Tuesday, February 25, 2014

Tax Reform Breakthrough?

The Democrat heading the Senate Finance Committee has announced that the Congressional Budget Office is now willing to "actually score pro-growth tax reform as generating revenue."

The Republican heading the Ways and Means Committee has introduced a tax reform plan, three years in the making, that would reduce income tax rates to just two, 10% and 25%, for almost all taxpayers. The plan aspires to revenue neutrality.

In theory, tax reform could awaken from its coma.
Recognizing that government can be a beneficiary from pro-growth tax reform makes it possible for Mr. Obama to get more revenues without Republicans having to vote for a tax hike. This is the glue that makes a bipartisan deal possible. 
In practice – well, you try to design a revenue-neutral plan that cuts income tax rates to 10% and 25%. You're eliminating the deduction for mortgage interest? Lots of luck with that!

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