James Pethokoukis

Politics and policy from inside Washington

The budget deficit examined

Aug 31, 2010 18:48 UTC

Nice chart from Jim Glassman over at JPMorgan on why we have a such a giant budget deficit:

taxdebt

An obvious tax cut

Aug 31, 2010 18:37 UTC

Josh Barro of the Manhattan Institute give a wonderful explanation of the wisdom of indexing capital gains taxes for inflation. Here is  a taste:

But 2011 would be a good time to revisit indexation. First, this could help offset the negative economic effects from the likely rise in the top capital gains rate from 15% to 20%: taxpayers would face higher capital gains tax rates, but they would know that they are protected from tax on inflationary gains. Also, low inflation makes this an opportune time to introduce indexation, as the revenue loss from indexation is linked to the inflation rate, and would therefore be lower than usual.

The fiscal impact of indexation could be reduced by applying it also to the deduction side of the tax code, notably including the mortgage interest deduction. This would mean that only the portion of home mortgage interest in excess of the inflation rate would be deductible. Again, low inflation rates make this a politically opportune time for such a reform, because the near-term effect on tax bills would be small.

COMMENT

STORYBURNthere: I suppose you want the 1970s economy too – high inflation, low growth, incompetent government (Ford / Carter), sky-high energy prices, disco music ad nauseum. I’ll take Reaganomics any time, thanks.

Posted by Gotthardbahn | Report as abusive

Are tax cuts on the Obama autumn agenda?

Aug 31, 2010 18:27 UTC

I would love to think so. And I know some folks on Wall Street would love to believe. But there are few signs that Obama will change course on taxes.  Here is White House economic adviser Jason Furman:

Jason Furman, an economic adviser to President Barack Obama, told a meeting on Tuesday there was a concern that even a temporary extension of the Bush-era tax cuts for the wealthy would be a “foot in the door” to permanent extension.

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