Thoughts on a Tax Deal

by Chris Edwards

— The extension of unemployment benefits is bad policy, which, ironically, will hurt the Democrats politically, because it will keep the unemployment rate artificially high.

— It’s good to get the tax-cut extension enacted now so that the budget focus next year can be spending cuts and more spending cuts.

— The end of Obama’s Make Work Pay credit is a good thing, because it was mainly just a spending subsidy program hidden in the tax code.

— The next tax deal between President Obama and the GOP should be to enact the fiscal commission’s corporate-tax-rate-cut proposal.

— The unified front shown by Republicans on this tax extension was very important. Centrist deficit hawks dream that Republicans will just give in and sign on to big tax hikes in some future budget summit, as occurred in 1990. Today’s news suggests that won’t happen for the time being.

— The message of the election was not that Americans thought that their taxes were too low, but that the government was too big. If the Republicans can show a similar united front on spending cuts next year, we could really make some budget progress.

Chris Edwards is director of tax-policy studies at the Cato Institute.

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