August 22, 2014

State of the Union: Changes Needed

President Obama proposed significant changes in tax policy in his State of the Union address last week, emphasizing the need for fairness as the economy continues to recover from a severe recession. Gov. Mitch Daniels of Indiana delivered the Republican response, faulting Obama for what he and other Republicans say is a divisive approach to economic policy.

Joshua Gordon, policy director for The Concord Coalition, and Diane Lim Rogers, Concord’s chief economist, give the President’s speech mixed reviews in two new videos.

Rogers notes that the tax system could be made more fair by eliminating many of the special tax breaks that favor some individuals and businesses over others. These “tax expenditures,” which often receive only limited public scrutiny, tend to favor higher income households.

Broadening the tax base by eliminating such provisions, she said, is “one of the most promising areas for reducing the role of government . . . in a progressive manner.”

Gordon pointed out, however, that Obama also proposed a host of new or expanded tax deductions that would make the tax code more complex rather than simplifying it. Gordon said Daniels offered a “valid criticism” of Obama on this point.

Gordon is encouraged, however, that the President focused on the trade-offs between tax cuts and effective government spending and investment – and that Daniels seemed to acknowledge these trade-offs as well.