Any of you who somehow stayed awake through the debates during the presidential elections over the course of … well, of your life… surely remember that one of the hottest topics for both candidates and supporters was tax reform. Both sides were talking about it, though admittedly the Democrats were mostly talking about raising certain taxes to make things “more fair.” (Hey, that’s still “reform” by definition, right?) The Republicans had all sorts of plans, and much of the myriad debates were spent jousting back and forth about who had the best plan to do what they universally agreed must be done, and how soon they would get right on that project after being elected. There was the 9-9-9 plan, the flat tax, the VAT and/or the complete elimination of the IRS and a national consumption tax, among others.
And then the election ended. So too, apparently, did any and all serious discussion among elected officials of doing anything. (Aside from the aforementioned tax increase, of course, which they managed handily.) So what happened? If it was all that important to everyone, how did it just evaporate every single time as soon as the votes were finished being counted? George Will put together a column this weekend where he explains it pretty well.
Every complexity in the 4 million-word tax code was created at the behest of a muscular interest group that tenaciously defends it. Which is why tax simplification would be political reform: Writing lucrative wrinkles into the code is one of the primary ways the political class confers favors. Furthermore, “targeted” tax cuts serve bossy government’s behavior modification agenda: Do what we want you to do and you can keep more of your money. Simplification would reduce the opportunities for the political class to throw its weight around. Hence the flinch from simplification.
This history lesson seems to be offered while being justifiably skeptical of a letter sent from Max Baucus and Orrin Hatch to the rest of their Senate colleagues suggesting that jut maybe it’s time to do more than simply talk about tax reform.
Together with Chairman Dave Camp (R-Mich.) of the House Ways and Means Committee, Baucus and Hatch propose a “blank slate” approach, erasing all deductions and credits — currently worth more than $1 trillion a year — and requiring legislators to justify reviving them. Hence the Baucus-Hatch letter, in response to which almost 70 senators sent more than 1,000 pages of suggestions. Although some often were short on specificity, the submissions were given encrypted identification numbers and locked in a safe, as befits dangerous documents.
It’s a bit early to paint this as simple posturing for the mid-terms, so maybe Baucus and Hatch are serious here. But the fact that the responses had to be anonymous and locked away from public view probably tell us more than enough. How are you going to get enough members of the upper chamber to sign on to any sort of significant, tough changes to the tax system if they won’t even put their name to a suggestion in the open?
The blank slate approach is a pretty good one, though, and might actually prove to be the one place where a stymied and gridlocked legislative body such as the one we “enjoy” now would be useful. To get all of the “wrinkles” Will describes put back in place, you’d need to get a majority of them to agree. With that as the bar to be set, there should be virtually no changes approved. But then, maybe I’m still giving Congress too much credit. It’s possible that they might be so desperate to hold on to the support of those who buy these tax advantages that they would begin heading for the cloak rooms and cutting deals, much the way that Congress has done business since the founding of the nation.
Will it go any further than this letter being published? Don’t bet your chewing gum money on it. But it’s nice to dream about it for a while.