Why Tax Reform Talk a Dead End – CNN.com

It turns out that Richard Nixon was a hippie.

Here’s Tricky Dick’s wisdom on taxation, always worth dusting off this time of year:

“We shall never make taxation popular, but we can make taxation fair.”

See — he’s talking about “fairness” — and we all now know that’s code for social justice straight out of Saul Alinsky. And it was especially socialistic for him to invoke the concept back in a time when the top tax rate was 70%.

Meanwhile, back in reality circa 2012, we are having a typically overheated election-year debate about taxes — and both teams in Washington have a point.

Republicans this side of Ronald Reagan finally found a way to out-promise Democrats. After decades spent griping that the New Deal’s electoral power came from liberal’s limitless ability to promise public goodies, conservatives have realized that they can tap into American’s anti-tax impulse by promising to lower taxes all the time, regardless of whether our nation is at war or running a long-term deficit. Liberals have always had a hard time appreciating that the American Revolution was founded in part on a tax revolt.

But historic perspective is the enemy of partisan ideologues, and on the flip-side, conservatives who idealize the past conveniently ignore that tax rates at the heart of the American Century were almost double what they are today. That was an outrage; by comparison, today’s debates are about rounding errors.

Essentially, we are debating whether the top tax rate should go back to where it was during the Bill Clinton presidency — 39.6%, up from the Bush tax cut level of 35%. And this would apply only to households making more than $250,000 a year.

I happen to think using that threshold is a mistake. A family making 250k with two earners doesn’t deserve to be lumped in with the super-rich at the top tax rate. At the same time, someone such as Mitt Romney, who makes $56,000 a day off passive income from investments, shouldn’t be taxed at just 14%.

Obama has a real weakness in this year’s debate, however. Read through his play-to-the-base budget, and you’ll see the term “fairness” advanced over and over again. Fairness is a noble goal and contributes to societal stability in the long-run. But the real argument for raising taxes is directly related to balancing budgets and reducing long-term deficits and debt. And that argument is rooted in rhetoric about the “shared sacrifice” needed to restore national greatness. After all, the world’s largest debtor nation cannot remain the world’s sole superpower for long.

Obama’s fairness rhetoric bypasses that rational argument in favor of something fluffier — namely, closing the growing gap between rich and poor via the tax code. This might excite the liberal Democratic base, but it also serves to confirm negative stereotypes about wealth redistribution and the left that alienates independents and swing voters.

On balance, I think policy arguments about moving the top rate to people making more than a million dollars a year makes good sense.

Republicans will balk out of deference to philosophy and big campaign contributors, but even 52% of self-identified tea partiers support that benchmark. It is an additional irony that many conservatives are fine with raising taxes on those 47% of Americans who don’t make enough money to pay federal income taxes, as long as top rates are lowered enough to make the overall shift revenue neutral. This isn’t tax policy as much as it has become a shell-game masquerading as ideology.

Tax day is unpleasant, and it has become a colossal waste of time and money. The current tax code is roughly 10 times longer than the Bible, and Forbes estimates that 6.1 billion hours are wasted in trying to comply with its byzantine structures.

Both Obama and congressional Republicans have campaigned on tax reform and tax simplification in the past. The Bowles-Simpson Plan and the sadly abandoned Obama-Boehner Grand Bargain imagined lowering rates and raising revenue by closing loopholes. The real tragedy is that such an agreement should be within reach — but the 80% agreement keeps getting eclipsed by the 20% disagreement, that signature, stubborn hyperpartisan insistence on all or nothing. So we get nothing.

That brings us back to Nixon’s aphorism: “We shall never make taxation popular but we can make taxation fair.” It’s about the last piece of useful wisdom on the subject that we’ve heard out of Washington.