July 28, 2014

Fiscal Responsibility, More Effective Options Are Neglected in Talk About Extending Bush Tax Cuts

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...

There’s talk of a political compromise on extending the Bush tax cuts but Diane Lim Rogers, The Concord Coalition’s chief economist, worries that fiscal responsibility is still taking a back seat. In a blog post today, she writes: “This is the same kind of ‘compromise’ on fiscal policies we've seen for the past decade: ‘I'll let you have your favorite deficit-financed policies (even those I don't like) if I can have some of mine (that you don't like), too.’ ”

Rogers finds it troubling, for example, that there has been some discussion of raising the threshold for “middle-class” tax relief to families with incomes of up to $1 million a year.

She does not find the economic stimulus argument for the tax cuts very persuasive because other types of tax cuts, according to the nonpartisan Congressional Budget Office, would provide more “bang per buck” in helping the U.S. economy recover.

As for the longer term, deficit-financed tax reductions will actually hurt economic growth. It would make far more sense, Rogers argues, to reform the tax system in ways that broaden the tax base and provide sufficient revenues to cover government expenses.