Both Ed Kilgore and my American Prospect colleague Sam Rosenfeld wonder if Social Security phase-out isn’t going to somehow warp into a proposal for the conservative version of “tax reform” (for how this differs from actual tax reform, see Jon Chait’s excellent article on the subject from some time ago), i.e. exempting all income derived from wealth and investments from taxation.
To be frank, I have a hard time seeing how the logistics of that would work, both thanks to the details of the budget process and because the President has appointed a stacked commission to offer tax reform proposals and presumably won’t move on the issue until John Breaux’s done selling the Democratic Party down the river.
Nevertheless, this is something to keep your eye on. One way or another, this issue’s going to hit us before Bush is out of office and Democrats need to be prepared. Unlike on Social Security, where the status quo is basically fine, it won’t be viable for Democrats to oppose even a terrible tax reform proposal if that opposition becomes a defense of the actually existing tax code which isn’t fine at all. Policywise, an unsatisfactory status quo is obviously better than a change for the worse, but politically I don’t think it will be viable. The smart thing to do would be for Democrats to take advantage of their out-of-power status to get ahead of the curve by offering-up some pie-in-the-sky tax reform ideas that comport with progressive principles.
John Podesta and his team at the Center for American Progress offered some smart ideas on this front back in March and liberals everywhere would do well to listen. You can read the short version here or get the details here.
