Elected officials in both parties have made what I call “magical, mystery tax pledges” that are at odds with bipartisan approaches to serious deficit reduction:
- Republicans: Don’t raise revenue above the 40-year historical average of around 18-19 percent of GDP.
- Democrats, including President Obama: Don’t raise tax burdens on households making under $250,000 a year.
Some Republicans may not realize how their promise works against not only bipartisan compromise but against their own policy goals. As explained in a recent opinion piece I wrote for Bloomberg Government (subscription-only access here):
“To those on the right holding fast to an 18-19 percent of gross domestic product revenue ceiling, here’s the paradox: Raising more revenue by broadening and leveling the tax base is actually consistent with ‘supply-side’ economic goals. Raising revenue by reducing at least some of the $1 trillion a year in tax breaks and shelters — also known as tax expenditures — and adding on new, broadly defined tax bases would increase, not decrease, the supply of productive resources in our economy…”
Reducing tax expenditures would actually reduce the government’s role in the economy, a central goal...