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Tuesday, July 2, 2013

Does Anyone Really Want Tax Reform?

     So Greg Sargent asks, and the answer is yes. However, as he points out, 'tax reform' means different things to different people. There is liberal tax reform and conservative tax reform.

     "both parties appear to have essentially unrelated policy goals that they would like to achieve through tax reform. Democrats want to increase overall revenues; in fact, Democratic wonk Jared Bernstein today calls revenue-neutrality the “tax reform trap.” Republicans aren’t as specific about it, but it’s pretty clear they want a less progressive system — fewer tax brackets, and changes which are much more helpful to the wealthy than to middle class or poorer Americans."

     http://www.washingtonpost.com/blogs/plum-line/wp/2013/07/02/does-anyone-actually-want-tax-reform/


     As the Fonz would have said, 'Correctomundo.'  I mean Bernstein  is correctomundo. I defintely agree that Sargent has got me down. I don't want 'tax reform' if it doesn't mean a more progressive tax code. For what reason? Supposedly there are these things called 'distortions in the tax code' but I really have never been sold that there's much here really. People like Sumner get all exercised about the supposed 'marriage penalty' which I'm not particularly convinced even exists but supposing it does, why does it matter so much? I'm not sold that this is the defining issue of our time the way say, slavery, was in the 1850s or segregation was in the 1950s.

   Mostly I don't believe there's any such penalty. In fact, it seems to me that everyone in Congress is always falling all over themselves to serve the interests of married people. Take welfare. Long before Clinton ended it as we know it, it was changed in the 60s to be specifically for 'aid for families with dependent children'-see families rather than the single. As far as I can see everyone is always trying to pass legislation for those who are married. I never hear anyone go for those who are single. In reality, there are parts of the tax code that favor one or the other but on balance it certainly doesn't materially favor the single.

   Then there are the alleged 'distortions' that tax 'savings and investment.' We hear plenty about the need to tax capital gains or savings at a lower level. Mostly I'm far from underwhelmed by these arguments. Not by lack of trying either I might say.

    http://diaryofarepublicanhater.blogspot.com/2013/04/a-progressive-consumption-tax.html

     For the most part these measures seem to be about what Sargent suggests: making the tax code more regressive.  If they aren't regressive but simply tax neutral, I still don't really see the point of doing them. So yes I follow Mr. Bernstein.

     Sargent argues that to get there both sides must compromise:

      "To get anything done, both sides are going to have to give up any additional goals. For Democrats, that means waiting for revenues. And that’s not impossible; after all, taxes went up twice in the years after the 1986 tax reform passed"

     "And for Republicans, it may mean accepting more brackets, not fewer, in order to protect progressive taxation. Remember, there’s nothing “simplifying” about fewer tax brackets. No one calculates their tax themselves, and they won’t with anything more complex than a full flat tax that begins with the first dollar earned. Complexity in the tax code comes from exclusions and deductions, not from the basic rates.
Now, my guess is that no one actually wants tax reform very much, with the likely exception of the committee chairs in both houses of Congress, David Camp and Max Baucus. But if I’m wrong and people within Congress and outside of Congress really want it, the only way it happens is if they check their other agendas at the door."
     If there are the parameters, Sargent may well be right. After all, whats' the point if we don't get anymore revenue? The one 'tax reform' moment we had was 1986 and I for one saw that as a dud. We got very close to the GOO flat tax-there were just two rates: 28% and 15% and it was actually very regressive. So if this is the best on offer maybe we should pass. 

      

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