William G. Gale

Everything is easier to do if the economy is growing. If you want to cut spending, it is easier to do in an environment where people think they are going to have robust income growth and aren’t as dependent on government. In terms of taxes, growth gets you not just more income to tax, but taxpayers moving into higher rates.

What we did on January 1st isn’t tax reform, but it may well preclude any tax reform for this year. First, the whole point of tax reform is to reduce the rates and broaden the base. But we just raised the rates. I find it difficult to think that after the election, where Obama campaigned and won on higher tax rates on the rich, that policymakers would then turn around and reduce rates on the rich, even in exchange for a broader base.

We should reform the tax system, no question. We are going to need to move beyond the current set of tax instruments to raise the needed revenues—a VAT and or a carbon tax seem like the obvious ways to go.