Gov. Daniels: ‘We Need A Lot More Revenues,’ Federal Debt ‘Began With A Recession And Two Wars’

A new analysis in USA Today shows that Americans, despite the hue and cry from Congressional Republicans and Tea Partiers, are paying the lowest level in taxes since 1958, due to the Great Recession and a decade of tax cuts. In fact, simply getting total personal tax payments back to where they were in the 1970’s, 80’s and 90’s would eliminate “one-third of the estimated $1.5 trillion federal deficit this year.”

Republicans, however, have been adamantly opposed to any attempt to raise additional revenue, with the House Republican budget calling for deficit-neutral tax reform (alongside a tax cut for the rich), as well as deficit neutral corporate tax reform. And the Republican mantra for months in reply to record low revenues has been “Washington does not have a revenue problem. Washington has a spending problem.”

But during an interview on Bloomberg’s Political Capital with Al Hunt (which will air this weekend, but has already been transcribed and circulated by Bloomberg), Gov. Mitch Daniels (R-IN) — a potential 2012 GOP presidential contender — broke with this Republican talking point and admitted “we need a lot more revenues”:

We need a lot more revenues. The question is, how do you get them? And if you take what I believe is a very flawed tax system, way too complicated, too many preferences and gimmicks in it, maybe of them, by the way, tilted toward upper-income people and what’s more, a system which is trying to squeeze more and more dollars out of fewer and fewer people, the question is, how do you get the revenues?…Let’s agree that we ought to have more tax revenues, and the way economists really of both sides seem to agree is, fewer preferences, lower and flatter rates.

Daniels also broke with GOP orthodoxy by admitting that the federal debt “began with a recession and two wars” (though he failed to mention the other major player, the Bush tax cuts).

Daniels did not endorse any actual rate increases, but said that the tax code should be reformed in such a way that it brings more revenue into the federal government through the closing of loopholes and the removal of deductions. But he’s at least willing to admit that there are two sides to the budget — revenue and spending — and that looking at one in isolation is never going to lead to a sustainable solution.