The debate about the Bush tax cuts shouldn't be a limited discussion about whether or not to leave $65 billion on the ground next year by preserving tax cuts for the wealthy. That's a debate about 4.6 percent of our 2011 deficit, and 0.7 percent of our projected debt accumulation in the next decade. In the grand scheme of things, it's not nearly as important as the broader discussion about our entire tax code. Howard Gleckman nails it:
Why have we allowed ourselves to remain trapped by decision made nearly a decade ago? Some pols would have us believe the 2001 tax cuts were the Ten Commandments, fixed and immutable for all time. But why not think outside this particularly small box? What sort of government do we want? And how should we pay for it? This question inevitably leads to a couple of others that can help us focus even more:
*Should the income tax continue to be the foundation of our revenue system? If so, do we want to raise rates while protecting hundreds of billions of dollars in special interest tax subsidies. Or should we reprise the 1986 Tax Reform Act, where we broadened the tax base by eliminating many special provisions and lowered overall rates. It seems like a good idea to me, but let's debate it.
*Is the income tax fixable at all, or is it so broken that we'll need to replace it, or supplement it, with a Value Added Tax or some other consumption tax? Such a change would have profound implications, not only for the budget, but for spending, savings, and investment. And it could create a very new set of winners and losers than under the current tax system.
*What is the role of Social Security and Medicare taxes in a fair and efficient revenue system? With almost no discussion, this year's health law fundamentally changed the nature of the Medicare tax by imposing it investment income, rather than just wages (starting in 2013). Perhaps we want to talk about this one some more.
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