Robert Samuelson's April 11 op-ed in the Washington Post, Obstacles to a Saner Tax Code, suggests that we could "make the income tax system simpler, friendlier and more economically sane" but Congress will not do so because of special interest groups and "fashionable public crusades."
He suggests "[t]he case for change is strong" because of the cost of compliance, the prevalence of use of tax return professionals, and the uncertainty due to constant Congressional tinkering with Code provisions. He goes on to say that taxpayers aren't willing "to surrender the concrete tax breaks of a complex system for the abstract advantages of a simpler system." Whatever reforms are made, there will be winners and losers, and no one wants to be a loser.
Similarly, politicians aren't interested in simplifying the system, because "simplicity deprives them of the chance to brag about tax breaks that fight global warming, pay for college tuition or encourage retirement saving." And, ultimately, the White House isn't willing to push for reforms, because it would open the door for discussion of tax increases needed to undo the ongoing budget deficits.
I found the op-ed unsatisfying for several reasons. First, arguments from complexity are somewhat like arguments based on "average" tax burdens (see yesterday's posting on the Tax Foundation's (mis)use of average numbers). Many wage-earners have relatively simple tax calculations, and a few wealthy taxpayers who engage sophisticated tax advisors have inordinately complex ones. It is not very helpful to lump those types of taxpayers (and transactions) together and talk about an average amount of complexity.
Second, I suspect that complaints about complexity have served the anti-tax agenda almost as a rhetorical device. Pointing out provisions that seem overly complex in the tax Code may well convince someone who doesn't think complexity is a problem that there is a problem. If that problem appears to be (or can be made to appear to be) associated with higher taxes than necessary, odds are the person will begin to see complexity as a major issue.
Third, Samuelson's points about taxpayers (who seldom see any problem with a tax break from which they benefit), politicians in general (who seldom miss an opportunity to capture votes with a tax change), and the White House in particular (for whom tax cuts are treated as the Holy Grail and tax increases as the Devil incarnate) are accurate descriptions, but seem to miss the point about what is needed. It's not that we need a simpler tax system or a broader based, lower rate tax system per se. We need to engage in thoughtful, public, and widespread deliberation about the long-term fiscal health of our economy and the long-term societal needs that should be met with tax revenues, rather than playing brinkmanship games with sunsetting gimmicks and artificial revenue targets or misleading cost estimates.
Many of the unwise deductions that Samuelson points out--like the mortgage interest deduction that should at best be a limited credit for those in the bottom of the income distribution-- result from maldistribution of political influence. As long as lobbying remains such a central part of the tax legislative process, we can expect unreasonable exemptions and hidden subsidies in the Code, no matter how many times we broaden the base and lower rates. Congress needs to clean up its act, so that it can engage in the thoughtful deliberation that is the cornerstone of a participatory democracy.
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