The Tax Debate That Isn’t

NYT Editorial

If there’s one issue on which Republican presidential hopefuls should feel vulnerable, it’s taxes. The Bush tax cuts, more than any other policy, are crippling the government financially.

From 2002 to 2011, forgone revenue from the cuts will account for 37 percent of the federal budget’s descent into the red, according to the Congressional Budget Office. War and defense spending come next, producing 30 percent of the deterioration, followed by domestic spending at 11 percent.

With revenue falling short year after year, federal borrowing from the public has mushroomed since 2001, by 53 percent, to $5.1 trillion, compared with a 2 percent increase during the Clinton years. American taxpayers must repay the borrowed money with interest, which means fewer federal dollars to spend on everything else for decades to come, including health care, infrastructure repair, emergency response, chemical plant security and alternative energy.

And yet, each of the Republican primary candidates act as though President Bush’s record on taxes has been a smashing success and prominently and proudly tout their tax policies — which boil down to a call for ever lower taxes, primarily through extending all of those same Bush tax cuts beyond their scheduled expiration at the end of 2010.

For Democratic candidates, in contrast, taxation is the issue that dare not speak its name. With the exception of John Edwards, none of the Democratic candidates list “taxes” under “issues” on their official Web sites. Hillary Clinton buries various tax proposals in a category labeled “Strengthening the Middle Class,” while most of Barack Obama’s tax ideas are under “Fighting Poverty.” Even the also-running candidates subsume tax issues under broad, bland headings.

A charitable explanation for the Democrats’ reticence is that not much of substance separates them on the issue of taxes. The front-runners, Mrs. Clinton, Mr. Edwards and Mr. Obama, all pledge to end the Bush tax cuts for the richest Americans — generally defined as people making upwards of $200,000 or so.

All three would keep the estate tax, but with multimillion-dollar exemptions to ensure that only the wealthiest Americans pay it. They’re also in general agreement on using the tax code to funnel more money to lower-income Americans — by expanding the child-care credit, for example, or boosting the earned income credit for low-income workers or introducing new tax breaks to defray the cost of college or make it easier to save for retirement.

All of that is laudable, especially when the candidates say they would target tax breaks based on fairness and need, both of which have been largely ignored in Bush tax policy. But with the nation in dire financial straits, serious tax talk circa 2007 has to do more than serve as a way to show a candidate cares about those who are struggling to make a living.

Which brings us to the less charitable, and more likely, explanation for the Democrats’ aversion to talking candidly about taxes: They don’t want to level with the American people, for fear of being felled by a barrage of anti-tax rhetoric from Republican opponents.

(We can’t imagine that any Democrat has forgotten how Walter Mondale tried being honest about taxes in 1984 and ended up winning only his home state and Washington, D.C.)

The Democrats are not as pie in the sky as the Republicans. Ending the Bush tax cuts for the rich would raise about $1 trillion in revenue over 10 years. Extending all the tax cuts and piling even more on top of them, as some Republicans propose, would only dig the budget hole deeper.

Still, going forward, competent governance, let alone achieving great things, will require more revenue, period. The expiration of the Bush tax cuts at the end of 2010 could be a moment of opportunity:

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To recast the tax system so that it raises needed revenue with the burden distributed progressively throughout the income scale.

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To create a system that does not disproportionately favor investment income over income from work.

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To consider new taxes that both raise revenue and distribute the overall burden even wider, including value-added taxes that have worked well in Europe.

Tax reform cannot be achieved piecemeal, and it will not be achieved as long as the debate is polarized, as it is now, between those who say that governing is possible without adequate tax revenue, and those who seem too cowed by fear of the “tax and spend” label to call for dramatic change.

Worse, the lack of serious tax debate opens the door to off-the-wall ideas, like the Republican candidate Mike Huckabee’s proposal to replace the income tax with a hefty national sales tax. “It will be like waving a magic wand releasing us from pain and unfairness,” he said in New Hampshire recently. It would also be easily evaded and incapable of raising adequate sums unless set prohibitively high. Fred Thompson proposes to let taxpayers choose to pay a flat income tax, without write-offs. That might make things easier on tax filing day. But it would make every other day more difficult, as the exorbitant cost of the flat tax would likely be paid by cutting Medicare, Social Security and other bedrock government services.

More difficult than tax reform itself may be the search for a candidate with the political courage to speak frankly to the American people about the nation’s budget problems and the leadership skills to solve them.