Democrats and Republicans agree: We need “tax reform.” Broadly, this means eliminating deductions and credits, while lowering tax rates. This would give us a simpler code, with all its virtues: less money and time wasted on compliance, less ability of crafty corporations and wealthy people to game the system and pay no income taxes, less distortion of the economy.
But tax reform has a long climb ahead, because Democrats and Republicans also agree that their specific tax carveouts are crucial.
Sen. Marco Rubio, R-Fla., told Charlie Rose in June he wants to focus on bringing “a simpleness to this tax code.” Rubio said, “I wish we would spend time on tax reform.” But then this month, Runio decided that the cash prizes that come with Olympic medals should get a special tax deduction.
Sen. Ron Wyden, D-Ore., has been the loudest voice calling for tax reform. He has constantly written and spoken about tax reform, so much that he sometimes is gently mocked for his Quixotic pursuit of tax reform. This week, though, Wyden inserted in a bill a tax credit for electric motorcycles, because the manufacturer is in his state. As he put it, “until you get [tax reform], you’re not a purist who sits around and says, ‘Oh, my constituents don’t matter.’”
President Obama says he wants to trim “spending in the tax code,” but he’s constantly rolling out tax preferences (and, to the disappointment of liberal blogger Matt Yglesias, backing Rubio’s Olympian tax deduction).
So, is tax reform doomed? Are these inconsistencies a sign that political calls for “tax reform” are empty rhetoric? Do politicians like Rubio and Obama think “reform” would really be getting rid of deductions they don’t like, and replacing them with deductions they do like? Or, as Wyden’s comments would suggest, is it a tragedy of the commons? Will nobody give up their own tax carveouts until everyone else gives up theirs?
