UPDATE: Deficit Hawks and Deficit Chickens:
Greg Mankiw appears to want to (a) count the impact of legislative actions he supports that raise taxes, (b) ignore the impact of legislative actions he supports that lower taxes, and (c) congratulate himself and pat himself on the back as he tells himself what a wonderful and responsible deficit hawk he is:
Greg Mankiw's Blog: Department of "Huh"? (Why Oh Why Can't We Have a Better Blogosphere? Brad DeLong Edition): Brad DeLong objects to my recent NY Times column by displaying some Tax Policy Center data that, he says, shows the Bowles-Simpson tax plan is hard on the poor and easy on the rich. Progressives, he concludes, should oppose the plan. The problem, however, is the benchmark used in this particular table: current law as of 2015. Under current law, all of the Bush tax cuts expire, and millions of new taxpayers are hit by the AMT. That is an outcome that has never been in effect and that neither political party endorses. It is an artifact of legislative history. A better benchmark, as noted by Howard Gleckman of the Tax Policy Center, is current policy. Here are those results. The implication is exactly the opposite. All income groups take a hit, particularly those at the top of the distribution.
Current law is indeed an artifact of legislative history.
But all laws are artifacts of legislative history.
Given our long-term deficit problems as they appeared in 2001 and 2003, the only legislative coalition George W. Bush could assemble for his--well, it was not a tax cut because to spend is to tax and GWB really liked to spend: call it a tax shift--tax shift was for a temporary tax shift that would expire in 2010 precisely because key senators were worried about the long-run.
Now Greg wants to ignore this history.
To start--as he wishes--from the baseline he claims is "current policy" is to give Congress a pass to blow yet another hole in the ship of long-term fiscal stability, and then to pat himself on the back on how responsible a deficit hawk he is.
He wants to pat himself on the back on how good a fiscal conservative he is by counting the impact of future legislative actions he supports that raise taxes. And he wants to ignore the impact of future legislative actions he supports that lower taxes. And past fiscal actions he worked tirelessly for that blew our long-term deficit wide open? Not a word about any of them.
I say no no no.
I say it does not work that way.
This annoys me because this is yet another example of budget arsonists putting on fire chief hats. Mankiw has lobbied for more than a decade now for the permanent extension of the Bush tax cuts--without proposing a dime of offset for them--and for the unfunded Medicare Part D as well. Now he says that large action is needed to deal with our long-term deficit problems. He is right: large action is needed.
But couldn't he include one single sentence about how he and the politicians he worked for are the people who created our current long-term deficit mess?
Real deficit hawks insist on PAYGO and start from a current-law baseline.
My Original Post:(
What the Simpson-Bowles tax provisions do:
Eric Toder and Daniel Baneman: TPC Tax Topics | Distributional Estimates for Bowles-Simpson "Chairmen's Mark":
What Greg Mankiw writes:
Deficit Reduction Plan Is Realistic: Erskine B. Bowles and Alan K. Simpson, the chairmen of President Obama’s deficit reduction commission, have taken at hard look at these tax expenditures — and they don’t like what they see. In their draft proposal, released earlier this month, they proposed doing away with tax expenditures, which together cost the Treasury over $1 trillion a year.
Such a drastic step would allow Mr. Bowles and Mr. Simpson to move the budget toward fiscal sustainability, while simultaneously reducing all income tax rates. Under their plan, the top tax rate would fall to 23 percent from the 35 percent in today’s law (and the 39.6 percent currently advocated by Democratic leadership).
This approach has long been the basic recipe for tax reform. By broadening the tax base and lowering tax rates, we can increase government revenue and distort incentives less. That should command widespread applause across the ideological spectrum. Unfortunately, the reaction has been less enthusiastic.
Pundits on the left are suspicious of any plan that reduces marginal tax rates on the rich. But, as Mr. Bowles and Mr. Simpson point out, tax expenditures disproportionately benefit those at the top of the economic ladder. According to their figures, tax expenditures increase the after-tax income of those in the bottom quintile by about 6 percent. Those in the top 1 percent of the income distribution enjoy about twice that gain. Progressives who are concerned about the gap between rich and poor should be eager to scale back tax expenditures.
Isn't it worth saying that it looks as though Simpson-Bowles is an average $7000/year tax cut for the top 1% and an average $600/year tax increase for the working and middle classes? "Progressives who are concerned about the gap between rich and poor should be eager to scale back tax expenditures" just does not cut it, does it?