Friday, November 12, 2010

Deficit Panel's Recommendations

I may not agree with all of their recommendations, but I must give Erskine Bowles and Alan Simpson a ton of credit for their bold recommendations for curtailing the federal budget deficit. Already, we hear folks railing against the notion of eliminating popular tax deductions such as the home mortgage interest deduction. However, Bowles and Simpson have also recommended lowering marginal tax rates substantially. The plan to lower rates but broaden the tax base through the elimination of many deductions makes good economic sense. A lower rate/broader base system is not only much simpler, but also more conducive to promoting economic growth. High rates coupled with many deductions yield many distortions and inefficiencies in the economy. Now, we need to educate Americans on why this type of tax reform is pro-growth. Again, I'm not suggesting that I understand or agree with all their recommendations yet, but I like the general direction in which they are heading.

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