Magazine article The American Prospect

Taxing Times

Magazine article The American Prospect

Taxing Times

Article excerpt

THE BENEFIT AND THE BURDEN: TAX REFORM--WHY WE NEED IT AND WHAT IT WILL TAKE BY BRUCE BARTLETT, Simon & Schuster, 271 pages, $26.00

CORPORATE TAX REFORM: TAXING PROFITS IN THE 21ST CENTURY BY MARTIN A. SULLIVAN, Apress, 174 pages, $19.99

If the last ten years of debt and jobs destruction have taught us anything, it's that we must change our tax system and soon, or face economic disaster. Instead of maintaining our infrastructure, we are consuming it. Instead of investing in education and research with an eye to later wealth, we're cutting our way to a poorer future.

Yet concerning taxes, which finance our civilization and distribute the cost, three great lies permeate society, all of which delay our doing what needs to be done. The first lie, with a nod to comedic candidate Jimmy McMillan, is that the tax is just too damn high. The second lie is that if you cut the rates, revenues will increase. The third lie is that taxes have become too complex for even an Einstein to understand.

Bruce Bartlett in The Benefit and the Burden and Martin A. Sullivan in Corporate Tax Reform demolish these lies with valuable primers, as complementary in their purpose as an easy chair and a reading lamp. Where ideological groups feed talking points to politicians and pundits, reducing the tax-policy discussion to a Gong Show of sound bites, Bartlett and Sullivan explain basic principles in English so readers can start to decode them. The authors' timing is perfect, too. Major corporations, emboldened by the Supreme Court's 2010 Citizens United decision, are gearing up to press Congress for lowered rates, favors, and loopholes. Representative Dave Camp, the Michigan Republican who chairs the House Ways and Means Committee, and Senator Ron Wyden, an Oregon Democrat, have signaled a readiness to push for major corporate tax code changes. The 2012 elections will surely bring the next round of the tax debate into sharp focus.

DESPITE ALL THE POLITICAL rhetoric about excessive taxes, federal tax revenues are at their lowest point since Harry S. Truman's presidency. In Barack Obama's first three years, federal taxes slipped from a little less than 15 percent of the economy to 14.4 percent, far below the 17.6 percent to 20.6 percent range from Ronald Reagan through George W. Bush.

Adjusted for inflation and population growth, the individual income tax brought in a third less revenue in 2011 than it did in 2001, when the Bush tax cuts began. Corporate tax revenues were down 6.2 percent by the same measure, despite recently soaring profits. According to tax-return data, non-financial corporations at the end of 2009 were hoarding more than $3 trillion in cash, a figure that has surely grown since. That's $10,000 of idle cash per American, a vast reserve army of capital as much in need of employment as the 24 million or so Americans who can't find a job or as much work as they want.

In fact, had Obama not acquiesced to extending all of the Bush tax cuts through 2012, we would be on our way to manageable budget deficits. Even so, this year the budget deficit will fall back to less than a trillion dollars--a major achievement under the circumstances, but not hailed as such in our poisonous political climate.

Bruce Bartlett is a Republican policy wonk turned columnist who worked since 1976 for conservatives, including Ron Paul and Jack Kemp, and for the Reagan and George H. W. Bush Treasury Departments. That career path changed when his 2006 book, Impostor, called out George W. Bush as the ultimate big spender. In his new book, Bartlett gives a broad overview of federal income-tax policy. He argues that people want more government than they have been willing to pay for, and chronic deficits are no longer sustainable. He dismisses Grover Norquist's mission to "starve the beast" of government as nonsense but favors reducing America's corporate tax rate because only Japan has a higher one. …

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