The problem begins with its innate unfairness, which can’t be separated from a tax code that is so complex and illogical that it’s routine to hire professionals simply to interpret and fill out basic forms. Sometimes, the professionals need to consult more professionals—more accountants and lawyers, or a team of them. That’s not restricted to any income group; if you’re renting out a spare room to help pay the mortgage, you’ve got forms to fill out and arithmetic to do, and very likely some explaining to do, too. We’re so used to this that, when April 15th (or its requested extension) arrives, it barely registers beyond the time-consuming, receipt-gathering, costly, baffling, headache-inducing inconvenience of it all.
There’s no need to belabor the 2012 Presidential race, with all that talk about the “Buffett rule” and what tax rate Mitt Romney paid on unearned income on all those returns he never fully made public. And no need to belabor what corporations like Apple do to avoid paying taxes. There’s nothing illegal in hiring an army of advisers to make best guesses about the law and do the math; in fact, a clever C.F.O. will tell you that a company owes its stockholders no less. Even individual taxpayers whose incomes fall roughly evenly in the (laughably labelled) “earned” and “unearned” categories soon learn that the system often results in distinctly different rates of taxation.
“All my life, I have heard promises about tax reform, but it never quite happens,” Carter told delegates at Madison Square Garden, thirty-eight years ago. “With your help, we are finally going to make it happen. And you can depend on it.”
To Carter’s credit, his Administration did make attempts at tax reform. The proposals, though, were pretty much eviscerated by Congress—successors to the men and women who helped to create earlier versions of the tax code. And to be fair to Congress, those members who want to keep their jobs need to satisfy constituents whose interests are sometimes in conflict. What may be more difficult for House members and senators is working with the men and women who belong to the other party. As Washington becomes an increasingly partisan place, those conflicting interests, augmented by regional priorities and plain bad temper, may be even more pronounced. It’s not easy.
The truth is that any major tax reform will require major simplification, and real simplification will probably incorporate elements of the much-derided flat tax. It’s also clear that most versions of the flat tax—such as Malcolm S. Forbes’s suggestions, in 1996, or Herman Cain’s “9-9-9,” in 2012—have enormous potential for unfairness; for being retrogressive, by hurting the poor more than the rich; for setting off calls for value-added taxes, which might be more retrogressive; and for simply being ploys to grant favors to various interest groups. Furthermore, any flattish tax, even one that incorporates progressive rates and doesn’t wreck beneficial social policies, might mean the end of many, or most, sacrosanct deductions.
That, though, is the direction that Dave Camp, the chairman of the House Ways and Means Committee, was heading with his renovation of the tax code: it was an approach that would lower tax rates for individuals and corporations and make up the revenue by getting rid of exemptions, deductions, and loopholes. For instance, some wealthy taxpayers might be taxed on heretofore tax-free municipal bonds. Camp, a Michigan Republican, seemed almost ready to lay down his political life on behalf of his years of hard work: after twenty-three years in Congress, he’s not seeking reëlection; and, while there are personal reasons for that decision, his frustrations also played a part.
Camp’s work has been praised by the Wall Street Journal, but also by John Koskinen, the new I.R.S. Commissioner, who knows that real reform means avoiding the incremental changes that often add more layers of complexity. The columnist Jonathan Chait, with vivid imagery, wrote that “Camp has actually plunged his hands into the guts of the tax code and pulled out item after item. It may be the most impressive and ambitious domestic policy proposal crafted by a major Republican in a generation.” (Chait added, “Granted, this is a low bar for a fanatical and brain-dead party, but it’s notable all the same.”)
This, though, is the sort of bipartisan support that tends to doom creative legislation. Lobbyists already anticipate another season of full employment. The House Budget Committee, led by Paul Ryan—likely to succeed Camp as chairman of the Ways and Means Committee—has come out with a budget proposal that undercuts what Camp’s committee has done. It didn’t help that Max Baucus, a Democratic senator who worked with Camp, left the chairmanship of the Senate Finance Committee to go to China as the American Ambassador, and that Camp was sabotaged by leaders of his own party: Senate Minority Leader Mitch McConnell and House Speaker John Boehner, both of whom, in George Eliot’s phrase, have “a batrachian unchangeableness of expression.” A while back, when a reporter asked Boehner about a detail in the Camp plan, Boehner replied, “Blah, blah, blah,” with a smile. When he was asked about the chance of a vote this year on Camp’s bill and of Senate Republican support, he said, this time with a laugh, “Aw, Jesus.”
And yet, on April 15th, wouldn’t it be nice to imagine a day when every American pays a fair, fixed percentage of income—all of it reported with minimal paperwork, with a simple range of permitted deductions that take account of the great variety of American occupations? The National Taxpayer Advocate at the I.R.S. says that Americans spend over six billion hours, and a hundred and sixty-eight billion dollars, every year to file their returns. Wouldn’t it be grand to lower such numbers? Life might get harder for those who make a living in search of novel pathways to tax avoidance, but they might be able to find useful work elsewhere. It’s no doubt a lost cause for the time being, and it’s particularly hard to arrive at equitable formulas while Washington is surrounded by a growing army of kibitzers: bloggers, editorialists, Twitter-mongers, the cable and talk-radio world, and the rest.
But it shouldn’t take a village of accountants and economic theorists to work it out; it’s been almost thirty years since Congress approved a tax-reform plan that, for all its flaws, earned the adjective “landmark.” Speaker Boehner might say “Aw, Jesus.” Jimmy Carter would still call it a disgrace.
Original Article
Source: newyorker.com/
Author: JEFFREY FRANK
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