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Tax Reforms Key to Solving Budget Crisis, Economist Says

December 2, 2011

Despite its well-publicized failure, the congressional supercommittee has generated meaningful discussions about tax reform, and proposals have surfaced on the campaign trail as well.

"Before we ask the question how much should we tax, the question is how can we tax better?" said Alex Brill, former senior adviser and chief economist to the House Ways and Means Committee.

Alex BrillBrill, who now serves as senior fellow in the economics department at the American Enterprise Institute in Washington, spoke to a group of about 30 students, faculty and members of the public at Palm Beach Atlantic University's MacArthur Hall on Thursday.

He said he doesn't see the current budget fight in Washington, D.C., simply as a black-and-white tax issue. "Taxes matter. They matter because they affect decisions. They affect our economy. They affect our behaviors. But the truth of the matter is, they don’t all matter the same," Brill said.

Brill believes that the current spending-cut-versus-tax-increase mentality among politicians ignores those differences.

"In my mind, a deal to address our entitlement issues … that resulted in a better tax code that was a bigger tax code could very well be a good trade," Brill said.

Presently, only about half of U.S. households pay federal income taxes. "I think that if we had a tax system that was broader because it included more households, we’d have more buy-in from the voters," he said. "And I think that would affect ultimately the decisions that policymakers, members of Congress and the president would make about how to spend those dollars."

At the last Republican presidential debate, which focused on national security, Brill had a chance to ask the candidates a question about what entitlement reforms they would make to address the country's long-term deficit, which is estimated to reach $11 trillion in the coming decade.

"We need to figure out how to get the system right and we need to figure out how to set the levels so that we're both paying for the costs that we’re incurring and doing so in a way that does the least to distort or harm our economy," Brill said. "I think that’s both sound economic policy and it’s also sound national security policy."

During his talk, which included a question-and-answer session, Brill addressed the debt-limit debate and the proposed payroll tax cut extension, as well as the failed supercommittee, which has triggered concerns about future cuts in defense spending.

While there are efficiencies that can be realized in the defense department, the decision about how to allocate funds for defense "shouldn’t be made with across-the-board cuts," he said.

Brill's talk was one of several guest lectures collectively known as the Global Events Forum. Prior to his speech, Brill spoke in two PBA macroeconomics classes. He also handed out copies of The Real Tax Burden: More than Dollars and Cents, a book he co-authored as part of the AEI’s Values and Capitalism educational series.

The goal of the Global Events Forum is to foster critical thinking within the PBA community regarding global events covered by the American news media, as well as to promote an open exchange of ideas.

The forum is sponsored by PBA's Quality Enhancement Plan (QEP), Think for Yourself – Write for Others; the Rinker School of Business; and the Office of Career Development.

12/2011General News


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