Obama Defends Obama Tax Plan

I didn’t watch last night’s health care town hall meeting, but Jeff Young did and he reports:

The administration has proposed more than $600 billion in Medicare and Medicaid cuts to partially pay for healthcare reform. In addition, Obama touted his proposal to raise more than $300 billion in tax revenue by limiting itemized deductions for people earning more than $250,000 a year.

But Obama also argued that the nation would spend even more on healthcare in the coming decades were reform not enacted.

Obama touting his own tax policy ideas shouldn’t be particularly exciting, but this is a genuinely novel development. The administration suggested this idea with its budget, and it was immediately and roundly denounced on the Hill. Which would have been one thing were the various powerful congressional Democrats who denounced it willing to say that they just don’t want big picture health care reform. But it turns out that all the relevant chairman do want big picture health care reform. So now they need to find ways to pay for it. And I’ve always thought this was a pretty darn good way.

When you think about taxes, there are two kinds of problems with higher taxes. One is that people just don’t want to pay more in taxes; it kind of sucks, they’d rather have more money. A second is that increased taxes can distort economic activity and impede economic growth. On the first, curbing deductions for the wealthy only impacts the wealthy and we don’t need to cry for them. And on the second, the best research available indicates that broadening the tax base is the most economically efficient way to raise revenue. In other words, curbing these itemized deductions is a good idea. Members of congress who are realizing that there’s no such thing as a wildly popular tax increase ought to reconsider their initial hostility to this proposal.