Let the Bush Tax Cuts for the Wealthy Expire

The Bush Tax Cuts of 2001 and 2003 were the largest pieces of economic policy from the last decade, one in which median household incomes declined and wages stagnated. As such, and for a panoply of other reasons, the portions of the tax cuts for the highest tax brackets should be allowed to expire. Steven Pearlstein and Ruth Marcus in the Washington Post both take a look at these dynamics today.

Pearlstein writes that the anti-tax dragon needs to be slain (and does a bit of the slaying):

It is the refusal to put any tax increase on the table that has impeded much-needed reform of the tax code and rendered impotent a bipartisan commission charged with figuring out how to rein in the budget deficit.

And it is the tax bugaboo that stands in the way of an investment agenda to match the global challenges we face.

If Obama fails to alter the political dynamic and finally slay the anti-tax dragon, it's game over for his economic agenda.

And Marcus writes about the illiteracy displayed by conservatives on tax policy:

At a breakfast with reporters the other day, Minnesota Gov. Tim Pawlenty, one of the GOP's rising stars and a more-likely-than-not 2012 presidential candidate, was asked what his reaction would be if the president's debt commission were to recommend a mix of spending cuts and tax increases.

"Not good," Pawlenty said. "I don't think the argument can be credibly made that the United States of America is undertaxed compared to our competitors." Actually, the United States is on the low end in terms of the overall tax burden -- 28 percent of gross domestic product in 2007, according to the Organization for Economic Cooperation and Development, compared with an average of 36 percent in the 30 OECD countries. Only South Korea, Mexico and Turkey were lower.

Of course, Pawlenty is hardly alone in his tax delusions. Senate Minority Leader Mitch McConnell proclaimed the other day that the Bush tax cuts actually raised money. "There's no evidence whatsoever that the Bush tax cuts actually diminished revenue," the Kentucky Republican told Brian Beutler of the Web site TPMDC. "They increased revenue, because of the vibrancy of these tax cuts in the economy."

Here's some evidence. Tax revenue fell from 21 percent of GDP in fiscal 2000 to 17.5 percent in 2008. (I'm leaving out the recession-induced plunge, to under 15 percent this year and last.)

Here's more evidence - a CBPP analysis of causes of deficits in the coming years:

It's pretty clear that the American people's money can be better spent to spur economic growth than on tax cuts for the wealthy. More on this to come...