Barron’s editorial page editor examines income tax reform failures

Thomas Donlan devotes his latest editorial commentary in Barron’s to the perpetual challenge of improving the American income-tax code.

[T]he federal income tax has become encrusted with fiscal barnacles. The tax code has more exceptions from tax than it has provisions for tax. It is unfair in so many ways that it ought to be made unconstitutional all over again.

The complexity of the tax code even works to preserve it from an aroused citizenry. As the serious humor columnist Russell Baker once explained, “Within 20 seconds of hearing someone launch into an explanation of tax laws, my eyes become glassy, my body loses all feeling, and I go into a shallow coma.”

In 2013, the leaders of the tax-writing committees of Congress—Sen. Max Baucus, D., Montana, and Rep. Dave Camp, R., Michigan—met lots of comatose Baker clones as they toured the country trying to create grass-roots support for some kind of tax reform.

From top to bottom, taxpayers were mildly interested in what the two lawmakers might do for them and strongly unimpressed with their ability to do it. Finding people from either party or from any income stratum who were deeply interested in reforming the tax code for fairness and the general good was practically hopeless.

Moreover, Camp and Baucus’ bipartisan tax-reform campaign had no substance. The legislators had no plan, just good intentions. They didn’t actually agree on much except the importance of agreeing eventually. Their divergence was particularly great on issues involving the corporate income tax.

Camp set a goal of removing enough corporate-tax loopholes to bring the nominal rate down to 25% without losing revenue. It was a modest goal, far short of the clean slate that he and Baucus had talked about. Then, early last summer, Baucus admitted that reducing the corporate income-tax rate by even 10 percentage points was “a bit of a stretch,” unlikely to win Democratic support.

By November, Baucus was saying that the revenue from eliminating corporate-tax loopholes should not be devoted to lowering the tax rate—the essence of tax reform in the past. Instead, he said, at least some of the money should be used to finance traditional Democratic spending priorities on job creation and infrastructure.

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