After the election, the big tax debate

Four months before the election, President Obama seems to have grasped an advantage with his attacks on Mitt Romney's honesty and trustworthiness. The Obama campaign last week asserted that Romney was guilty of either (1) laying off American workers by shipping jobs overseas during his work at Bain Capital or (2) falsifying securities documents, which is a felony. This sort of personal attack is bad enough by itself, but coming from the campaign of the guy who pledged to usher in a cooperative, bipartisan attitude in Washington, it's shocking. But Obama has stood behind his campaign's accusations.

Romney got rich by raising money for big deals that sometimes succeeded and sometimes failed. If that's a crime; he's guilty. If American voters don't want that background in their elected leaders, they have the option of opposing Romney.

A more interesting decision might come a month after the November election. According to news reports today, Democratic leaders may be willing to allow the Bush era tax cuts to expire at the end of this year rather than allow the tax cuts to continue for all income levels, as the Republicans prefer. Obama and congressional Democrats have opposed extending the tax cuts for Americans making more than $250,000 a year.

If Democrats can hold their coalition together, all they have to do is stop the Republican plan to extend the tax cuts. With a Senate majority, Democrats can prevent the extension. Without new legislation, the Bush tax cuts would end on Dec. 31.

There are worse things that could happen than seeing taxes return to 2000 levels — a time when the federal government was running a surplus instead of spending about a trillion dollars a year more than it takes in. The ingenuity of this plan is that it reshapes the debate. Once tax rates return to the level before the Bush cuts — cuts that were intended to give the budget surplus back to taxpayers — tax debates revert to what are the optimal tax rates for all income levels. That's a debate the Democrats can win. Higher taxes will hobble the economy, but reducing the federal deficit will benefit investments and benefit the economy. It's not likely to be "a wash," but keep in mind that we were paying these tax rates in the 1990s, when the economy was booming through most of the decade.

This tax debate could be more interesting than the election itself.