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Tuesday, February 28, 2012

Tax Reform in December 2012?

Source: Treasury's Flickr page
At February 24, 2012, interview on CNBC, Treasury Secretary Geithner suggested, in a somewhat obtuse way, that perhaps tax reform could occur at the end of this year because of several factors coming together.  I think he is hinting that if any of the tax breaks that expired at the end of 2011 (yes, 2011) are to be renewed, such as the research credit and AMT patch, and if any of the 2001/2003/2010 tax cuts are to be extended, there will need to be significant revenue offsets.  There are few places to get so much money (AMT patch along is about $60 billion just for one year), so President Obama's revenue raisers (mostly on "upper-income individuals") may have to get some attention.

Here is an excerpt from Geithner's interview (highlight added):

"We think there's a good chance that, by starting to lay a foundation for reform now, working with Democrats and Republicans, we can improve the odds that reform comes sooner than it otherwise would and in terms that are better for the economy long term. You know, at the end of this year, Congress faces some very difficult decisions, because you see -- you're going to see the Bush tax cuts all expire without legislation. The sequester, automatic cuts in spending, pretty substantial, will hit automatically unless there's a broader agreement, bipartisan agreement, that combines tax reform with efforts to help reduce long-term deficits. That creates a very powerful motivation for Congress to act. And what we're trying to do is lay the foundation for key elements of tax reform that'll be good for the economy as part of that ultimate progress. So we hope there's a chance to move. I think you heard Chairman Camp say this morning that, you know, it is a political moment, but things can happen even in election years."

The Treasury Secretary's remarks were to emphasize President Obama's Business Tax Reform framework that was released a few days earlier. I'm working on an article summarizing the proposals from this framework, recent Greenbooks, the PERAB tax reform task force report, the deficit reduction commission's report and President Obama's September 2011 budget plan (the one that introduced the Buffet rule). That will also note strengths and weaknesses in what all of these proposals offer.

What do you think regarding the prospects of any significant tax changes at year end?

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