Washington is buzzing with talk about taxing banks. And after watching the Goldman Sachs masters of the universe testify on Capitol Hill a couple of weeks ago, it is no surprise that many want to tax these people until they bleed. Unfortunately, punitive taxes are a bad idea, no matter how good they make us feel. But could a well-designed levy drive financial firms to allocate capital more efficiently? Maybe so, says Narayana Kocherlakota, the new president of the Federal Reserve Bank of Minneapolis.

Here is why deficit reduction is so hard: Politicians get reelected by encouraging spending, not savings. Supporting policies that reduce current consumption—either by government or households--rarely gets anyone elected to anything. Not to stereotype, but nations do have personalities. Italians eat. Russians drink. Americans spend. And when anything—or anyone—gets between us and our consumption, watch out.

It has become a regular stop on Washington’s fiscal merry-go-round: Congress patches the Alternative Minimum Tax for a year or two, but leaves future fixes for mañana. For instance, the Senate Budget Committee’s new fiscal blueprint makes room to fix the AMT for one year only and assumes money will be found from somewhere to pay for future patches. In its fiscal 2011 budget, the Obama Administration also assumes the AMT will be repaired, but buries the cost in its baseline and makes no effort to find the money to pay for the fix.

Bill Gale and Alan Auerbach are once again ruining another beautiful spring day. Bill, the Tax Policy Center’s co-director, and Alan, a highly-respected economics professor at Berkeley, have updated their federal budget outlook. And their projections—based on realistic assumptions of what may happen to tax and spending—are truly frightening.

If your neighborhood is anything like mine, “under contract” signs are blossoming like dandelions. Many (of the signs, not the weeds) were very likely the result of the artificial land rush created by tomorrow's expiration of Homebuyer Tax Credit II. The credit gives $8,000 to first-time buyers and up to $6,500 to move-up buyers.

President Obama’s Bipartisan Commission on Fiscal Responsibility and Reform is having its first meeting today. As I peer at my bookshelf full of well-meaning policy prescriptions produced by similar panels over the years, I am skeptical at best. These enterprises are, as Dr. Johnson said of second marriages, “a triumph of hope over experience.” Still, you never know. As my colleague Gene Steuerle reminds me, few thought tax reform would get off the ground in 1984-85. Yet, by mid-1986, it had happened.

Okay, this one’s personal. For years I’ve filed my state tax return using iFile, Virginia’s free on-line tax filing service. I do that partly because I’m cheap—I don’t want to pay Intuit $15 to send my return electronically—and partly because it reduces errors and saves the state money. But this year the General Assembly, with the concurrence of new governor Robert McDonnell, voted to end the iFile program. So next year I’ll go back to mailing in a paper return. A 44-cent stamp costs just 3 percent of Intuit’s bill. I did say I’m cheap, didn’t I?

At first glance, the 2011 budget resolution passed along party lines yesterday by the Senate Budget Committee shows signs of fiscal responsibility. Although it would result in a huge budget deficit next year, it promises to pare the deficit from nearly 10 percent of GDP this year to just 3 percent—a sustainable level with expected economic growth—by 2015.

I share Howard’s criticism of the Senate proposition that characterizes a Value Added Tax (VAT) as “a massive tax increase that will cripple families on fixed income and only further push back America’s economic recovery.” However, my problem with the Senate vote isn’t that it opposes a VAT; rather, it’s that it rules out any VAT, even one that is part of a broader tax reform that reduces distortionary income and corporate taxes.

The combination of the recently-passed health care legislation and the President’s proposed rollback of the Bush tax cuts for upper-income taxpayers would sharply boost tax rates on the wealthy. This is great news for the high-end real estate market. It may seem counterintuitive, but raising taxes on those in the top brackets could increase urban house prices by as much as 10 percent, and even more in east and west coast cities where homes are most expensive. The drivers of this windfall: higher top rates on ordinary income and hikes in capital gains taxes. Obama’s proposal to limit the benefit of itemized deductions to 28 percent could more than reverse this housing windfall, but that measure is unlikely to win congressional approval.