Revenue increases just a first step in reforming tax code

The “so called” fiscal cliff represents an unparalleled opportunity for our country and its leadership to rebuild and renew America, put us on a path for a sustainable fiscal future, and maybe even save the planet while we are at it.
 
During almost 20 years in Congress, I have watched political games and fierce partisan divisions trump badly needed investment and policy reform.  From bloated spending on agriculture and the Pentagon, to unfunded wars and Medicare expansion, we have slowly backed ourselves into a budgetary corner. There have been a few bright spots like the Clinton-era budget surpluses as well as the healthcare reform passed by the last Congress. Yet even these accomplishments contain gimmicks, have largely ignored the climate crisis, our hopelessly flawed tax structure, and have preserved sacred cows – literally, in the case of farm policy.
 
Since Nixon was president, the federal government has collected about 18.5 percent of GDP in annual revenues.

Unfortunately the cost of government has remained at more than 21 percent of GDP on average, sometimes much higher. The resulting deficits have exploded the national debt and made the borrow-and-spend policies in place since Reagan was president simply no longer feasible.
 
The budget is more precarious than it seems due to bookkeeping conventions and record low interest rates. The 10 year total for the Alternative Minimum Tax, Medicare Sustained Growth Rate and interest could easily cost over $2.4 trillion for no increase in government service, education, or infrastructure investment and sadly, no reform.

And it will get worse.
 
No matter the political spin, the public has little appetite for reductions in Social Security and Medicare, more expensive higher education, or less help for our veterans. An aging and growing population will demand ever more resources if we maintain anywhere near the current service level.
 
The good news is that we know what to do to confront these challenges. There is value to be captured from spending dollars more efficiently on defense, agriculture, and healthcare. We, as a nation, are not taxed nearly as heavily as other rich nations so there is capacity to generate more revenue.
 
There are steps we can take right now. First, there is a role for more responsibility for individuals and our partners at the state and local level. A perfect example is reforming disaster prevention and recovery policies and making flood insurance programs actuarially sound.
 
Another example is increasing efficiency by accelerating healthcare reform. On my website are examples that save money immediately and improve care.
 
We can right-size the military while using some of the savings for veterans’ needs. A prime candidate is scaling down nuclear weapons, thousands of which we don’t need, won’t use, and cannot afford. We can rebuild and renew America with a modest user fee increase, suggested by Simpson-Bowles, which will reduce the deficit and put millions back to work.
 
Congress and the administration must take their collective heads out of the sand when it comes to new revenue. Paying for what America needs and getting our fiscal house in order is not going to be met by raising taxes modestly on two percent of the population. It is an important step, but it should be the beginning of a broader effort at actually reforming the tax code. The system has reached the point of near collapse. It’s unfair, complex, and expensive to administer, with total receipts exceeding the net amount collected.
 
We should consider the addition of one or more broad-based taxes to supplement the most progressive income tax system in the world with the highest statutory corporate tax rates.  With more revenue, the corporate tax can and should be decreased.

If we launch tax reform with these broad-based elements as outlined above, combined with abolishing the Alternative Minimum Tax and the Sustainable Growth Rate for Medicare, it will simplify the politics, make it easier for people to do business, as we no longer rely on “phantom” budget revenues.
 
These changes will not be easy and are not without controversy, yet are what we will have to do over the next 20 years. Why not focus on the next 20 months instead of the next 20 days and do it right? If politicians work with a president in establishing a legacy for the American people, great things can happen.

Blumenauer is a member of the House Budget and Ways and Means committees.

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