Why tax reform is a waste of time
We can have an efficient system that serves us well if we simplify the current code by treating all income the same, closing loopholes, and sticking with the progressiveness of the current rate structure.
I’ve been thinking about tax reform lately (who hasn’t?), as in a major restructuring of our tax system. And I’ve concluded that it’s a big waste of time. Yes, the current system needs repair, and more to come on this, but here’s the core of the argument:Skip to next paragraph
Subscribe Today to the Monitor
We need a system that raises adequate revenue with the least distortions. Those distortions, however, do not come from the rate structure, so all this junk about lower rates unleashing a growth tsunami is at its core trickle-down propaganda.
The distortions come from the loopholes, exemptions, and most of all, from all the myriad ways different types of income are defined and treated.
It should also be a system that does not amplify pretax income inequalities—i.e., it should be progressive (the CBO inequality study finds that after-tax inequality has grown faster than pretax, implying diminished progressivity of the Federal tax system).
Once you accept these simple truths, you’re free from all the mishegas about flat taxes, corporate reforms, VATs, territorial systems, etc. Nothing against all of those—many embed smart policy thinking.
But we can have an efficient system that serves us well if we simplify the current code by treating all income the same, regardless of its source, close distortionary loopholes (and yes, defining what’s distortionary implies an argument, but there’s actually more agreement here than you might think), and sticking with—I’d say expanding—the progressivity of the current rate structure.
So, join me on path of tax policy enlightenment, and you too will experience the bliss of liberation from all the angst of this highly fractious debate.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on jaredbernsteinblog.com.