By Monique Coppola
(01/28/13) RICHMOND, Va. – Some in Congress want cut Medicare, Medicaid and Social Security to shrink the federal deficit. However, some economists say it would be fairer – and smarter – to change the tax code.
Andrew Fieldhouse, federal budget policy analyst with the Economic Policy Institute, likes the idea of creating a more progressive tax structure. Capping itemized deductions for the wealthy – as proposed by Mitt Romney – and raising the capital gains tax are two methods, he says.
"There's more than enough revenue to be had from the tax code: broadening the tax base, eliminating itemized deductions," Fieldhouse explains. "Progressive revenue could easily be enough to stabilize the debt over the next decade – or longer." Taking that approach would slow the economy less than taking money from working families, he predicts.
Fieldhouse contends that part of the reason the economy has been so weak and unstable is the rising gap between the rich and the middle class. "We've seen real wages of median working-age families fall back to their 1994 level, roughly," Fieldhouse says. "You're creeping up on two decades that have been lost, income-wise, for the middle class."
It's not good for long-term growth, he adds, that super wealthy people like Warren Buffett pay a lower tax rate than those in lower income brackets.