Published for CNBC, December 11, 2012
f tax reform is a “Fiscal Cliff” goal, let’s return to the ’90s.
This morning I joined Becky Quick in Washington, DC for CNBC’s “Squawk Box”and noted in my view that there are benefits to allowing my favored Bush income tax rates to expire and return to Clinton-era tax rates for everyone.
Don’t get me wrong: returning to the higher Clinton income tax rates isn’t ideal policy – it would certainly dampen economic activity, but those income tax rates alone would not be the calamity many Republicans, Democrats, and commentators now fear. In fact, they even have some benefits.
Here are my reasons for returning to Clinton-era tax rates:
1) The Obama plan of only raising the top two rates on the wealthiest Americans kills any chance of income tax reform. This is important to understand: tax reform was always going to be a long shot. The forces arrayed against reform are numerous, well-organized, well-financed, dispersed across the country, and are often sympathetic groups: charities, state and local governments, the housing industry, and homeowners, just to name a few.
But tax reform becomes practically and politically impossible if the tax burden is skewed to the top as the Obama plan intends. In fact, the wealthiest Americans will face an even higher top marginal tax rate than under the Clinton years due to the increased Medicare payroll and investment taxes in Obamacare. Tax reform requires creating winners, and the pool of winners has to come from people paying taxes. Those not paying taxes today have absolutely nothing to gain from tax reform. In fact, if we only raise the top two rates, the only people who would gain from income tax reform would be the wealthy. And we can’t help the wealthy, so…no tax reform.
Published for CNBC, November 16, 2012
Tony Fratto and Austan Goolsbee (4:15)
Published for Marketplace Morning Report, November 7, 2012
This election, there was ad after ad after ad, and many of those were not paid for by the campaigns themselves.
The “Citizens United” Supreme Court case gave rise tosuper PACs. Those groups raised millions of dollars, and then funneled that money into political races.
Pro-Republican super PACs had hoped to propel the GOP to a majority in the Senate, but that didn’t happen. According to Tony Fratto, who was an adviser to President George W. Bush, money can only do so much.
“In nearly every case where a Republican Senate candidate lost, it is hard to say that it was a great candidate or that candidate ran a terrific campaign,” he says.
But even if super PACs didn’t get everything they wanted, Heather McGhee, a vice president at Demos, a Washington-based think tank, says they did get something.
“Today, the phones start ringing,” she says, “And there are people in Washington who have to take the calls of millionaires and in some cases billionaires who purchased exactly what they wanted, which is influence and access over the next two to four years.”
That is, until the next campaign, which Howard Dean, the former chairman of the Democratic National Committee, predicts will be even more expensive.