Friday, January 28, 2011

Obama Planning Crafty Copycat Gambit?

From Taxes: What people forget about Reagan

Two bills passed in 1982 and 1984 together "constituted the biggest tax increase ever enacted during peacetime," Thorndike said.

The bills didn't raise more revenue by hiking individual income tax rates though. Instead they did it largely through making it tougher to evade taxes, and through "base broadening" -- that is, reducing various federal tax breaks and closing tax loopholes.

"What people forget about Ronald Reagan was that he very much converted to base broadening as a means of reducing deficits and as a means of tax reform," said Eugene Steuerle, an Institute Fellow at the Urban Institute who had helped lay the groundwork for tax reform in 1986 and served as a deputy assistant Treasury secretary during Reagan's second term.

Got it? Reagan decreased tax rates, and then he dealt with revenue shortfalls with tweaks that weren't tax hikes per se, but led to more tax dollars being collected. Here's Obama in his SOTU:
Over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. But all the rest are hit with one of the highest corporate tax rates in the world. It makes no sense, and it has to change.

So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field. And use the savings to lower the corporate tax rate for the first time in 25 years – without adding to our deficit.

Someone has been looking over the Gipper's  playbooks, I'm good wit' it.


  1. I believe I've mentioned the structural desirability of broad and flat tax bases a time or three thousand. Nice to see the Prez mention it (if only for the takeaway quotes to stuff down the throats of the "Eat the rich, corps are evil!" progs. It's generally anathema to "progressives." But with the re-ascent of the GOP in the House, Obama knows he will not get the tax increases (permanent increase in %GDP devoted to fed gov spending) he wants any other way.

    Let's remember the flip side of what happened to Reagan there. He got that tax reform into law as part of a deal with Congress to restrain spending. And that Dem-majority Congress promptly reneged on their part of the deal, boosting spending by nearly two dollars for every new dollar raised, with the "progressives" then and since disingenuously and dishonestly blaming Reagan for the resulting deficits.

    As my dear departed dad always said, "Forget what they say. Watch what they DO." Obama knows (as does every non-freshman on the Hill) that industries will fight tooth and toenail to keep their own particular tweaks, that Congresscritters of both parties will support their donors, and that the White House's idea of proper tweaking will involve screwing demonized industries by taking away their tweaks (including ones that have a real purpose) while creating new subsidies and tweaks for favored industries and using regulatory/agency powers to punish the unfavored. Ask coal miners and oil industry workers how that's worked in practice the last couple of years.

    I'd much rather see a Clintonian retrenchment. Slick Willy was a guy who really knew how to make lemonade out of lemons. If Congress can bring itself to actually cut spending and bring it back into line with historic levels while taxes are tweaked for more efficient and less economically damaging collections (as happened '95-'99) then real reform is possible, including meaningful and USEFUL tax reform. If not, we're screwed.

    And we'll still need REAL reform for SS and MCR/MCD. I notice the GOP leadership and the TP people are starting to realize that means-testing at the upper end is not such a bad thing.

  2. Yeah, elected leaders seem for the most part to want to keep dancing round SS and medicare. But talk to your average person who keeps up with the broad outlines of these debates, and it seems that there's a broadening understanding among some regular folks that SS and Medicare are the big problems. Long way to go yet, I think.

    Obviously it's not a bad thing at all to pare back spending in discretionary areas, though I doubt we'll see wholesale eliminations of departments like Rand Paul and others say they want. More likely we'll see some consolidations. Hopefully that does include some narrowing of scope in certain arrows, with money actually saved. Not holding my breath.