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Taxes Are Taxes — and So Are Expirations

Political language often frames the public discussion of political issues. “Pro-choice” sounds a lot better than “pro-abortion.” Economic “stimulus” sounds a lot better than government “spending.” The party that better frames the language surrounding the public debate can sometimes win the debate almost by that means alone.

So let me take Jennifer’s perceptive post “Taxes Are Taxes” one step further. It is a mistake to say that Congress is “letting the Bush tax cuts expire.” The proper way of framing the issue is “failing to stop a massive tax increase.” The issue is not tax cuts relative to the 2001 economy, but the prospect of a huge tax increase on the 2010 one.

In April 2008 — long before President Obama engineered an increase in government spending that transformed “billions” into small change, making anything under a trillion a certification of political acceptability (rather than, in Everett Dirksen’s phrase, “real money”) — John F. Cogan and R. Glenn Hubbard described, in an article entitled “The Coming Tax Bomb,” what will happen if Congress fails to act:

This would be the largest increase in personal income taxes since World War II. It would be more than twice as large as President Lyndon Johnson’s surcharge to finance the war in Vietnam and the war on poverty. It would be more than twice the combined personal income tax increases under Presidents George H. W. Bush and Bill Clinton. The increase would push total federal government revenues relative to GDP to 20%.

All this is before the tax increases the Democrats want to use for cap-and-trade, health care, the Afghan war, etc. — or rather, it is after such tax increases. The strategy appears to be to enact those tax increases first and then engineer another one simply phrased “letting the Bush tax cuts expire.”

It is not too soon to bring this issue to the forefront, even though it will not come to a head until next year. Indeed, as Cogan and Hubbard argued, the prospect of scheduled future tax increases may itself be part of the current economic problem, and making the Bush tax cuts permanent might provide certainty for investors that would spur the economy. In any event, it would be a mistake to defer discussion of this until next year, especially if the debate then is framed as a mere “expiration” of something “Bush” did.



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