Do great minds move in the same direction? Evidence in favor of this proposition comes from the fact that both Charles Krauthammer and Stephen Moore have columns in today’s papers advocating a 1986-style rate-cutting, preference-eliminating tax reform law. Many have argued that this would be precluded by the debt limit agreement, but they beg to differ.
They are right in saying that a 1986-style tax reform could produce results both Democrats and Republicans would like. Krauthammer advocates an upper limit on the deductibility of home mortgage interest, which makes sense to me; the government may have an interest in subsidizing home ownership, but ownership of $1 million homes? Leave that up to the market.
He also calls for eliminating the tax preference for employer-provided health insurance. Another excellent idea, which could have provided a basis for bipartisan legislation on health insurance. He declines, however, to endorse a reduction in or phaseout of the charitable deduction. Let’s leave the voluntary sector alone, he argues; I agree.
Moore makes the point that Treasury Secretary Tim Geithner has conceded that we need to reduce or eliminate the corporate income tax rate, which is now one of the highest in the world, hurting the competitiveness of many American businesses. He might have added that the Democrats have a political need to get rid of the Alternative Minimum Tax, which threatens to engulf their constituencies in high-tax, high-income states like New York, New Jersey, Connecticut and California.
Unfortunately, choices made by the Obama administration make a deal of this sort less likely. The administration and congressional Democratic leaders had no interest in eliminating the tax preference for employer-provided health insurance, even though there was a bipartisan legislative vehicle available for modification, co-sponsored by Democrat Ron Wyden and Republican Bob Bennett. What the administration has tried to do is to limit the amount of the charitable deduction available to high earners. This is an attempt to transfer money from the voluntary sector to the government—a profoundly unwise policy choice in my view and, more to the point, in the view of most members of Congress, including plenty of Democrats.
Speaker John Boehner has said on a number of occasions that House Ways and Means Chairman Dave Camp is better prepared to work on a 1986-style tax reform than most people in Washington realize. But it takes a long time to put such legislation together, and a real commitment from the Ways and Means and Senate Finance chairmen and from Treasury as well. It’s not clear whether such commitments are there. But at least the Krauthammer and Moore columns are a start.
