John Gardner on Tax Reform
|January 9, 2007||Posted by Staff under Archive, Progress Report, The Progress Report|
John Gardner on Democracy
The Need for Tax Reform
Both those who fear it and those who seek it talk as though “the redistribution of wealth” is something that is not now happening but might be made to happen. Actually it is going on all the time and its chief instrument is the tax system. When redistribution benefits the poor it does so under charity-soaked words such as “welfare.” When it benefits the rich it does so under businesslike labels such as “provision of economic incentives.” Whichever direction the money moves it is coin of the realm and not rejected by the recipient.
A seventeenth-century Englishman said, “Give me the making of the songs of a nation, and I care not who makes its laws.” Many an American businessman, possessing.the same delicate perception of differing roles, might say “Give me the making of the nation’s tax laws, and I care not who governs.” One might think that a process so central to economic justice as the shaping of the tax laws would be the subject of intense public scrutiny. But it is not. It is surrounded by a secrecy that makes it impossible to hold one’s elected representatives accountable. And behind the curtain of secrecy, some curious things happen.
In 1970, 112 individuals with annual incomes of more than $200,000 were legally able to avoid paying any federal income taxes. Three of the 112 reported incomes of more than one million dollars. That’s the kind of information that has convinced a lot of ordinary hard-working taxpaying Americans that they’re playing in a game where someone has stacked the deck.
Joseph Pechman, one of the leading tax authorities in the country, has said that income tax rates could be lowered one-third with no resulting reduction in the amount of money raised if all income were subject to tax and the personal deductions were pruned to the essential items.
Depletion allowances, the capital gains tax, the many avenues of escape from the estate tax, the abuse of farm tax losses, accelerated depreciation, and innumerable other devices enable the high-income taxpayer to bring his tax rate far below that of citizens in the middle- and lower-income ranges.
The tax system is not equitable today.
Tax reform must be high on the priority list of those who would restore the citizen’s lost confidence in government. But there will be no tax reform without congressional reform. In the long run an equitable tax system will not come about until we impose the requirements of responsiveness and accountability on the House Ways and Means Committee and the Senate Finance Committee.
The secrecy with which the revenue committees operate must be ended. The closed rule, which prohibits any amendments to a tax bill coming out of the Ways and Means Committee, must be abolished.
And there is a third requirement. Conference committees on revenue legislation must reflect the majority views in both Senate and House. After the House and the Senate has each voted its version of a tax bill, a “conference committee,” consisting of members from the House Ways and Means Committee and the Senate Finance Committee, is appointed to resolve differences between House and Senate versions. The iron rule of seniority has in the past determined who gets named to the conference committee, and this has had the effect of stacking the cards against tax reform proposals voted by the Senate. In recent years, conference committees on tax bills have invariably failed to include a majority of senators who voted for major tax reform amendments.
What’s your opinion about tax reform priorities? Speak up!