The so-called, and unhappily named, “Gang of Six” has devised a bipartisan plan to reduce the deficit over the long-term and raise the debt ceiling in the short-term. Details, if this morning’s Washington Post is any guide, are sketchy but they key question is not if this is the best deal possible, or the best way to address the nation’s finances, but if this proposal can, and should, pass both houses of Congress.
The most significant part of the plan has to do with taxes. It would simplify the tax code radically, eliminating many special interest tax breaks and corporate loopholes. Some of the revenue saved by closing the loopholes, about $1 trillion over ten years, would go towards long-term debt reduction but most of it would go into lowering both corporate and individual tax rates. This kind of simplification has many benefits. It levels the economic playing field so that small business are not paying the full tax rate while those corporations with lobbyists capable of getting favorable tax treatment pay miniscule taxes or avoid them altogether. So far, so good.