Jul 13, 2011 -
The Wall Street Journal - July 13, 2011
This is a leadership moment for President Barack Obama and House Speaker John Boehner. The debt limit -- an issue both leaders agree must be addressed -- is the last best hope for regaining America's fiscal footing before 2012 presidential politics bring an already sclerotic legislative process to a grinding halt.
The good news is that both leaders appear to be thinking big. But to reach the goal of lowering the debt by $4 trillion, or at least by $2 trillion, members of Congress need to throw off the rhetorical binds that they've placed upon themselves.
Republicans risk taking "no new taxes" to entirely new heights, labeling any attempt to increase federal revenues as a tax increase. And some Democrats have made even minor entitlement adjustments off-limits, which renders the largest portions of the federal budget untouchable.
But even if Republicans and Democrats don't abandon their uncompromising rhetoric, there are many ways in which we can work together to close the deficit while honoring the pledges we've made to our constituencies.
On the issue of increasing revenue, the famous Grover Norquist antitax pledge that many Republicans have signed does not preclude provisions that will increase revenue without actually increasing taxes on Americans. One way would be to require the 10 million immigrants living in America illegally to get right with the law and pay back-taxes and fees, which would generate as much as $5.4 billion in new revenue, according to the Center for American Progress.
The nonpartisan Congressional Budget Office found that the bipartisan 2007 Senate immigration bill would have boosted revenues by $15 billion by 2012 and by $48 billion by 2017. The Cato Institute, a libertarian think tank, also found that forcing undocumented immigrants to get right with the law would boost their productivity and thus the incomes of U.S. households $180 billion a year by 2019, thereby further increasing tax revenues.
New revenues can also be found by changing the way we treat Internet gaming, which is currently both underground and offshore. U.S. Immigration and Customs Enforcement currently spends millions of dollars trying to shut down and prosecute Internet gaming sites, but they remain a casual click away for any interested gambler. Legalizing and regulating online gaming, as Reps. John Campbell (R., Calif.) and Jim McDermott (D., Wash.) have proposed, would generate $42 billion in additional revenue over the next decade, according to the Joint Committee on Taxation.
In my home state of Colorado, and in 15 other states and the District of Columbia, local revenues have increased by millions of dollars since lawmakers decided to legalize and regulate medical marijuana. By reducing the current 100% confiscatory tax on marijuana to more reasonable levels, we can make revenues increase. If we were to nationally legalize, regulate and reduce federal taxes on marijuana, we could receive as much as $2.4 billion in additional revenue annually, according to a 2005 study conducted by Harvard economist Jeffrey Miron.
We can also institute a one-year amnesty program for federal taxpayers. This can quickly raise substantial revenues, boost our economy, and provide a broader tax base as former tax cheaters come out of the shadows and file returns. To reduce the fiscal burden on states, we could implement state tax amnesty programs alongside any federal one. According to economist Arthur Laffer, a one-year amnesty program could provide $800 billion to $1 trillion in additional revenues over 10 years.
Much of what we've seen out of Congress so far this year has been a political sideshow, as mere percentage points are shaved from spending bills that in total comprise only a small fraction of the federal budget. All four of these ideas, and many more like them, are fully consistent with the Norquist pledge and produce substantial new revenue streams for the federal government. They should all be on the table, along with spending cuts, if we are to break free of the rhetorical shackles that prevent cutting the deficit.