Economics Plans

The White House says President Obama is set to release his budget and/or deficit reduction plan sometime this week. If that's the case, then both David Brooks and Fareed Zakaria are correct about the Ryan Plan forcing the discussion and throwing down a gauntlet on government budgets that must be addressed. Yet, I still far that Zakaria and Brooks are far too generous in identifying the bill as courageous and forward-thinking. It's still too naive in terms of growth and the role of tax rates, and it is simply unconscionable in terms of the faith it plays with the free market and insurance companies concerning health care for the elderly.

Yet, my gut instinct tells me that the President's plan is going to be equally naive concerning spending. And he is going to lose the battle on taxes if he keeps targeting as low as earners making more than $250,000. While I do feel that amount is comfortably wealthy, it is not an vast sum of money, especially in places like New York and California. He could certainly argue for higher rates on people in the million dollar tax brackets and address the revenue problem more rationally. Better yet, it should, as both the Wyden-Gregg and Ryan Plan argue, focus predominantly on the deductions. Certainly, we can come to consensus that the mortgage deduction is a reasonable tax break for many Americans, but it is unnecessary for people making more than 500 Gs, or for purchasing more than one residence.

So, if we could focus on that. We'd be getting somewhere. Broaden the base, flatten the rates, narrow the deductions for all, end them for the top 20%, and be done with it.

Tax Reform that Works?

Congressmen Judd Gregg of New Hampshire and Ron Wyden of Oregon - two of my favorite pragmatic and rational problem solvers - are proposing a serious, and I mean serious, tax reform bill that makes so much sense, it will never pass. They propose to simply the tax code, eliminating thousands of deductions and offering three simple, progressive brackets. It also proposes lowering the corporate tax rate to a flat 24%. I am definitely intrigued.

However, while it proposes to be a deficit neutral bill, that quality will do nothing to alleviate a trillion dollar deficit and a $12 trillion debt. Additionally, the GOP-side continues to push the corporate rate change on a comparison to other countries - even though, because of deductions, most American corporations pay almost nothing in taxes as it is now. I don't see corporations giving up all their deductions and increasing their tax liability to 24%, but we will see.

With those problems, I don't see a lot of hope. But it's better than the status quo.