Bipartisan Blight: The Great Tax Reform Mirage
Robert L Borsage President, Institute for America's Future Posted: December 3, 2010 07:02 AM
David Brooks is always a good marker of establishment conventional wisdom. Today, in a column grandly entitled, "A Tax Reform Vision," Brooks celebrates the growing beltway consensus on
tax reform, suggesting that a bipartisan accord could be built around lowering tax rates, simplifying the code, and erasing
most tax deductions and loopholes. He touts a bill put together by Senators Ron Wyden (D-Oregon) and Judd Gregg (R-New Hampshire)
that is far more sensible than the more extreme version offered up by the co-chairs of the president's deficit commission.
It would lower rates, eliminate loopholes, and end with a tax code that is a bit more progressive and raises a bit more money.
If the Republican wingnuts will sign on -- although there is no sign that they will -- progress could be made. Irresistible.
Only we really have played this game before. In the mid 1980s, under Ronald Reagan, civic
minded Senator Bill Bradley joined with reformers to fashion a similar deal -- lower rates, eliminate egregious tax loopholes
and deductions, in a revenue neutral fashion. The establishment rallied; the bill passed.
Only while the deductions were eliminated, the lobbies that created them were not. They went
to work. The loopholes, tax expenditures, various dodges returned. Now the tax code is so riddled with them, that beltway
pundits can call for playing the same game once more.
Only while the loopholes returned, the lower rates stayed largely in place. The effect? By
2006, the top 1 percent of Americans (average net worth of about $15 million) pays rates fully one third lower than they did
in 1970. The top 0.01 percent -- we're talking multimillionaires here -- pays less than half as large a share of their income.
This has had staggering effect. Jacob Hacker and Paul Pierson show in their compelling study, Winner Take All Politics, that in 2000, the top one-tenth of 1 percent of Americans now capture a stunning 7.3 percent
of all national after-tax income. If they were paying taxes at the same rate as they did in 1970, they would capture "only"
4.5 percent in after tax income. Over one third of their added after-tax income share comes from lower taxes.
We now suffer the worst inequality we've witnessed since the eve of the Great Depression.
This inequality undermines our democracy, as concentrated money becomes concentrated power. But it also undermines our economy
-- when the few capture so much, the many are strapped, demand for goods declines, companies have over capacity, workers get
laid off, the economy suffers.
Alan Simpson, the egregious co-chair of the President's Commission, postures his plan as courageous
in opposition to the "greediest generation" that would make no sacrifice. But his plan for deficit reduction begins by lowering
top end tax rates once more, playing the same game again. And it seeks budget balance by cutting spending far more than by
Simpson can't bear to level with Americans about the real deal. The inescapable fact is that
we need to be investing more at the federal level, not less. Our core infrastructure is literally falling apart. Our schools
are unable even to provide the basics to every child. Our colleges are growing less not more affordable, even as advanced
training or education becomes ever more important. We're defaulting in the crucial competition to gain leadership in the new
green industrial revolution that will define the growing markets of the world. Our safety net -- support for the poor, training
and support for the unemployed, affordable and skilled child care for working mothers, retirement security for the elderly
-- is shamefully inadequate.
We need very different priorities, far greater discipline, much less waste, but we also need
tax reforms that raise revenue. We need to raise rates on the top, tax the wealthiest Americans as they used to be taxed,
and use that money to rebuild the economic infrastructure of this country, generating the growth that is the prerequisite
to bringing down the debt.
These are simple truths. They are largely unspeakable in conservative Washington, and certainly
among a beltway establishment comfortable with the extremes of wealth and cushioned against the terrors of economic recession
Do we have to fall for the same game again? Charley Brown is a lovable chump. Each year, Lucy
promises to hold the ball for him to kick. Each year, he trusts her, runs up and takes a mighty swing. Each year, she pulls
it away and he falls on his back. We adore him for his trust, his abiding innocence, and his faith in the good will of others.
He's a lovable chump. But he ends on his back. We don't really need to fall for the con again do we?
\Robert L. Borosage is the founder and president
of the Institute for America’s Future and co-director of its sister organization, the Campaign for America’s Future.
The organizations were launched by 100 prominent Americans to develop the policies, message and issue campaigns to help forge
an enduring majority for progressive change in America.
Mr. Borosage writes widely on political, economic
and national security issues. He is a Contributing Editor at The Nation magazine, and a regular blogger on the Huffington
Post. His articles have appeared in The American Prospect, the Washington Post, the New York Times
and the Philadelphia Inquirer. He edits the Campaign’s Making Sense issues guides, and is co-editor of
Taking Back America (with Katrina Vanden Heuvel) and The Next Agenda (with Roger Hickey).
the founder and board chair of Progressive Majority, an organization devoted to recruiting and training progressive to run
for state and local office. He is co founder and chair of ProgressiveCongress.org, an organization that provides a bridge
between progressives in the Congress and the progressive community. He serves on the board of Worki