Bowles-Simpson Isn't Bold Enough On New Revenue
Alan Simpson and Erskine Bowles have styled themselves as the straight shooters of fiscal policy. They are the guys who tell the hard truth, as opposed to cowering before powerful interest groups. The original Simpson-Bowles proposal, in 2010, riled any number of powerful players with its call for major cuts in Social Security and defense spending, and the elimination of nearly all tax breaks and credits for corporations. That proposal also included a call for major new revenues—some $2.6 trillion in additional taxes over 10 years, or nearly half of all deficit reduction called for by the plan.
The new Simpson-Bowles proposal is not nearly as bold. In particular, the duo call for just $600 billion in new revenue over the next decade, which would come from closing tax loopholes.
Leaving aside the problem that the new proposal is so heavily tilted toward spending cuts, Simpson and Bowles have missed an opportunity to speak an obvious truth to the powers that be in both parties, which is that taxes on most Americans are too low given the challenges this country faces. And closing a few loopholes doesn't do enough to align revenues with spending needs. The truth—which neither party wants to hear—is that taxes need to go up not just on the rich, but on nearly everyone.
Last year, an analysis by the New York Times found that taxes are now lower for many U.S. households than at any time in decades:
Most Americans in 2010 paid far less in total taxes—federal, state and local—than they would have paid 30 years ago. . . the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.
This is not sustainable. Not with Baby Boomers retiring and the United States facing rising competition from China and other nations that require us to make major new investments in our human and physical capital. And not with the huge budget deficits the country faces.