Tax Reform Will Be Much Easier In The New Year

As ideas about tax reform ping pong back and forth from Speaker Boehner’s desk to the White House, I’m once again struck by how much simpler these negotiations will be if everyone just spends the holidays with their families and starts the negotiation again in the New Year.

The reason is we’re right now stuck between two no—Boehner’s commitment to avoid tax hikes on the rich and Obama’s commitment to avoid tax hikes on the middle class.


The issue is that while it’s easy to come up with tax reform proposals that are broadly progressive in their impact—proposals, that is, that raise the vast majority of their revenue from the rich while sparing low income people—it’s extremely difficult to do anything non-trivial that literally raises no money from any middle class families. Circumstances differ from person to person and family to family and almost any meaningful tax reform will cost a few middle class households some cash.

With the post-cliff baseline in place in January, these problems go away. Overall tax revenues will be much higher than Obama wants, which gives everyone the flexibility to agree to just about anything that they think makes sense and claim victory.