Should Tax Reform Be Sold on Values Instead of Economics?

By :: March 31st, 2014

Maybe the best way for tax reformers to get political traction is to focus on values, not economics. That, at least, was one take-away from three political scientists who spoke at a Tax Policy Center panel today.

Until now, backers of reform have focused primarily on economic arguments: A reformed tax code would increase growth or create more jobs. But they may do better on issues such as fairness, according to Karlyn Bowman of the American Enterprise Institute; Chris Faricy, an assistant professor of political science and public policy at the Maxwell  School at Syracuse university; and Bill Galston of the  Brookings Institution.

In the current environment, none of the panelists felt reform would happen any time soon. Its best bet:  A president who uses it as a springboard to prove he or she can break though partisan gridlock and get things done in Washington.

Bowman noted that tax reform is not a top priority for the public today, an attitude that could make reform easier than higher-profile yet more controversial issues. Still, other public attitudes could make a rewrite more challenging that it was 30 years ago.

For instance, she noted that when Congress was debating the 1986 tax reform, most people thought their own taxes were too high, President Reagan was enormously popular, and more than 40 percent of the public told pollsters they trusted government. All of these attitudes made it relatively easy for Congress to enact reform, despite overall public indifference to the specific legislation.

Today public attitudes are quite different. Half of those surveyed think the amount of tax they pay is “about right.” And only about 15 percent say they trust government.  If people have relatively few complaints about their taxes, will they be willing to let a government they so distrust rewrite the law?

Faricy’s research shows that public support for deductions and credits is “wide but not deep” and very much driven by broader political views.

For instance, he found that most people favor tax subsidies. But when they are told that higher income households are more likely to benefit from the subsidies than others, support fades among independents and Democrats. But conservatives and Republicans continue to support the preferences. That partisan split could make reform more difficult.

Galston noted that in 1986, Ronald Reagan made both an economic and a values-oriented argument for reform that resonated strongly with the public.

Galston suggested that while tax evolution may not attract the public’s attention, “tax revolution” might. One strategy:  A broad-based carbon tax tied to cuts in payroll taxes. Such a move could tie tax reform to support for environmental protection.

Yet, even that idea would bump against the public’s resistance to more modest measures such as a gas tax increase.

Bowman, Faricy, and Galston agreed that any reform must have strong bipartisan support, and that winning such backing in the current political environment would be a massive challenge. However it is presented, tax reform has a tough uphill battle. But understanding its challenges can help start the process.

5Comments

  1. Michael Bindner  ::  4:26 am on April 1st, 2014:

    The current House will never pass a reasonable tax reform – even the one by David Camp. Oddly, when Mike Huckabee hawked the FairTax, he created a huge stir. There is a vast movement out there for this bad crafted consumption tax – as any reading of the Phase III comments to Presdent Bush’s Tax Reform Task Force will show. Indeed, had Huck won, the compromise between the FairTax and status quo may have been something like the VAT Michael Graetz proposes, the Net Business Receipts Tax that Michael Lindsey mentions (note that both are Republicans) or my proposal, which was presented to the Bush Commission, which combines the best of both sides. Point is, people jump at not having to file taxes – though tax preparers hate it. Since refund anticipation loans are gone, their power has diminished.

    The tax increase that should pass is the gas tax. The carbon tax is so dead that even a Democratic majority in the House won’t be able to pass it, nor should they – because if it succeeds the rates will have to go up to keep from losing revenue. A VAT is a better idea.

    Voters need something more than a wonkish plan. They need some income guaruntees for families. Getting rid of the home mortgage and property tax credits to fund this will, as the research shows – get the liberals behind it. Making doing so a pro-life issue (some call Pope Francis) would force the GOP to fall in line – even as the Calvinists adhere to their belief in individual rather than public responsibility for funding families.

  2. Tax Roundup, 4/1/14: Two weeks to go edition. And: neglected spouses! « Roth & Company, P.C  ::  9:38 am on April 1st, 2014:

    […] Howard Gleckman, Should Tax Reform Be Sold on Values Instead of Economics? […]

  3. Secondary Sources: Debt-Fueled Spending, Robots, Taxes and Morality |  ::  10:57 am on April 1st, 2014:

    […] –Taxes and Morality: Howard Gleckman recaps a panel asking about the best way to sell tax reform. “Maybe the best way for tax reformers to get political traction is to focus on values, not economics. That, at least, was one take-away from three political scientists who spoke at a Tax Policy Center panel today. Until now, backers of reform have focused primarily on economic arguments: A reformed tax code would increase growth or create more jobs. But they may do better on issues such as fairness, according to Karlyn Bowman of the American Enterprise Institute; Chris Faricy, an assistant professor of political science and public policy at the Maxwell School at Syracuse university; and Bill Galston of the Brookings Institution. In the current environment, none of the panelists felt reform would happen any time soon. Its best bet: A president who uses it as a springboard to prove he or she can break though partisan gridlock and get things done in Washington.” […]

  4. AMTbuff  ::  6:13 pm on April 1st, 2014:

    “Galston suggested that while tax evolution may not attract the public’s attention, “tax revolution” might.”

    That was the most compelling line of the conference. That plus calling the 1986 Tax Reform “small ball” or something to that effect.

    I agree that tax reform will occur in some major way, e.g. a federal property tax complete with a Constitutional Amendment authorizing it. This will be motivated by a currency collapse and/or default on the federal debt. Many aspects of our government will change, including a reduction in the scope of promises to the middle class and public belief in what promises remain. The most economically helpful change will be a return to pay as you go financing of government spending.

  5. On Retirement, Values, Patience, and Strategy  ::  2:01 am on April 3rd, 2014:

    […] values like that are key to tax reform. Yesterday’s TPC panel on the politics of reform suggested as much, as moderator Howard Gleckman notes. The three political scientists, Karlyn Bowman of the American […]