Mission Impossible? An Upcoming TPC Panel Will Explore the Politics of Tax Reform

By :: March 27th, 2014

Everyone agrees that the tax code is a mess. So why is it so hard for Congress and the President to fix it? On Monday, the Tax Policy Center will host three top political experts who will explain why reform is such a challenge and how backers could overcome its hurdles.

It won’t be easy. As observers of House Ways & Means Committee Chair Dave Camp’s tax reform effort have seen, the idea has no natural constituency (except perhaps economists).

Some political headwinds apply to all big reforms. They are complicated and hard for real people to understand, the public mistrusts the motives of politicians who claim to be reformers, and voters doubt government’s ability to get the changes right. Lawmakers today are in no mood for a grand bargain on anything. And then there is every pol’s legislative Rule #1: Those who benefit from the reform will never thank you but the losers will squeal like stuck pigs.

Worse, tax reform has its own unique problems. By its very nature, real reform creates lots of winners and lots of losers. It’s hard to make a political case for concepts such as fairness—an aim of reform that’s often misunderstood. And there is no simple bumper-sticker goal. For instance, it is hard to make a credible case that reform will unambiguously create jobs and grow the economy (though supporters will certainly try).

Yet, tax reform has been possible in the past. It happened in 1986 when the unlikely team of Ronald Reagan, Dan Rostenkowski, Bob Packwood, Bill Bradley, and Jack Kemp overcame public indifference and skeptical lawmakers to rewrite the tax code.

Could political lightning strike again? And how? To answer these questions, TPC will host a panel discussion on Monday at Noon with three of the nation’s leading scholars on the politics of tax reform.

Speakers will be Karlyn Bowman of the American Enterprise Institute, a highly-respected expert in public opinion research; Chris Faricy of the Maxwell School at Syracuse University, who is doing cutting-edge research on public attitudes toward taxes; and Bill Galston of the Brookings Institution, a political scientist and sage observer of Washington policy-making. I’ll have the pleasure of moderating. Join us if you can, either in person or by Webcast.

1Comment

  1. Michael Bindner  ::  2:16 am on March 28th, 2014:

    This looks interesting. I may come if I am not otherwise engaged. The whole rate lowering and base broadening thing is essentially OCD tax reform. I am not sure it is worth the effort and the things left undone can be truly damaging with time – note the second mortgage loophole which immediately turned into an ATM for the borrower and a way for lenders to keep asset values in their portfolios at a guaranteed rate of return. Eventually this became part of the housing crisis. Tax reform should, at minimum, undo this loophole. Now THAT would have a constituency.

    I think the biggest constituency would be for having 80% of tax units pay nothing at all (giving filing responsibility to either vendors or employers – or both – see both Graetz and Bindner). While the top 20% of taxpayers and the tax preparation industry won’t like it, everyone else will.

    The other worthy reform, which will also help our demographic problem, is to shift the home interest deduction and the property tax deduction to a much larger child tax credit (also end the exemption for children). The poor and the people who advocate for them – like the Catholic Church – will favor this, although the middle class will get the most benefit so it is not a lost cause.

    We could even reform Social Security as part of tax reform – but that is probably a bridge to far – even if doing so made most workers owners of their own company. Of coruse, current shareholders and family proprietors might not like that and they are very powerful in Congress since they give the money.

    This gets to what the two preconditions for reform really are. The first is for someone who advocates true reform (rather than Tax Wonk reform) to run for POTUS and win. The second is to enact massive campaign finance reform first so that the privileged no longer can stop such ideas. (Note that if no one else on the panel makes these points then perhaps I should have been invited to speak).