Committee for a Responsible Federal Budget

Taxes, Taxes, Taxes

Apr 19, 2010 | Taxes

With the April 15 deadline having just passed, it seems that taxes are on everyone's mindThe Washington Post ran an editorial and an op-ed by Robert Samuelson over the weekend, discussing the uncertain future of our tax system and the prospects of raising revenue through the current system or changing it to adequately meet our spending.  

The editorial talked about the prospects for the 2001/2003 tax cuts, which the Post would prefer to see expire. They say:

There is almost no chance that Congress will let the tax cuts expire. The only question is whether it will act with a modicum of fiscal responsibility. Recent signs on that front...are not promising. But we urge lawmakers to allow the upper-income tax cuts to expire and, if they must extend those for households making less than $250,000 a year, to do so for a year or two, not permanently.

Interestingly, The Post did not simply toe the $250,000 line, instead advocating for letting most of the tax cuts expire.  They also panned an idea that is similar to one we had last week on this blog to extend all the tax cuts temporarily, which, they thought, "just increases the likelihood that they will all be extended permanently"; however, our idea would have forced any permanent extension of the tax cuts to be paid for.  Clearly, though, The Post wants most of the tax cuts to expire as scheduled.

Robert Samuelson disputed the claims of VAT supporters that the tax would be a "quick fix" to our budget problems (we discussed the pros and cons here.)  As he said:

The VAT is being merchandised as an almost-painless way to avoid deep spending cuts. The implicit, though often unstated, message is that a VAT could raise so much money it could eliminate future deficits by itself. This reasoning, if embraced, would create staggering tax burdens and exempt us from a debate we desperately need.

His concern, correctly, is that relying on just a VAT for deficit reduction would require relatively high rates that would have to get higher as spending exploded in the decades to come.  Granted, Samuelson was not necessarily against the VAT itself and said it "might be the least bad tax", but the characterization of the VAT as a cure-all certainly is exaggerated.  

Samuelson hit the nail on the head when he said that tax increases alone cannot get the job done without imposing an enormous burden on the American taxpayer.  Spending cuts and tax increases should both be considered in any serious deficit reduction plan.  In the near future, Congress will have to make decisions about what it wants to do with regards to the expiring tax cuts.  How they choose to go about dealing with the tax cuts should be a good indication of whether they are ready to get serious about our fiscal problems. 

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