- The Washington Times - Monday, October 31, 2011

With Gov. Rick Perry’s new tax plan, on top of Mitt Romney’s, Newt Gingrich’s, Ron Paul’s and, of course, Herman Cain’s, it’s now clear that Republicans - and probably Democrats, too - think that an overhaul of the federal income tax should accompany a reform of government itself.

Disdain for Washington, unease about unemployment and discomfort with the growing gap between rich and poor have led to a political stirring on the left and the right that could produce a major change in the way the federal government operates - both in spending and collecting funds - in 2013.

The presidential election will be a referendum about how - and whether - that will be done.

The problem is that, at least on taxes, history tells us that a bipartisan consensus is needed to make reform work. In general, no change in taxation is possible without the backing, at least in principle, by the president. In addition, to produce a systemwide change, buy-in by the opposition party is also fundamental.

The last time the tax code was rewritten, in 1986, Republican Ronald Reagan had to link arms with House Ways and Means Committee Chairman Dan Rostenkowski, a Democrat, to overcome the natural opposition to so monumental a change. And even that was, at several junctures, barely enough to make the effort succeed.

Today, the president believes in redistribution of income in a way that’s anathema to Republicans in Congress. Indeed, there’s hardly anything that the two sides agree on. Flowery rhetoric about simplicity and fairness, and about lowering tax rates and eliminating deductions, is nothing more than window dressing. Neither side has any intention of finding common ground with the other.

But it doesn’t have to stay that way and probably won’t.

The Republican plans are different in many ways, but they have in common a belief that tax rates are too high and that deductions, credits and exemptions should be trimmed. In 1986, that combination was accomplished without making the overall federal budget deficit either higher or lower. These days, there is huge pressure to make that trade-off yield extra revenue to reduce the staggering deficit.

On that question alone - whether tax reform should be a net tax increase - the entire enterprise could collapse.

Something in the polls must have convinced the GOP wannabes to target the tax code, and that’s a good sign for reform. The income tax must be thoroughly disgraced and vilified for an overhaul to defeat the many interests that are deeply devoted to preserving various parts of the code.

In 1986, the income tax teetered on the verge of collapse. Government officials feared that the public might stop voluntarily paying their taxes - the heart of the revenue-collection system - because corporations and millionaires were taking such unfair advantage of shelters and loopholes. A rewrite was needed to restore faith.

At the moment, Republicans think that the size and shape of government has reached such a critical moment. Democrats are not so convinced. And the question of whether taxes are considered unfair and unwise is an untested proposition.

But 2013 will be different than 1986. Tax reform, if it happens, would probably have to be part of government reform.

It’s also possible that instead of having divided government as there was in 1986, the House, Senate and White House could all be in Republican hands. That will make for a different dynamic, but one that can produce tax reform.

Back in the 1980s, competition between the parties to pass something called “reform” lifted the legislation from the dead many times. In 2013, a dominant Republican Party would probably have to act on a mandate for major change to make anything similar happen.

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