Tax Oped

Source: Wall Street Journal

An Oped at the Wall Street Journal, "Here's what genuine tax reform looks like." With a new art style by WSJ. (Ungated via Hoover. I have to wait 30 days to post the whole thing.)

 I buried the lead, which I'll excerpt here:

"...Why is tax reform paralyzed? Because political debate mixes the goal of efficiently raising revenue with so many other objectives. Some want more progressivity or more revenue. Others defend subsidies and transfers for specific activities, groups or businesses. They hold reform hostage.

Wise politicians often bundle dissimilar goals to attract a majority. But when bundling leads to paralysis, progress comes by separating the issues. 

Thus, we should agree to first reform the structure of the tax code, leaving the rates blank. We will then separately debate rates, and the consequent overall revenue and progressivity.... we can agree on an efficient, simple and fair tax, and debate revenues and progressivity separately.

We should also agree to separate the tax code from the subsidy code. We agree to debate subsidies for mortgage-interest payments, electric cars and the like—transparent and on-budget—but separately from tax reform.

Negotiating such an agreement will be hard. But the ability to achieve grand bargains is the most important characteristic of great political leaders."

This is, I think, the most novel idea in the oped. All tax reform packages mix changes to the structure of the tax code with specific rates. Then, the wonkosphere goes on a witch hunt of who pays more and who pays less, and the attempt to fix pathological problems in the structure falls apart.

I think our politicians really could negotiate a tax code in which all the rates are left blank. Then, we have a separate debate about what those rates will be.  In fact, tax rates ought to change a lot more often than the tax code itself.

Similarly,  the key to removing the pernicious subsidies in the tax code is again to separate the issues. Taxes are for taxing, then we can debate subsidies.

We need to move from the equilibrium of, I have my subsidy/deduction/credit/special deal, so I won't complain about yours, to the equilibrium of, I gave up my subsidy/deduction/credit special deal, so I'll make darn sure you give up yours too.