Leaders of both political parties say they want to overhaul the federal income tax, but saying is a lot different from doing. BesBefore the tax code was reformed in the mid-1980s, Congress passed three consecutive years of tax increases. That was good practice for the tax-reform job that lay ahead. The reason: Tax reform requires difficult trade-offs — the elimination or reduction of
tax breaks in order to pay for lower tax rates.
But today’s lawmakers are spoiled. For years they have done nothing but widen the federal deficit by inserting loopholes into the tax system. They have no experience taking things away.
As a result, the talk about tax reform is only that, talk. There’s no evidence lawmakers actually can start doing the hard part, forcing any taxpayers to pay more than they currently do.
But that’s what tax reform is all about.
So don’t believe the hype. Congress can’t reshape taxes in any short period of time and certainly not during the few weeks of the lame-duck session between Election Day and the start of the new Congress next year. And don’t buy the line that reform can happen in a few short months even though that’s what big shots on Capitol Hill are contemplating.
Lawmakers will have to be forced by public opinion to make the wrenching choices that underlie tax reform. The public will have to say something it hasn’t said in decades: Raise my taxes, please.
That’s a bit of an exaggeration, of course. Trade-offs produce both losers and winners. The legislative combat will be all about which interests wind up on which side of the ledger. Some individuals and corporations will end up paying more. Others less. But, without doubt, a large number will be losers in the end. There’s no way around it, especially in the current environment.
Tax reform is needed because the tax system doesn’t produce anywhere near enough revenue to pay for the current size of government. The only way Republicans will vote for more revenues will be if the tax code is “reformed” as part of a massive downsizing of Washington.
Reform is an easy word to say but very hard to accomplish. The central question is: Where will the money come from to lower tax rates?
The experts understand that Congress and the president will have to downsize some of our most prized tax breaks.
The write-off for charitable donations, for example, might have to be placed on the chopping block. Maybe the deduction for home mortgage interest payments as well. Who knows? The deduction we all take for granted of the taxes we pay to state and local governments might also be trimmed or excised altogether.
In the 1980s, tax loopholes were slashed to pay for tax-rate reductions for individuals. This time around, individuals and corporations probably will have to sacrifice to get where we have to be.
This will be so large and arduous an undertaking that it will not be accomplished quickly. In fact, it could take years.
More to the point, unless the candidates for president begin to detail what they really mean by tax reform and the tough trade-offs it will require, the public will not be adequately prepared for what’s about to happen. That will lengthen the process considerably and possibly stop it.View Entire Story
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