Tax Reform -- Now With 50% Less Yawning

I'm going to second Matt on this one -- the Center for American Progress's brand-spankin-new tax proposal is really very good, even to an untrained eye like my own. Those of you wanting the full rundown can find it here (warning: 32 page PDF), but most will probably opt for the two page executive summary.

Democrats would be smart to find themselves a few days lull during the Social Security fight and switch gears to blitzing for tax reform. Our tax reform. Because CAP has released a proposal that is, in fact, very good politics. Most Americans would love to see the SS portion of their payroll taxes eliminated, with Social Security now being funded through a guaranteed 2.25% allocation of GDP and a removal of the payroll cap on the employer side. Very smart politics, and very relevant to the current battles. And by changing the subject from Social Security and to tax reform, Republicans can no longer accuse us of lacking a plan, but the subject switch will help bog down the privatization process and defeat the president's proposal outright. CAP also offers incentives for marriage (or, more precisely, the elimination of disincentives for lower-income couples, as single-parent women currently lose their EITC when they accept the ring), consolidates everyone into three income brackets, eliminates the AMT, and encourages saving with an across-the-board 25% tax credit on retirement savings and the ability to shield 50% of assets worth less than $1 million from the capital gains tax so long as they're marked for retirement.

You'll probably notice a lot of tax cuts and exemptions in there. You'd be right. The plan will raise revenue as a percentage of GDP from 2004's 16.2% to about 17.2%. That's an improvement, but it's also the second lowest it's been in years. Bush's average (which has been going down, so much of this is balanced out by pre-tax cut revenues) is 17.5%, Clinton's average was 19.2%, Reagan stood at 18.1% -- so in some ways, we're making up just a bit of lost ground, and we're still way behind the Europeans. But the plan is such good politics, and so much sounder than what Bush wants to do, that the sacrifices are well worth it. Democrats should print it out, study it, and begin selling it to the American people. In the same way that Gephardt undercut Dean's momentum on health care by getting a more progressive, more attractive (but less pragmatic) plan out the door first, so too should Democrats sap the urgency from Bush's tax reform by offering a massively appealing plan before he even takes on the subject. CAP's proposal* is an excellent starting point.

* By the way, props to the Center for American progress, huh? This is exactly what we need our Think Tanks to be doing. And they're not leaving the plan alone to stumble about it a cold, cruel world. John Podesta's been hitting the op-ed pages burying Bush and selling progrssive tax reform. Check him out.

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