TaxVox’s Lump of Coal Award: The Ten Worst Ideas of 2008

It was quite a year. Taxpayers are now shareholders in most major U.S. banks, a massive insurance conglomerate, and three failing car companies. After years of debating whether the government was implicitly or explicitly guaranteeing Fannie Mae and Freddie Mac debt, Washington settled the argument by buying the mortgage giants. I know George Bush liked to talk about an ownership society, but I never imagined this is what he had in mind.

And, of course, it was an election year. Thus, the opportunities for dumbness increased exponentially. Campaign promises veered from the improbable to the unworkable to the truly bizarre. With so many bad ideas to choose from, picking the lowlights was not easy. Nonetheless, here is TaxVox’s list of the 10 dumbest fiscal policy ideas of 2008.

10. Barack Obama’s plan to exempt seniors making $50,000 or less from tax. Most already pay nothing. Besides, anybody know why a 65-year-old should get a tax preference over a twenty-something making the same income? Senior discounts should be left to restaurants and movie theaters.

9. Hillary Clinton’s and John McCain’s summer gas tax holiday. Tell me again how we are going to end global warming? Obama gets extra credit for passing on this one.

8. Obama’s windfall profits tax for oil companies. Unfortunately, he couldn't resist this bad idea.

7. The TARP. A $750 billion blank check. And after giving hundreds of billions to banks, Treasury neglected to make them lend the money to anyone. Polishing their balance sheets may help in the long-run, but hello….

6. Patching, but not fixing, the AMT. It may be a Golden Goody, but this failure of political leadership still smells. We used to worry about the cost of true reform, but that was so 2007.

5. Treasury unilaterally letting banks buy the tax losses of the financial institutions they acquire. The Wells Fargo rule is not only a terrible policy, but Treasury probably had no legal authority to adopt it. Otherwise, a heckuva good idea, as the current president might say.

4. Obama’s proposal to raise Social Security taxes on high-income earners—two years after the end of his second term. A new chapter in Profiles in Courage.

3. The Democrats definition of Middle Class: Obama says anyone making $250,000 or less belongs. Has anyone told him the median income is $61,500? Senator Barbara Mikulski (D-Md), wants to give a tax break to the same folks who borrow up to $49,000 to buy an American-made car. Cadillac owners unite! You have nothing to lose but your On-Star.

2. Extending the Bush Tax Cuts. Did I miss the day Congress etched these on stone tablets? McCain vowed to make them permanent. Obama said he’d repeal many of these breaks, but then assumed they’d last forever—a budget gimmick intended to make his own trillion-dollar promises seem less costly.

1. And the TPC Lump of Coal Award for the single worst idea of 2008: Fred Thompson’s plan to allow people to pick their own tax system. Choice is nice, but this puppy would cut government revenues by $7 trillion over 10 years. McCain and other Republicans all tinkered with this absurd idea, but we’ll give Thompson credit for being the first to raise it in the Presidential campaign. Happy 2009 to all.