The Challenge of Tax Reform: A Price without a Product

July 31st, 2013 at 11:11 am

I see the peeps over at Wonkbook were struck by the same quote I was this AM from an NYT piece on tax reform. 

“Get rid of the deductions that don’t affect me.” That’s what Debbie Schaeffer, the owner of Mrs. G TV and Appliances, told Max Baucus and Dave Camp, the chairmen of the Senate and House committees charged with tax reform, when they asked for her advice.

The Wonkbookers quite reasonably think the problem is that actual tax reform–the type that involves changes to real people’s tax liabilities—is less inviting than the awesome ideas that politicians like Rep. Camp and Sen. Baucus kvell about.

To see why, Compare two sentences:

By the end of this year, we’re going to pass revenue neutral tax reform that gets rids of wasteful loopholes and deductions and lowers your rates!

And the translated version:

By the end of this year, we’re going to pass a tax-reform plan that doesn’t save Americans any money but cuts things like the state and local tax deduction and the home-mortgage interest deduction and the depreciation rules for businesses in order to lower some of your rates!

I think that’s right but I also believe there’s a significantly deeper problem here.  Selling tax reform is selling a price without a product.  Let me explain.

Taxes are not just a matter of rates, schedules, and deductions.  They’re a means to an end, the “end” being the funding of government.  Yet the presentation by reformers like Camp, Hatch, Baucus, and so on, deal only with the means, not the end.  It’s all a discussion about how their going to jigger the price in ways that you should like, even though as Ezra and co. point out, some of you will pay more.  It’s never a discussion about what you’re getting for your money.

Actually, it’s worse.  While the reformers are running around trying to get folks excited about tax expenditures (the price), government (the product) is increasingly dysfunctional.  I don’t mean to be overly critical of the would-be reformers.  I agree with some of their motivation and I appreciate their openness to ideas like the one the President unveiled yesterday (Hatch was one of the few R’s who sounded at least slightly open to the deal).

But their sequencing is off.  Without getting into a meaningful, substantive, convincing discussion and commitment to improve the functioning of government in ways that really matter to the majority—meeting market failures, ensuring retirement security, protecting the environment, providing real economic opportunity, affordable health care), they’re like Monte-Hall-style salesmen trying to engage customers in a Let’s-Make-a-Deal negotiation about what’s behind the curtain.

I mean, really, guys.  I very much appreciate your getting out there to talk to the people, but explain to me why any constituent should engage with you in a conversation about funding a government wherein one chamber is about to take its 40th vote on repealing Obamacare.

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8 comments in reply to "The Challenge of Tax Reform: A Price without a Product"

  1. David says:

    just as people only like government spending cuts in the abstract that don’t affect them, they’re all for them. Here obviously they all want to close loophole and deductions in the abstract.


  2. kathynj says:

    Oy! Just saw you on MSNBC and must respond to your assertion that Chris Christie sometimes says good things (or words to that effect). As a resident of New Jersey, I’ve had the misfortune of experiencing the effects of his policies, as well as his temper tantrums, bullying, and general lack of culture. How can you commend someone who opposes an increase in the minimum wage, supports Simpson-Bowles, slashes aid to schools, sells off public education to political cronies, and says the state can no longer afford giving property tax rebates to the elderly while simultaneously pushing for more tax cuts for the wealthy? Oh, and let’s not forget that on Christie’s watch NJ’s unemployment has remained the highest in the region and property and other taxes and fees have soared. (Plus, there’s always the case of his brother and biggest booster, Todd, of Wall Street infamy.) Anyone with a brain knows that Christie needed federal money post-Sandy to boost his own political fortunes, so I wouldn’t read too much into his support for government assistance in this particular case. Yes, Rand Paul is a danger, but so is Christie.


    • purple says:

      Christie is the perfect reflection of what America is at this point and time. Rude, loud, ignorant and proud of it, and demanding discipline from anyone other than himself. We deserve him.


    • Jared Bernstein says:

      All good points. But I think I have observed fleeting moments, like the one in which he critiqued the libertarians, where he seems to be saying there needs to be some compromise if we’re going to get anywhere. I’m a strong believer in that. OTOH, his record, as you point out, ain’t exactly balanced.


      • kathynj says:

        Let’s not elevate “compromise” in and of itself to the celestial plane. One must first determine whose interests will most benefit(and whose will be most harmed) in order to assess the merits of a given compromise. For example, vis-a-vis strengthening Social Security, we could “compromise” in two very different ways: We could raise revenues by removing the cap on earnings subject to the Social Security tax (and/or subjecting investment income to that tax)OR we could reduce benefits via the CPI, raising the retirement age, etc. Sure, Christie is willing to “compromise–but only by opting for the latter, thereby protecting his real base on Wall Street while doing incalculable harm to the people he sells himself to as a regular Jersey Joe. It’s a safe bet that Christie pursues only those “compromises” that benefit himself personally or his very wealthy patrons, and not those that benefit the rest of us.


  3. Stephen Weinberg says:

    Jared,

    Distinguish between “government” and “the legislative process,” please. Congress is utterly dysfunctional, but that isn’t stopping Social Security checks from going out. It’s hindering the implementation of ObamaCare, but the government is still going to spend a ton of money on health care subsidies, in addition to what it already spends on Medicare, Medicaid, SCHIP, and the VA. We’re still paying salaries for a lot of government employees who are out there doing their jobs. All of that works pretty well, but needs to be paid for! And all of that is actually addressing the stuff you demanded in your second-to-last paragraph.

    Perhaps you intended this as a communications point, a concern that public perceptions of government will be driven by their perceptions of Congress. If so, that’s really not how it reads.

    I agree that it would be much better to discuss taxes in the context of what we’re buying with that money, but I thoroughly reject your argument that we’re not getting a good product for it–and I especially reject the claim that what the House Republicans are up to is any sort of measure of the actual quality of service.


    • Jared Bernstein says:

      Your comment seems to me to ignore that the dysfunction includes not just the daily votes on Obamacare, but very pointed attacks on social insurance (Medicare is cut in the sequester, btw; same with some VA programs). Check out the House budget. The President himself has Mcaid, Mcare, and Social Security cuts in his budget (chained CPI; I have supported some of these cuts, btw).

      I agree with you that we’re getting a good product in ways you elaborate. But people are being asked to fund a Congress that is quite devoted to making that product worse, and they’ve been having way too much success.


      • Stephen Weinberg says:

        The problem I have is your statement “people are being asked to fund a Congress.” The tax rate isn’t about funding Congress; it’s about funding the operations of the government. I can want to do that even if I hate Congress. Heck, I can especially want to do that if I hate Congress, if I think that a tax increase weakens the deficit hawks’ arguments to cut spending,

        If you want to argue that the proper level of taxation needs to be debated as part of a broader question of the proper level of government services, I’m with you. I agree with everything you say before “Actually, it’s worse.” But I don’t see what the last few paragraphs add.


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