Reforming the tax code
Michael Drew makes a number of good points in the comments to the Simpson-Bowles post. Essentially, he believes that A) the trade-offs are unrealistic; B) they benefit the wealthy over the middle class by bringing income rates down much too far while eliminating tax exemptions that have traditionally been very good to the middle-class; and C) the proposal does address Medicare in a serious manner and instead focuses on the relatively minor problem of Social Security.
All of these are good points and I’m honestly not in a position to evaluate them with the care they deserve. Drastically lowering income taxes would be good for the American economy overall I think, especially in such a global, competitive economy, so long as you can pay for it through trade-offs; but I worry also that the cuts would benefit the rich too much while the middle and working class would suffer from the cuts. Then again, as North and others point out elsewhere, the capital gains tax reform would have a huge impact on the rich while leaving the poor and middle-class unscathed.
But here’s my theory: I think the commissioners made a lot of extreme proposals in the knowledge that they’d have to walk back from pretty much all of them some distance to reach consensus. So I would expect to see rates much higher, probably more brackets than just three, and fewer exemptions removed. I would expect the proposals for Social Security to be watered down significantly since they easily could be. And I would expect the healthcare problems to get kicked down the road since nobody is willing to tackle that Goliath at the moment, and probably won’t be until the new healthcare law is already up and running.
But that’s just a hunch. On the whole I like the direction the deficit commission is moving, but I agree that many details need to be improved upon, and we need to take extra care not to cut back too heavily on the middle class or move too quickly to remove things like the mortgage tax deduction.