Next up: tax reform

Gettysblog



By now the Bush administration must be positively begging for a change of subject from the Social Security Reform fiasco. As luck would have it, come July we’ll be getting a report from the President’s Advisory Panel on Federal Tax Reform, a “bipartisan” (the current definition of bipartisan being any group of people dominated by Republicans and including John Breaux) commission that President Bush set up to help him carry out the second of his two top second term priorities. In April the Panel issued a statement that makes for interesting reading. Fortunately, I’ve read it so you don’t have to (but here’s the link just in case).



What I find most entertaining about the report is the criticism it levels at the current tax code. Paragraph Two reads:



Since the last major reform effort in 1986, there have been more than 14,000 changes to the tax code, many adding special provisions and targeted tax benefits, some of which expire after only a few years.These myriad changes decrease the stability,consistency, and transparency of our current tax system while making it drastically more complicated, unfair,and economically wasteful.Today,our tax system falls well short of the expectations of Americans that revenues needed for government should be raised in a manner that is simple, efficient,and fair.



Remind me, which party has had control of Congress since 1994? Who has been ensconced in the White House for the past four years? Who has made his/their signature domestic policy accomplishments the passage of gargantuan changes in the tax code in each of the past four years? Wasn’t a thicket of phase-ins and expiring provisions the distinguishing feature of the 2001 tax cut? Gosh, whichever party’s been in charge of tax policy lately sure has been screwing up. The report continues:



Our business tax code is littered with special provisions providing special rates, deductions, or credits.These provisions – designed to encourage particular conduct or business activity – create complexity,volumes of new regulations,opportunities for tax shelters, and unfairness. Moreover, these provisions often do not have their intended effect on taxpayer behavior and

motivate businesses to adopt governance structures that may not be consistent with business efficiency.



Exactly the problem. Who was it again that passed a package of corporate tax cuts in 2003 that, included (among hundreds of arcane items) a provision reducing taxes on imported ceiling fans? And what about that energy bill that’s supposed to make its way through Congress this summer, the one that showers targeted tax breaks on the energy industry?



All right, enough sarcasm. But here’s a serious question: can a political party that has been so successful trading targeted tax cuts for political benefit really be serious about simplification? How, for example, will President Bush explain to his backers in the energy industry that the tax breaks that they (will have) worked so hard to secure in 2005 now must be sacrificed on the altar of fairness and efficiency? What will Tom Delay do for a living post tax reform? I agree that the tax code ought to be run through with a fine toothed comb to get rid of loopholes; I just can’t believe that this crowd is going to be the ones to do it.