Economist: Obama Sweeping Tax Reform Under Rug As the economic situation grows increasingly complex, experts weigh in on what's working, what's not and what's next. Economist Rosanne Altshuler, whose specialty is tax policy, says President Obama has been busy with health care and education reform but seems to have swept tax reform under the rug.
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Economist: Obama Sweeping Tax Reform Under Rug

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Economist: Obama Sweeping Tax Reform Under Rug

Economist: Obama Sweeping Tax Reform Under Rug

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And you just heard Scott talk about a minor course correction. You might want to define minor course correction when it comes to the president's budget. He inherited a massive deficit and added so many priorities that some lawmakers want to scale back.


A Democratic tax expert thinks the president's goals will demand even bigger changes. Rosanne Altshuler worked on a bipartisan commission on tax reform. Now she's at a think tank called the Tax Policy Center in Washington. And, she's the latest expert we're asking basic questions about the economy - what's working, what's not and what's next.

She starts with something she thinks is working, a tax credit of up to $800 for working families.

Ms. ROSEANNE ALTSHULER (Tax Policy Center): Actually, the way it's working right now, is that it's a reduction in withholding. So, everybody is getting a little bit more in their paycheck every week. And research in economics has suggested that instead of giving people a lump sum of money, it's better just to give them a little bit week by week.

Think about it: if you look at your paycheck and it has about 25 more dollars in it, you're not going to say, oh wow, I see that I got $22.30 more this week - I'm going to put that in the bank. It's probably going to be imperceptible to you and you're just going to go out and spend it, and that's exactly what we want.

INSKEEP: I want to underline what you're saying, because putting it in the bank sounds like a good thing but economists are actually worried that people are saving too much and not spending enough. You're saying this is structured to encourage people to just buy a couple of extra Coca-Colas or whatever it might be?

Ms. ALTSHULER: That is exactly right. Schoolbooks, clothes, just get out there and spend the money. The worst thing that could happen actually is that people take the money and put it under their mattress.

INSKEEP: So, you've zeroed in in one thing in this huge stimulus package in your area of specialty, tax policy, that you think is working. When you look across the administration's economic plans and proposals, what's not working or doesn't make sense?

Ms. ALTSHULER: What I think is not working is I don't see a good tax reform effort going on. I see the administration going forward with healthcare reform, education reform. On top of that, we have very, very, very big deficits. If the CBO report that came out on Friday wasn't a call to action on tax reform, I don't know what is.

INSKEEP: That's the Congressional Budget Office, which found that as huge as the deficits are that the Obama administration has been projecting, they're actually huger if the CBO is correct.

Ms. ALTSHULER: That's right. What we do know is that we have a long-term fiscal problem ahead of us, and we don't have a tax system that's set up to handle that.

INSKEEP: Do they need tax reform or do they just need more money? They need to raise taxes or cut spending - I mean, do they really need to change the whole tax system…

Ms. ALTSHULER: Absolutely.

INSKEEP: …in order to deal with this?

Ms. ALTSHULER: The tax system is right now on its deathbed. For instance, in the budget, he has health reform. Our numbers from the Tax Policy Center suggest that that would hit 3.3 percent of taxpayers. Can we really fund health care reform by going after the top 3.3 percent of taxpayers with our current tax system?

INSKEEP: It sounds like you think the answer to that question is no.

Ms. ALTSHULER: I think Americans are going to have to realize, more than just those making over $250,000 a year are going to have to contribute.

INSKEEP: Has the president painted himself into a corner though, because he's said thousands of times - or his advisors…


INSKEEP: …have said - …


INSKEEP: …anybody, the bottom 95 percent of America will pay no tax increase. End of story.

Ms. ALTSHULER: Yeah, I think he has painted himself a bit into a corner. But again, let me stress, if we were to seriously look at our tax system, we may be able to make some changes to that, broaden the base, make it more simple, make it more efficient, so that it can be the revenue-raising mechanism that we're going to need going forward.

INSKEEP: Meaning that some people might lose a lot of deductions and benefits.

Ms. ALTSHULER: Yes, yes.

INSKEEP: Some might people pay more but you'd avoid a really, really broad based tax increase on everybody, including the people who truly can't afford it.

Ms. ALTSHULER: Yes, yes, yes.

INSKEEP: Let me ask one other question that we're asking many guests these days. And that is, when you look at the economy, is there a problem or a situation or even a benefit coming up that's on the horizon that people are going to have to look out for?

Ms. ALTSHULER: Well, the benefit is that we're finally being forced to face the reality: the budget is out of control, that we have deficits that just aren't sustainable going forward, we have the baby boomers to deal with. So basically the day of reckoning has been moved forward and that probably is a very, very good thing.

INSKEEP: The benefit is we're being forced to face the problem is basically what you're saying.

Ms. ALTSHULER: The benefit is that we're being forced to face the problem.

INSKEEP: That's Roseanne Altshuler, co-director of the Tax Policy Center here in Washington, D.C.

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