Tax Reform, Part 1: Introduction
Is the tax reform plan of Baucus, Camp, and Hatch REALLY a ‘blank slate’?
If you are an observer of current events, you may by now have heard of an effort underway to reform the tax code. Congress is abuzz with negotiations. The media and citizenry at large look on, speculating as to what they might come up with. And skepticism abounds that Washington, of late so bitterly divided, can manage to produce any agreement at all on what would be the first tax reform of its kind in a quarter-century.
Still, as with many such efforts, it begins with enthusiasm and the appearance of bipartisan camaraderie. House Ways and Means Chairman Dave Camp (R-MI) and Senate Finance Chairman Max Baucus (D-MT) are taking a series of road trips together to “talk to business owners, and families and individuals, and really try to get a read from around the country” on the kinds of reforms Americans want. Baucus and Utah Republican Sen. Orrin Hatch (ranking member on the Finance Committee) are making bold statements about taking a “blank slate” approach, in an effort to produce sweeping, comprehensive reform. Of course, even in the midst of this early enthusiasm, Senate Minority Leader Mitch McConnell (R-KY) and Majority Leader Harry Reid (D-NV) have already cast a few dark clouds over the proceedings.
But the darkest cloud of all is the tax code itself, which involves . . .
- A trillion dollars a year in compliance costs.
- Six billion labor-hours per year—the equivalent of 3.4 million people working full-time—spent dealing with the United States’ byzantine tax laws.
- Corporate taxes—a form of taxation that an OECD study found to be the most damaging to economic growth—that are now the highest in the world.
- Favored industries (such as wind and solar) lavished with taxpayer dollars while convenient bugbears like the oil and gas industries are hit with punitive levels of taxation.
- A labyrinthine combination of tax incentives and penalties—unequal and unfair, yet so entrenched as to defy all efforts at extrication.
The list could go on and on, but this last item bears amplification.
The Hill describes Baucus and Hatch as taking a “blank slate approach,” and then immediately goes on to qualify that approach as one in which “their colleagues [are required] to make the case for their favorite tax breaks.” If that is the starting-point definition of “blank slate,” this tax reform effort is virtually guaranteed to produce a result that looks eerily similar to exactly what we have now.
The problem is found in the core assumption itself, namely that anyone should be getting tax breaks. The idea that one individual, cohort of people, or industry should be favored while others are penalized runs counter to the very reason that a people consents to be taxed in the first place.
Now, rather than have a simple, fair system of taxation for the purpose of funding a core set of social-contract functions from which all citizens generally benefit, we have a system in which interest groups lobby to get goodies from the public trough—a trough filled at others’ expense. If we were truly to take a “blank slate” approach to reforming our system of taxation, would we start by building upon a foundation whose core sentiment is, “I don’t care whose ox is being gored, as long as I’m getting paid”?
Indeed, let’s take this even further. Would a group of villagers, working together to form their first society, even consider a tax code—or anything else—that treated people this unequally?
Tax Reform, Part 2: In the Village