Advertisement

Don’t Look To The White House For Tax Reform

Lori Montgomery observes that Barack Obama’s promise not to raise taxes on anyone in the bottom 98 percent of the income distribution means you can’t do efficiency increasing tax reform:

President Obama’s refusal to raise taxes for the vast majority of Americans will prevent him from pursuing a broad overhaul of the tax code and is making it difficult for him to achieve his goals for reducing the budget deficit, according to administration and congressional sources.

I’ve noted this before, but I think it’s a real conceptual problem with this overall approach to tax politics. This is because the pledge prevents even reforms that make the tax code more progressive. In general, if you eliminate a tax credit and offset the revenue gain with a higher personal exemption, that will make most middle class households better off financially while also making the tax code more growth-friendly. That’s good policy. But it’s still the case that some middle class households would be better off with the old code.

That said, I don’t think the specifics of the pledge are a huge deal in this case. That’s because thinking of tax reform as a White House initiative is a mistake. If the President goes and leads the charge for tax reform, what happens is that tax reform passing becomes “a victory for the White House” and we start getting stories about “President Obama’s goal of overhauling the tax code.” And a proposal like that will be dead on arrival. Fundamental tax reform has a chance if and only if there’s a bipartisan group of hardworking members of the House and Senate who sincerely want to reach consensus on a tax reform proposal. The role of the White House in a scenario like this is to be quietly encouraging, while making sure it doesn’t become the tax that Republican who works on tax reform is immediately branded a traitor.

Advertisement

In general, people are eager to overrate the merits of intensive presidential involvement in difficult congressional fights.