I am really surprised that the tax fight hasn’t been engaged really. There was some, but not too much, noise when the tax-raising budget was passed by a Democratic Congress. But this is going to come back.

In theory, the Bush administration helped the 2008 GOP nominee because imminent, steep tax increases are on the horizon. One question will be how these will be presented over the next couple of years as this debate winds down. Capital Commerce has some great thoughts on this:

The Republican presidential candidates seem to be assuming that their Democratic rivals are going to push for repeal of all the Bush tax cuts. That’s why they are always talking about a potential $2 trillion-plus tax hike when those reductions expire at the end of 2010. More likely, Democrats will call for only the tax cuts on wealthier Americans to be repealed—such as raising the top rate from 35 percent to 40 percent—and for keeping most of the middle-class tax cuts, including rate reductions and a higher child tax credit.

The flip side of this is that the Democrats are going to propose lots of new spending, in the form of health care, etc. How are they going to pay for it? Especially, if they keep the middle-class tax cuts, etc.? Again, Capital Commerce:

Of course, Democrats are going to have to explain how they will pay for keeping the Bush tax cuts after 2010. Even if a Democratic president and Congress let them all expire, none of the new tax revenue—assuming there is any and the economy doesn’t tumble into a recession—could be spent on new programs like healthcare under current congressional budget rules.

Somehow, a circle is going have to get squared in this debate.