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Tax the rich and extend the tax cut for the rest of us

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Charles Dharapak/AP

(Read caption) President Barack Obama speaks about tax reform in the Grand Foyer of the White House in Washington on May 4.

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Bill Gale makes the case for fundamental tax reform in the Brookings interview above, consistent with my “top two” list of reasons for tax reform I discussed in this past weekend’s CNN special on “IOUSA Solutions.” From the CNN transcript (emphasis added):

ROGERS: There are two questions. One is, are we raising enough revenue to cover our bills? Right now it’s obvious we are not. We don’t have a sustainable federal tax system.

A separate question is once you decide what the right level of revenue is, how do you raise it? There is nothing [that] says we have to stick with any combination of the Bush tax cuts, in fact, current law says they are going away at the end of this year.

So Congress and the administration are going to have to decide what they want to do. Do they want to continue Bush tax policy or replace it with something new?

I happen to think that the Obama Administration can come up with something better than just “Bush tax policy extended”–especially given how much they’ve complained about the poor quality of Bush tax policy over the years. It is obvious that tax reform is needed both for deficit reduction and for the sake of tax policy itself, even if we didn’t have to raise more revenue. I can’t imagine the President’s fiscal commission coming back to the President in December and telling him: “gee, Mr. President, it turns out you’re right…Extending the Bush tax cuts and making up for lost revenue by raising tax rates only on the rich is a good idea.”

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