Outside editorial: Tax compromise is a start; now Congress must fix code

Posted: Friday, December 10, 2010

On balance, we're glad to see congressional Republicans and the White House come together around a package to keep the Bush-era tax cuts for two years, include numerous tax cuts favored by President Barack Obama and extend benefits for unemployed workers.

That's the right political combination, giving each party something to cheer and each party something to dislike. To a large degree, it's the nature of compromise.

More than that, the strategy is largely a good economic move.

Letting even some of the Bush tax cuts expire Dec. 31 could further drag down an economy still struggling to recover. Even Democratic Keynesians must admit that letting tax rates increase now, including in ways the administration favors, would not fit with John Maynard Keynes' warnings against raising taxes during down times. Perhaps that's why several Democratic senators backed off ending all the tax cuts.

But Republicans, likewise, can't assume keeping taxes low will help everyone in economic need. With U.S. unemployment up to 9.8 percent, many strapped families demand immediate relief, which extended jobless benefits would provide.

Nor can Republicans assume extending these tax cuts is anything but a temporary tactic. The decision only gives Congress two years to get on with the more important task of overhauling the entire tax code. Leaner, smarter tax laws would provide employers and consumers alike the economic certainty they need to invest and spend more.

And here is who must lead this effort: Republican Reps. Jeb Hensarling of Dallas, Paul Ryan of Wisconsin and Dave Camp of Michigan and Democratic Sen. Max Baucus of Montana. As members of the presidential debt commission, they voted last week against sending the panel's reforms to Congress for a vote. We still can't fathom why they wouldn't let their congressional colleagues vote on the numerous tax and spending changes in the commission's proposal.

Since they didn't, the onus is on them to show that they are serious about tackling the tax code.

The commission actually presented sensible ways to overhaul tax policies. The panel wants to lower tax rates for individuals and corporations. That could give the economy the juice it needs for greater growth.

The panel also suggested ending "tax expenditures" that would require each of us to sacrifice. Chief among the suggestions was limiting the mortgage deduction. Capping that and ending numerous other tax subsidies could save billions as Congress tries to reduce the nearly $14 trillion debt.

By reaching this lame-duck-session compromise, President Barack Obama and congressional Republicans gave us a good start - but it is no more than that. The tougher task still lies ahead, and those legislators who voted against the debt commission's report must prove they can negotiate their own bipartisan compromise.

The nasty alternatives are political gridlock and, ultimately, economic calamity.

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