour]; (3) accurately analyze short-term versus longer-term economic effects [how are the considered policies helpful or harmful to the economic goals of highest priority?]; (4) set revenue targets and stick to them [use the budget process and budget committees to bring tax policy into the deficit reduction effort]; (5) treat tax expenditures more like expenditures [recognize they're more like spending-side subsidies than simple tax cuts, and scrutinize them to evaluate whether their benefits are worth their costs]; (6) don’t be hypocritical about fiscal responsibility [don't fuss over the small-change items while giving a huge pass to the big-ticket ones]; (7) don’t be so afraid to agree with the other side [there's huge bipartisan common ground on goals for tax and fiscal reform if policymakers would only stop picking fights]; and (8) get specific about good tax policy [study, analyze, and better promote the specific tax policies that experts recognize as economically smart so that policymakers are forced to notice and respond].
Note that this list is more broadly applicable to fiscal policy–tax and spending–more generally, but I was writing for Tax Notes, of course.
The biggest item on this year’s expiring tax provisions list is of course (and yet again) the Bush tax cuts–or as I sometimes refer to them, the Bush/Obama tax cuts. Who knows, if policymakers keep doing the same old thing with them, by next year they could become the “Bush/Obama/Romney [or Santorum or Gingrich or Paul]” tax cuts!
My Tax Notes column reprinted the CBO table above, just to highlight the point that these expiring tax cuts–just the ones set to expire by the end of this year–are worth $4 to $5 trillion over the next ten years, without interest costs. (Remember the “go big” goal?)
Happy New Year to my EconomistMom readers! More from me later this week.