Was The Recent Tax Deal Good News?

With the passage of the extension on the Bush tax cuts (now and forever, to be called the Obama tax cuts) has revved up the calls for extensive tax reforms….from the Prez and his minions and even from some in the Tea Party….but what are the chances?

From the WSJ…..

This week’s great debate over the fate of the Bush-era tax cuts is doing something more important than determining tax levels for a couple of years: It’s helping set the table for a fundamental reform of the tax system.

That may be a blessing in disguise. Today’s tax compromise is laying the groundwork for tomorrow’s badly needed national debate over how to perform a much more fundamental makeover of the tax code, most likely after the next presidential election.

Actually, this week’s tax debate is merely the second big recent event pushing the country closer toward this rendezvous with real tax reform. The first came in the form of the report issued by the bipartisan deficit-reduction commission Mr. Obama created to deal with Washington’s tide of red ink.

A real conversation on tax reform is needed but will it ever come?

Ezra Klein makes a very astute observation in the WaPo……..

I doubt it. If you could agree on what the words “revenue neutral” meant, you really could redesign the tax code to feature lower rates, simpler forms and less economic drag. But given the coming expiration of the Bush tax cuts, you can’t agree on what revenue-neutral means, as Democrats will say it means revenue after the cuts expire, and Republicans will say it means revenue if the cuts were extended. Until that question is resolved, every tax reform conversation will break down when Republicans realize Democrats are trying to lock in the expiration of the Bush tax cuts and Democrats realize Republicans will only reform the tax code if it means the Bush cuts live forever and ever, amen.

Conservatives want lower taxes, particularly on the rich. They want a larger percentage of Americans to pay federal income taxes, as they believe that paying federal income taxes makes you less likely to support federal spending (Question: Is there any evidence for this view?). They want major cuts in existing government programs and a high bar to creating new programs, which means total revenues have to remain below current spending and far below projected spending.

Liberals have their own concerns: They want more revenues, as they know that their programs can’t survive forever unless taxes rise to meet spending. They want the tax code to be more progressive, and they want to see inequality fall. They want taxes on wealth-income brought into line with taxes on work-income. They want the social spending that runs through the tax code, like the Earned Income Tax Credit or the breaks for clean energy development, to survive, and even be expanded.

All this back and forth….only proves ONE thing….there will be little change in the tax code and structure in the near future……the working class will pay and the wealthy will get the benefits of their station in life…………