Eliminate Tax Cut for $250,000, No Possible VAT: Frank

Tax cuts first instituted under President George W. Bush should be eliminated for people making $250,000 or more a year, but the idea of value added tax is "dead as a doornail," Rep. Barney Frank (D-Mass.), and chairman of the House Financial Services Committee said on CNBC Thursday.

"The argument that raising the marginal rate somehow hurts economy activity has been tested," Frank said. "When Bill Clinton became president in 1993, I voted with his policy to take the marginal rate, the top parts of income, from 36 percent to 39 percent. It had zero negative impact."

As for a value-added tax, Frank said the idea might have some appeal to companies seeking an export advantage, but that there's "zero chance of it going forward."

Frank also said he thought St. Louis Federal Reserve Board President James Bullard's commentsthat the U.S. was heading for a Japan-like economy marked by deflation was overly pessimistic.

"We’re not in a situation like Japan, I don’t think, and we’ve learned from it," Frank said.

In the interview, Frank also said:

  • The Federal stimulus bill has helped the economy, just not as much as hoped.
  • Fannie Mae and Freddie Mac's continued debt problems are the result of practices employed before the once quasi-government sponsored enterprises were placed in conservatorship in 2008.
  • The government should drop the implicit government guarantee carried by Fannie and Freddie, ideally making the mortgage giants private companies. The government is holding a conference next monthto discuss Fannie and Freddie's future.
  • He doesn't support eliminating the tax deductibility of mortgage interest, saying it's too inherent to home price valuation in the U.S. "You can’t unscramble the egg," he said.
  • Regulators will ensure Financial regulatory reformis enforced, and he doesn't expect unintended consequences.

For a different point of view:

Letting the Bush Tax Cuts Die Would Kill Recovery