Projections by the Congressional Budget Office make it clear that future choices about tax policy -- and particularly about expiring tax cuts -- will be a critical factor in the country’s fiscal outlook for many years to come.
Republicans counted it as an important victory that the first round of deficit reduction in last week’s debt limit deal contained no tax increases. But the deal leaves that as a possibility for the second round, with all options back on the negotiating table for the special congressional committee that will make recommendations later this year.
Diane Lim Rogers, chief economist for The Concord Coalition, argues that the tax reform strategy most likely to appeal to both Republicans and Democrats is to broaden the tax base by reducing tax expenditures -- such as exclusions, deductions and credits – while lowering marginal tax rates and raising additional revenue.
The committee, Rogers suggests, should consider strict pay-as-you-go rules on any extension of expiring tax cuts, including any of the Bush tax cuts that are set to expire at the end of next year. The panel should also work to identify tax breaks that could be eliminated.