Romney adviser open to fiscal cliff tax increases

Economist and former Mitt Romney campaign adviser Glenn Hubbard is out Monday with his fiscal cliff recommendations, and a tax increase on the wealthy tops the list.

A few weeks ago, Hubbard was being talked about as a possible Treasury secretary under Romney, and his opinions still count among the GOP establishment. 

The comments come as House Speaker John Boehner (R-Ohio) has emphasized his openness to tax revenues, but not tax rate increases, ahead of Friday's first fiscal cliff summit at the White House. 

“The first step is to raise average (not marginal) tax rates on upper-income taxpayers. Revenue increases should first come from these individuals,” Hubbard writes in a new opinion piece in the Financial Times. “This means closing loopholes.”

Hubbard, who is dean of the Columbia Business School, says that, while keeping today’s marginal income tax rates in place, deficit reduction can come from limiting the charitable and home-mortgage interest deduction and the exclusion for employer-based health insurance.

Hubbard also puts a clear red line down: taxes should not exceed 20 percent of the economy. 

That is higher than the 18.5 percent called for in the House-passed Paul Ryan budget or the 15.8 percent of GDP today. It is very close to the 19.9 percent called for in President Obama’s 2013 budget.

“The present tax system can raise at most about 20 per cent of GDP in a booming economy. A government of, say, 25 per cent of GDP cannot be paid for by changing rates in such a system,” Hubbard warns. He says a value-added consumption tax would be necessary.

Hubbard goes on to say that limiting defense and non-defense spending and major entitlement reforms must also be part of a deal. During the campaign Romney called for increase in defense spending.