Book: Contemporary U.S. Tax Policy May 12, 2004
A new book on the nexus of U.S. politics and tax policy by economist Gene Steuerle highlights the difficulty of keeping taxes simple in a democracy.
This brilliant new book traces recent tax changes in a clear and understandable way, giving the meaning as well as the facts and trends.
In a column today in the Washington Post, Robert Samuelson highlights the difficulties elected officials have in keeping the tax code simple and fair. Here are some excerpts:
Eugene Steuerle is one of Washington's ranking policy wonks -- a term used here with respect. He's forgotten more about taxes in the past 15 seconds than most of us will ever know. He arrived in Washington in 1974, worked for years at the Treasury and moved in 1989 to the Urban Institute, a think tank. Steuerle has just written a book, "Contemporary U.S. Tax Policy," that addresses the insistent question: Why is the federal tax system such a mess? The answer, in a word, is democracy.
In theory, it's easy to imagine a simple tax system with low rates, a broad tax base -- the amount of taxable income -- and substantial "progressivity," meaning that the rich pay higher rates. But in practice it has been elusive. Democrats and Republicans alike are too eager to use tax breaks to advance various social, economic and political agendas. The resulting tax code is so confusing, complex and contradictory that it costs taxpayers (in accounting fees and the value of their time) about $100 billion annually to complete their returns, estimates economist Joel Slemrod of the University of Michigan. In 2003 that roughly equaled the combined spending of the departments of education ($57.4 billion), homeland security ($32 billion) and state ($9.3 billion).
The appeal of tax breaks is that they give "the appearance of reducing the government's size . . . even as government interference in the economy increases," writes Steuerle. But a tax system that promotes various causes (more saving, more health insurance, college attendance) cannot be simple. It brims with provisions. Goals conflict; contradictions are unavoidable. Similarly, a system that favors some taxpayers (homeowners, the elderly) must disfavor others. "Fairness" suffers.
Links:
C. Eugene Steuerle Contemporary U.S. Tax Policy Urban Institute Press (2004)
Robert Samuelson "Tax Reform R.I.P." Washington Post (May 12, 2004)
Centrists.Org Issue Summary: Budget and Tax (Basics)
