The Senate Finance Committee got some cogent advice Wednesday from both a Republican and a Democrat on what to do about the Bush tax cuts. The bottom line: don’t make them permanent. The tax system is broken, and needs to be fixed first.
The first piece of advice came from Leonard E. Burman, a former Treasury official under President Clinton and now a professor at Syracuse University. Burman said the economy is too weak to let all the tax cuts expire on Jan. 1, as will happen unless Congress acts. But he said that any extension should be temporary and should exclude people at the top of the income scale.
“It would be a serious mistake to make any of the tax cuts permanent now,’’ Burman said in his prepared testimony. “The income tax is a mess and is badly in need of an overhaul. It doesn’t raise close to enough revenue to pay for current governmental expenditures and is needlessly complex, unfair, and inefficient….Permanent extension of the tax cuts would make such a reform far more difficult and would signal to markets that our budget problems are only going to get worse.”
Burman said there is no reason, even now, to extend the tax cuts for people at the top -- they aren’t going to spend more just because their tax cut lasts another year. But he also said any extension for those with incomes below $250,000 a year should be tied to a schedule for producing and voting on a major tax reform. And that tax reform, he makes clear, would lead to higher taxes for middle-income earners.
Lawmakers also heard from Donald Marron, who worked in the George W. Bush White House and is now director of the Urban-Brookings Tax Policy Center. (Marron succeeded Burman at the Tax Policy Center, in fact.)
Marron was agnostic about whether to extend some or all of the Bush tax cuts. But he broke from both Republican and Democratic orthodoxy, saying that Congress should offset the cost of any extensions with spending cuts and tax increases in other areas. Neither party plans any offsets at the moment.
