Tax Reform, Mr President, Tax Reform

Jan 24 2012 @ 10:48am

13.9 percent. If you're really, really rich, that's all you have to pay in taxes, we see more plainly today. It seems to me that this is not about Romney and shouldn't be about Romney. He broke no laws; he seems admirably charitable; his massive wealth is not a marker against him.

The issue is the system. My basic view has long been for a flat, simple tax code, in which everyone pays either the same rate, or two or three clear rates, and all deductions are removed. You tax income and dividends at the same rate. You get government out of the way of an economy's market decisions, by not tilting the playing field.

137375266My position is on the right. I know that. I'm not a redistributionist. But the system we have now is geting close to absurd. I pay almost half my income in taxes of various sorts. It's nuts that I should be paying far, far more as a precentage than a man like Romney. And I'm a one percenter. For the average American, struggling in this economy, seeing this man pay so little in taxes is astounding. In fact, it's a scandal.

In my view, the critical issue that the president hasn't yet fully grasped and that he should champion in the SOTU is tax reform. If he wants one area where he and the GOP truly can hammer out a deal, it should be on reforming taxes. I'd prefer to see that reform combined with a revenue increase. But it can be done revenue-neutrally too. But just calling the GOP's bluff on tax reform would be enough, as a preparation for a second term push.

To put it more bluntly: The president and the Democrats should not be piling on Romney because he's rich. They should be piling on the tax code because it is so insane. This issue is populist and good economics. With a full-scale Bowles-Simpson attack on deductions, reform could keep taxation simple and low and easier to understand. And that restrains lobbyists, who suddenly have far less to lobby for; and it restrains taxation. If you have three simple rates – say, 10, 20, 30 – then any increase in them is very, very visible. You want a government that can be monitored and controlled by the people? Simplify the tax code!

If Obama wants to win this election, he needs to embrace radical tax reform. The shape and structure of sane reforms is already out there, as Bruce Bartlett explains here, and in his new book, here. He cannot and must not rely on a recovery alone. And he should force the GOP to refuse it, as he has forced them to refuse the payroll tax cut and extending unemployment insurance. Good policy. Good politics. And a reminder of the independent-minded liberal we backed in 2008.

Go big, Mr President, tonight. Go big. This is the moment when the transformation away from the old politics happens; when the baby-boom battle recedes; when the extremism of the GOP finally eats itself; and when a saner future can be born. The real moment of transformation will be the re-election of a reasonable president in an unreasonable time. But tonight is the harbinger, the marker, the rally moment.

Seize it.

(Photo: Jewel Samad/Getty.)