December 14, 2010

Tax Cuts: Don't let perfect be the enemy of good

Jason J. Fichtner

Former Senior Research Fellow
Summary

While some in both political parties are raising objections to the tax deal before the Senate today, despite recent polling showing that 7 out of 10 Americans are in favor of the plan. While there are some downsides in the plan, it’s important that we don’t let perfect be the enemy of the good.

Contact us
To speak with a scholar or learn more on this topic, visit our contact page.

While some in both political parties are raising objections to the tax deal before the Senate today, despite recent polling showing that 7 out of 10 Americans are in favor of the plan.  While there are some downsides in the plan, it’s important that we don’t let perfect be the enemy of the good.

There’s a lot in the compromise proposal to like and it will benefit all Americans that pay taxes.  But fundamental tax reform that permanently lowers tax rates for individuals and corporations still needs to come sooner rather than later.

The payroll tax extension is one area that is a weakness of the bill because it only adds to the deficit without increasing incentives for job creation, as it only temporarily reduces taxes for employees, not the labor costs for employers.

Temporary is not as good as permanent. All of this is better than nothing, but this plan does not provide the necessary structural reforms to strengthen long-term economic growth or Social Security.