In a new column for National Journal, I compare Obama's and McCain's proposals on taxes. Neither candidate makes much sense on the subject, I argue. With their fixation on the fate of the Bush tax cuts, both of them are missing the main point: comprehensive reform is needed--and needed so badly it may be unavoidable. The key is to broaden the income-tax base.
Income-tax rates are moderate in the United States by international standards, but the income-tax base is narrow, so the total raised is less than you would expect. Raising significant amounts of additional revenue--which is going to be necessary, even if no new spending is undertaken--would push income-tax rates quite high. The country needs to broaden its tax base and simplify the rate structure, and much the best way to do this is as part of a thorough overhaul of the code.
A lot of what should be done is neither liberal nor conservative. Ordinarily one thinks of a trade-off between equity and efficiency. At some point, those choices do have to be made, but the United States is not at that point. The current system is so inept, so complicated, and so replete with unintended consequences that it is easy to devise a win-win alternative--fairer and more conducive to growth at the same time. Yet neither Obama nor McCain gives any sign of embracing comprehensive reform. Quarreling over the fiscal legacy of the Bush administration is more to their liking. So much for post-partisan politics.
I mention a few specific possible reforms, based on some recommended pre-election reading: A short paper by Bill Gale of the Brookings Institution on priorities for fixing the system. You can find that here. If you want to read the rest of my column, it is here (the link expires in two weeks).