In a fortnight Barack Obama will submit his last budget before the election. Let us hope it improves on last week’s State of the Union address. To be sure, America’s tax system is unfair and needs to be reformed. With the exception of the 30 per cent minimum tax on millionaires, which smacked of election-year gimmickry, Mr Obama’s proposals were too timid.
Much like Bill Clinton in the 1990s, Mr Obama is slipping into a habit of fiddling with the tax system rather than trying to overhaul it. The US tax code cries out for simplification. Mr Obama offers only to add to its complexity. His proposals disappointed on two important counts.
First, by downplaying fiscal reform, Mr Obama ducked America’s biggest challenge. That may be understandable given that last year Washington only narrowly avoided a default in what would have been the biggest unforced error in memory. Yet that is no excuse for inaction. It is not too late to pick up on last year’s Simpson-Bowles plan,which would have broadened the tax base and abolished most exemptions.