Even Republicans will sometimes support progressive taxes. Representative Dave Camp is considering legislation that would increase taxes on the largest banks. (AP Photo/Pablo Martinez Monsivais.)
While the New Year’s deficit deal divided congressional Republicans, there’s one point on which they’re all reading from the same hymnal: No more tax talk! The revenues under the deal are relatively modest—they leave rich people’s taxes well short of Clinton era rates. But Republicans, while claiming to care deeply about the deficit, have locked arms to take further tax increases off the table. We can’t let them.
The truth is, we could do our economy a world of good with some smart and fair tax hikes. While the current deficit hysteria is unmoored from reality, the right tax hikes could improve economic incentives, reduce obscene inequality and fund much-needed programs. Rather than the usual dust-ups over competing flavors of austerity, our budget debate should have healthy tax hikes front and center.
To start with, Congress should listen to Sarah Anderson, who directs the Global Economy Project at the Institute for Policy Studies. As Anderson noted at The Huffington Post last week, while progressive taxation may appear an uphill battle, politics is fluid, and “Openings will come…. The even more important challenge is to push progressive reforms into the center of the debate so they get plucked when the stars are aligned.”
Anderson has a few good taxes in mind to start with. First: Close the carried-interest loophole, so that money made by managing private equity or hedge funds no longer gets preferential treatment over wages earned by teaching kids or mining coal (President Obama offered welcome support for this change in his Super Bowl Sunday interview). Second: Cap executive pay deductibility, so that calling obscene bonuses “performance-based” no longer lets them be easily exempted from taxation. Third: Tax financial transactions, so bad behavior can be discouraged, and the people who crashed the economy can be required to pay for the cost of recovery. And fourth: Shut down offshore tax haven loopholes, so our tax code stops seducing money away from America.