Conservative tax orthodoxy as outlined by Grover Norquist and the Americans for Tax Reform -- and accepted by most Republicans -- requires not only opposition to tax increases but also opposition to closing tax loopholes: Any act that might raise revenue is forbidden. Unfortunately, this perpetuates a slew of subsidies and give-aways in the current tax code, often targeted at corporate interests, that distort its effects and are the equivalent of real spending. While Democrats have made this a campaign issue, now Martin Feldstein -- the former Reagan economic official -- has joined the likes of the Center for American Progress in critiquing the Republican stance. Here's Feldstein:
[E]liminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking. It would also increase overall economic efficiency by removing incentives that distort private spending decisions. And eliminating or consolidating the large number of overlapping tax-based subsidies would also greatly simplify tax filing. In short, cutting tax expenditures is not at all like other ways of raising revenue.
Once again, liberals and conservatives can agree, at least in theory, on a plausible program for deficit reduction, but it's hard to imagine Republicans relaxing their doctrinaire approach to taxes since the problem from their point of view isn't so much deficits but ensuring that their interest groups have the lowest possible taxes.
-- Tim Fernholz