19 Nov 2010


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Daniel Henniger identifies serious tax reform as the key issue that Congressional Republicans ought to make the centerpiece of the alternative they offer to the American people.

Last week the two chairmen of President Barack Obama’s bipartisan deficit commission, Democrat Erskine Bowles and Republican Alan Simpson, issued a set of “draft” recommendations that includes this: a new U.S. individual income tax system with only three rates—8%, 14% and 23%. You would have to move to Estonia to get a top marginal rate near 23%. Also, they would drop the U.S.’s self-destructive corporate rate of 35% to 26%.

Then yesterday came another “bipartisan” group, led by former Sen. Pete Domenici and Alice Rivlin, Bill Clinton’s OMB director and also a member of the deficit commission. Their goal: a system “to improve incentives to work, save and invest” with two personal tax rates of 15% and 27%, and a corporate rate of 27%. Theirs includes a 6.5% sales tax; Bowles-Simpson, a surprise, has no sales tax.

Proving reform fever can catch anyone, Treasury Secretary Tim Geithner on Tuesday called for a fundamental overhaul of our tax system, which “is not a sensible way to run a country.”

Lower tax rates are suddenly moving to the center of the political debate.

Saving the most important for last, Michigan GOP Congressman Dave Camp, who surely will be chairman of the tax-writing Ways and Means Committee in January, delivered a strong reform speech Tuesday. “What we need,” said Rep. Camp (also a member of the Bowles-Simpson commission), “is a comprehensive reform of the tax code that expands the tax base and lowers rates.”

Putting this in context: The current fight between the Obama White House and congressional Republicans over whether the top rate should be 39.6% or 35%, notwithstanding its immediate importance for the economy, is a ridiculous sideshow to what serious people now want to do to sync up our tax system with the goal of strong economic growth.

Words found nowhere in the deficit commission’s draft include “fairness,” “the wealthiest,” and “the top 1%.” The explicit purpose of its tax proposals is to “make America the best place in the world to start and grow a business.”

Even in our current political universe of smirking cynics, this is progress—a bipartisan presidential group has put the subject of lower tax rates at the center of the policy debate.

Yes, yes, I understand the deficit commission gets down to 8-14-23 by eliminating every hallowed tax expenditure in the tax code and by taxing capital gains at ordinary rates.

But still. 23%.

Feel free to sniff at a 23% top rate. I won’t. The new Republican Congress shouldn’t either. Nor should the lifeboat full of moderate Democratic senators heading toward the 2012 whirlpool.

Read the whole thing.

The country wants real action taken to turn the economy around. This is the proposal that would do it.


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