The Failure of U.S. Tax Policy: Revenue and Politics

The Failure of U.S. Tax Policy: Revenue and Politics

The Failure of U.S. Tax Policy: Revenue and Politics

The Failure of U.S. Tax Policy: Revenue and Politics

Excerpt

[M]odern taxation or tax making in its most characteristic aspect is a group
contest in which powerful interests vigorously endeavor to rid themselves of
present or proposed tax burdens. It is, first of all, a hard game in which he who
trusts wholly to economics, reason, and justice, will in the end retire beaten and
disillusioned. Class politics is the essence of taxation.

-T. S. Adams (1927)

[T]he tax system is more than a revenue-raising device, it is an instrument of
national policy.

-Walter Heller (1961)

During the 1980s, the income tax laws of the United States were revised, reformed, and rewritten to a greater extent than during any other period in the history of the tax. The federal courts, the IRS, taxpayers, and the private tax bar all struggled just to keep up with the deluge of increasingly complex tax statutes and regulations. The Tax Reform Act of 1986 (TRA) was the most important bill ever enacted in the history of the federal income tax, and it completely changed the landscape of tax practice. Contrary to all expectations, "tax reform" became the centerpiece of domestic policy during the Reagan administration, and TRA was a massive tax-reform bill. Other significant tax legislation was also enacted during the 1980s-much of which contradicted the underlying philosophy and policies behind TRA. By the end of the decade, tax policy was adrift. That changed with the triumph of the Republican Party in the 1994 mid-term elections; tax policy very much found a direction. Nevertheless, it remains to be seen whether any long-term stability and coherence will return to federal tax policy as a result of Republican domination of Congress, or whether the next few years will witness the same pattern of erratic policymaking that characterized the 1980s.

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