James Pethokoukis

Politics and policy from inside Washington

Democrats now favor the Pethokoukis ‘extend and reform’ tax plan

November 10, 2010

Evan Bayh and Kent Conrad like my “extend and reform” proposal (via the WSJ):

Two top Senate Democrats floated the idea Tuesday of extending the Bush-era income-tax rates for a limited time only, and tying that move to an overhaul of the U.S. tax code or passage of policies to address the budget deficit.

At a news conference, Sen. Kent Conrad (D., N.D.), the current chairman of the Senate Budget Committee, said he would prefer to extend the current breaks only until a complete tax overhaul can be accomplished. “If I were able to make the decision, I would go for changing the tax system fundamentally,” Mr. Conrad said. “And I’d have an extension [of the Bush-era tax cuts] until that was accomplished.”

Sen. Evan Bayh (D., Ind.) suggested a similar approach. He proposed a two-year extension of all the current tax levels, to be followed by the implementation of policies to reduce government deficits.

And here is the sort of thing I have been proposing:

The Bush tax cuts look on the verge of cheating death. The White House is strongly hinting it will compromise with Republicans and agree to extend temporarily wealthy and middle-class tax reductions set to vanish at year-end. That would provide welcome relief since even partial expiration risks sapping economic growth during a flaccid recovery. But a two-year deal, while welcome, would also still leave the long-term state of the tax code in flux. Washington should use the extra time for sweeping reform. … Obama’s deficit panel may offer some suggestions next month, but the basics seem basic enough. Taxes should be lower, broadly applied and subject to as few market-distorting deductions and loopholes as possible. As Indiana Governor Mitch Daniels often quips, American needs a tax system that looks like someone designed it on purpose.

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