It’s no surprise. Democrats and Republicans still can’t seem to agree on how to shepherd our tax dollars into a comfortable and prosperous future. U.S. Treasury Secretary Timothy Geithner is crazy about “modest” tax increases proposed by President Obama, but the Republicans hate the idea, saying that raising taxes when our wallets are stretched thin as it is won’t contribute to a healthy economy. But Geithner is saying that some tax increases would be far preferable to spending cuts, normally championed by Republicans.
In his testimony today before the Senate Finance Committee, Geithner said that the only way to reduce the nation’s whopping deficit over the next decade without damaging national security or Medicare is to raise taxes. He’s defending the budget plan released yesterday, in which Obama called for $1.4 trillion in fresh revenue (read: new taxes) mostly from Americans sitting at the top of the financial totem pole. The proposed budget also includes higher taxes on wages and investments and limits on tax breaks for retirement savings and health insurance.
“We think the economics are quite good, quite sound,” Geithner said in his testimony.
Geithner also added personally that he would like to see more revenue raised from a comprehensive re-write of the tax code, a passive political threat that is always on the back-burner, but added that there are no plans for such an overhaul right now. Senator Max Baucus, a Montana Democrat and chairman of the hearing, also called for overhauling the tax code.
“We must make the tax code fairer and more predictable,” he said. “We need to simplify it and close loopholes.”
On the other wide of the aisle, Senator Orrin Hatch of Utah said that the Obama budget would impose “stifling tax hikes” that will do more harm than good.
“This budget is a plan for a permanently larger, European- style government,” he said. “It does not set our country on a sustainable fiscal path.”
Later this month we’ll see a rough draft for corporate tax reform from the Obama administration. Geithner said at the hearing that the plan will be “a little tougher” than the House proposals.
Such gentle bipartisan bulls in the China shop, aren’t we?