Achieving real tax reform now will be substantially more complex and critical than it was in 1986
By Joseph Minarik, Senior Vice President and Director of Research, Committee for Economic Development; Member, BPC's Debt Reduction Task Force
This blog post was originally published on "Back in the Black," the blog for the Committee for Economic Development's Fiscal Health Initiative.
Two weeks ago, I wrote about a claim that increases in tax rates on capital gains reduce revenue (and vice versa). This week, I would like to put that question in the context of the potential for a budget agreement in Washington – which three weeks ago I wrote is not going to happen in 2012, either before or after the election.
So where will capital gains taxation – and tax reform generally – stand in any budget deliberations?
If either party sweeps the board in November, then that party may succeed in resolving the budget issue all by itself, and all in its own way, early in 2013. The House of Representatives can do anything that a bare but unified majority wants to do – essentially overnight. (The “overnight” part is why the staff burn out so quickly, whether their marriages survive or not.) And just about the only thing that a bare majority can do in the Senate is to pass a budget resolution that includes “reconciliation instructions,” which empower that same bare majority to pass a strictly budget-related “reconciliation bill” that is not subject to a filibuster (that is, endless debate – which can be terminated only with 60 votes). If a President of the same party is waiting to sign that reconciliation bill, then, bingo – enormous change can be achieved in a very short time.