- The Washington Times - Tuesday, September 14, 2004

If John Kerry ends up losing this election, it may not be because of what he did as much as what he did not. By overemphasizing his Vietnam record, he ignored issues on which George Bush is potentially vulnerable, among them tax reform.

Tax reform has been one of the best issues Republicans have had over the last 20 years or so. No wonder. Every poll ever done has shown deep dissatisfaction with the tax system, quite apart from the tax burden. In other words, the way we raise revenue bothers people almost as much as the amount it takes out of their pockets.

Historically, tax reform was primarily a liberal Democratic issue. Under the leadership of tax experts like Stanley Surrey and Joseph Pechman, Democrats in Congress rammed the tax reform acts of 1969 and 1976 down the throats of two Republican presidents. These bills’ main goal was to soak the rich by taking away their tax loopholes.

In the early 1980s, Republicans and conservatives joined the tax reform fight, using loophole closing for tax rate reductions. The Tax Reform Act of 1986 brought the top tax rate down to just 28 percent — the lowest since the 1920s. This was a marriage of Republican and Democratic views of tax reform.

Unfortunately, a divorce occurred shortly after. George H.W. Bush abandoned Ronald Reagan’s vision by endorsing higher tax rates in 1990 and was joined by the leading Democratic tax reformer, Sen. Bill Bradley of New Jersey.

Like Lucy and the football, we were promised lower rates in return for losing loopholes. But soon the football was pulled away and rates raised without restoring loopholes. The 1993 tax increase under Bill Clinton completed the double-cross.

Most Republicans still wanted tax reform, but unfortunately split into two competing camps — those supporting a flat rate tax and those favoring a national retail sales tax. This dissipated of support for any reform. After 1994, when Republicans gained control of Congress for the first time in two generations, their interest in tax reform evaporated. They liked being able to add special tax code provisions to benefit their friends, and did so with abandon. Republicans channeled what was left of their tax reform agenda into scapegoating the Internal Revenue Service, blaming it for all sins of the tax law.

Unfortunately, George W. Bush has never spelled out a tax reform agenda. The many tax bills he got through Congress have mostly made the tax code more complicated. Reports by the Economic Policy Institute on the left and the National Taxpayers Union on the right agree on this point, if little else.

Villanova University law professor James Maule notes that even as President Bush proposed a tax reform commission at the Republican Convention, he also endorsed more special provisions for the tax code. “So which is it?” Mr. Maule asked. “The tax code is complicated and needs to be simplified? Or the tax code should be made more complex by adding at least two more special provisions?”

It isn’t as if Treasury is unaware the tax code has become more complicated during this administration. Journalist Ron Suskind recently posted on his Web site a memo to former Treasury Secretary Paul O’Neill from his tax policy staff on the need for tax simplification and how to do it. It proves we don’t need another commission to study the issue, just a commitment to do something.

Lately, some journalists have argued that beneath the mass of new complexity and special interest provisions enacted over the last four years, Mr. Bush has been secretly engineering a massive tax restructuring. In the Sept. 6 issue of the New Yorker, John Cassidy sees a virtual conspiracy to eliminate all taxes on the rich by abolishing taxation of capital.

In his new book, “Neoconomy,” former New York Times reporter Daniel Altman says much the same. He argues Mr. Bush’s ultimate goal is a system that taxes only consumption, achieved by incrementally lowering taxes on saving and investment until there is nothing to tax but consumption. Although Mr. Altman favors such a tax change, he admits it has involved “a bit of bait-and-switch,” where tax cuts for long-term growth were sold politically as short-run stimulus although they were not.

I think Mr. Kerry missed an opportunity to score some points against Mr. Bush by making tax reform a campaign issue. A national debate on this during a presidential campaign would help. Only by engaging the voters can we expect congressional action.

Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide