Don’t Reform the Code

Robert Samuelson explains why serious tax reform isn't going to happen. Lew Rockwell explains why it shouldn't:

Hardly a day goes by when I don't receive an email from someone who has a grand plan to reform the tax code, replacing the current system completely, with something else. That something is usually the Value Added Tax or the National Sales Tax. The people promoting this plan long for a world in which they are permitted to keep all the money they make and only the purchasers of goods and services pay….

But there is another danger to promoting a VAT or a NST. It might actually convince someone in Washington to give it a try. And instead of replacing the whole tax code, the politicians might try to introduce the new one at the seemingly low rate of 1 percent or 3 percent. If they ever get away with this, look out. It will inch up year by year as the political class discovers yet another way to loot us.

Samuelson's article points to just how high the compliance costs associated with the current tax code are — "about $150 billion annually." That's a powerful standing argument for simplifying the code. But when the other points Samuelson raises are taken into account — most of all the political impossibility of doing away with the home mortgage deduction — the only kind of tax reform likely to emerge is one that would make things worse by keeping the most popular breaks (thus leaving in place the taproot of complexity) and closing useful loopholes that occasionally give taxpayers a fighting chance against the IRS.

But what's worst about the tax-reform movement is that it distracts angry taxpayers from what should really be at issue: lowering taxes, not coming up with revenue-neutral schemes for distrubting the same tax burden in new ways. Don't fight for flatter, "fairer" taxes — fight for lower taxes.

 

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