When Tax Reform Means Soaking the Rich

When Tax Reform Means Soaking the Rich

Tax reform has evolved into one of the emptier platitudes of U.S. politics. Politicians support "tax reform" in the same way that they support "a strong national defense," "fiscal responsibility," and "pro-growth economic policies." It's a brave statement in search of a challenge. Is anyone ever against tax reform?

In practice, tax reform is defined by what it's not: It's not the tax system we have. It's not the compromised structure produced by a messy democracy. Tax reform means striving for the tax system we want, rather than the tax system we have.

But tax reform has no inherent, timeless meaning beyond that expression of dissatisfaction. In terms of policy specifics, its meaning changes over time.

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Last December, Clint Stretch wrote a thoughtful post for Capital Gains and Games pointing out that tax reform was once defined in terms of social justice. It derived its meaning from the same populist and religious impulses that gave rise to other kinds of policy reform, including slavery abolition, universal suffrage, public education, and temperance. Tax reform, in this older tradition, was defined by the progressive redistribution of tax burdens.

This understanding of tax reform is as old as the income tax itself...

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When did this definition of tax reform lose out to revenue neutrality? Politically speaking, not until the Reagan years, when Congress passed the Tax Reform Act of 1986.

But according to Stretch, 1986 was also the high water mark for that sort of tax reform; in the years since, the lower rates/broader base bargain was supplanted by a single-minded fixation on rate cuts, at least among Republicans...

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Over the past four years, President Obama has mounted a challenge to this Norquistian definition of tax reform. Indeed, he has even rejected the older tradition of revenue neutrality, instead arguing for a version of tax reform that actually raises raises money, chiefly by raising taxes on the rich.

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View Joe Thorndike's opinion in its entirety on the taxanalysts® Blog.

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