That the Obama reelection campaign is a cold leftover that’s just been temporarily reheated in the microwave of a three-night primetime infomercial is not a farfetched idea. I see two problems with it, however. 1) Even if “bounces” are by definition temporary, on balance, I think you’d rather have one than not; and 2) simply assuming that the surge in support won’t last is a poor substitute for actively trying to make sure that it doesn’t.
On that score, and since I’m such a nice guy, I have a suggestion for Team Romney. It involves the thorny issue of tax deductions: namely which ones a President Romney would reduce or eliminate in order to pay for more tax cuts and defense spending, and to maintain distributional and revenue neutrality. Glenn Hubbard, one of Romney’s top economic advisers, insists that “everything is on the table.” It sounds toughminded and fearless — like a threat of military action against a sovereign nation.
Yet in reality it’s an untenable dodge. The arithmetic-defying vagueness of this tax plan has left Romney vulnerable to the charge that he will raise taxes on the middle class — something he clearly doesn’t intend, but can’t definitively falsify.
And, as David Frum has observed, one of the big reasons Romney found himself in this box is because he was pushed into backing across-the-board tax cuts plus a top rate of 28 percent — whereas his original 59-point plan had called only for making permanent the current Bush-Obama rates.
Now would be a good time for Romney to put something specific on the table. Maybe even two somethings!
A good place to start: limiting the standard deduction to taxpayers who make less than $100,000 annually. Harvard economist Martin Feldstein, in his defense of the Romney plan, tacitly assumed that this reform would take place. So why not come out and say it?
A second suggestion: eliminate the step-up-in-basis inheritance tax break. Bankrate.com’s Jay MacDonald explains what this provision of the tax code entails: “Under special Internal Revenue Service inheritance rules, when you inherit assets such as stock, real estate or a closely held business, you are allowed to step up their basis — what the deceased originally paid for them — to their current fair market value. Therefore, when you sell the assets, you would only be taxed on their gain in value from the time you inherited them.”
The step-up-in-basis rule is distinct from capital gains and the estate tax, and, like those things, overwhelmingly favors the wealthy. It costs the government about $60 billion a year. Considering that the Bush tax cuts account for about $100 billion of annual budget shortfalls, that’s a significant chunk of change. If it were revised to include an elimination of the step-up-in-basis tax break, the Romney plan would not regain the entire $60 billion in revenue, for reasons explained here. That’s why I’m calling this a “modest” suggestion.” It’s a baby step. If the race continues on anything like its current trajectory, the Romney-Ryan campaign will find that it needs to do even more to prove that its tax plan is serious and to reassure voters that it’s not in the tank for the rich.