I have an answer to Ezra's question, "where is the progressive tax proposal?" Going back to the 2004 campaign, I've been arguing similarly that Democratic candidates should make real tax reform a centerpiece of their agendas. I'd particularly like to see a focus on what's called "horizontal equity" -- that all types of income should be treated alike and people with the same income should pay the same tax -- which would mean eliminating the special treatment of capital gains and dividend income, and in turn getting rid of the hedge fund and carried interest "loopholes," which exist only because of the incentives to redefine income as cap gains. Senator Ron Wyden and Rep. Rahm Emanuel's "Fair, Flat Tax" would be my preferred starting point.
An even more ambitious reform vision is Yale law professor Michael Graetz's " Competitive Tax Plan," which would eliminate the income tax for households under $100,000 in income, and substitute a Value-Added Tax. Given the level of revenues we'll need in the years ahead, a balance of taxation of income and consumption seems responsible, although there's a lot of complexity in making sure such a plan is fair to low-income households.
But I keep being told by those who know more about this than I do that the moment is not right for big tax reform, the demand isn't there, the pieces aren't in place, as they were in the mid-1980s. I'm not fully persuaded, as I still think a robust reform message, rather than another layer of little tax credits, is a way for Democrats to sidestep the cruel duality of the question of whether you will raise taxes or lower taxes.
But I think it's right in one respect: As part of another project I'm involved in, we looked at public opinion on taxes, and the best thing you can say is that it is a "low-salience" issue.
