The Wrongologist

What
does this mean for tax reform?

It means
it’s going to be nearly impossible to simplify the tax code. Lobbyists representing pretty much the entire
economy are well entrenched and prepared to defend a dense thicket of
interlocking interests to protect loopholes, credits and other tax favors.
Their ability to influence the outcome is both wide and deep.

In other Tax Day news, Gallup reported
today on a new
poll of public perceptions of their tax burden:

Gallup wants to paint a picture about
how public opinion has changed, stating that the percent who view their tax
burden as fair is the “lowest since 2001”.

True. But the real story is that
public perceptions haven’t fluctuated much in the last 10-15 years.  The
Bush tax cuts improved people’s attitudes about their taxes and attitudes have not changed much since then.

We need to change the perceptions about taxes by
promoting the idea that taxes provide benefits that we all use every day. Every tax cut bill now has the
word “relief” in it. Taxes are not just costs, or a “burden” from which we need
“relief”.

The anti-tax crusaders use two ideas
to drive home their view about lower taxes:

First is government
dysfunction.  Conservatives run for office with the message: Government
is the problem, it’s broken, let’s cut your taxes and shrink it.  If they
win, they naturally work to ensure that their prophecy is fulfilled. 
Fomenting dysfunction is a highly effective strategy practiced by those who
want to cut taxes and shrink government.  When the public sector works
well, it has more fans and that’s the last thing the tax cutters want. So they
try to starve it.

Second is the long-term
stagnation in personal income.  We all say something like “given the
stagnation in pretax income over the last decade and a half, we can’t raise taxes on middle-class households.” 

Mr. Obama bought this idea, pledging not to raise taxes on households below $250,000,
meaning that the bottom 98% is off limits!

His thinking is based on the (correct)
assessment that since income growth has bypassed middle and low-income families
on its way to the top of the income brackets, the middle class now needs to be
protected from tax increases while those who’ve received the lion’s share of
the growth have to pay more of their “fair share.” 

This contributed to making 82% of the Bush tax cuts permanent during the
fiscal cliff deal, a move
that will make it much harder to raise the revenues we will need in coming
years.

So today, pro-tax increase arguments
are largely based on “fairness”. But this approach is limited.  People
have to believe that their money will be spent smartly on the services they
want and need, and that the private sector either won’t provide (public goods,
infrastructure, pollution abatement, innovative investments) or will do so
less affordably (retirement security, public education). 

President Obama’s has a bad take on
taxes.  He articulates, better than anyone recently in high office, the
“we’re-in-this-together” theme, along with great analyses of how and why we
need an amply funded, efficient government sector.  His health care plan is
evidence that he gets this, as are his words regarding investing in clean
energy, infrastructure, safety-nets, productivity-enhancing innovations, and
education.

But his tax policy falls far
short of his agenda.  His agenda cannot be accomplished solely by taxing households
above $400,000 (the top 1.5%) while permanently keeping the Bush tax cuts. We
need to raise corporate taxes.

So, there is a ton of political work
to be done. But how will we do it?

If voters can understand that the cash that US corporations and the wealthy “invest” in
campaign contributions is provided by the rest of us through tax
loopholes, then they will understand the importance
of severing these links.

100% public
financing of campaigns would not cost the public any more than what we pay now via loopholes; the
only difference would be that the voters would retain the political power they now
“voluntarily” give up without a fight.

We have given the
plutocrats veto power over who can realistically run for public office and as a result, we have
gotten the tax code they want, not the tax code we need.