Whenever the federal government falls upon tough economic times, Congress paints its bull’s-eye on one goal: Reforming the federal tax code.
Saturday marked the 25th anniversary since the complex standard for collecting revenue from the masses was last overhauled by President Ronald Reagan in 1986.
Political and economic observers today say the climate that fostered the historic changes is absent. If the tax code is to be rewritten, one Louisiana delegation member will be in the scrum, U.S. Rep. Charles Boustany, R-Lafayette.
Boustany sits on the House Ways and Means Committee, which writes the nation’s tax laws. Like his fellow Republicans, Boustany is calling for a reduction of the corporate and individual tax rates that he said would spur economic growth, including more revenue.
Republicans want to cut the 35 percent corporate tax rate that they note is one of the largest in the world. And they want to reduce the individual tax rate from the current 28 percent.
“We have a tax code that is hurting competition right now,” Boustany said. “The bottom line is that we have to simplify the tax code and broaden its base.”
Those familiar with the history of the tax code say there is a reason why it hasn’t been altered in the last 25 years and most of it is political. Stephen Hess of the conservative Brookings Institution has been watching Congress since the Eisenhower administration and said creating a similar climate will be difficult.
“If it’s going to happen, all the stars have to be in the right configuration,” Hess said. “It’s worth keeping it as close to the front burner as you can, but don’t bet the stars on it.”
As soon as any major reform of the tax code would begin, fierce lobbying to protect interests would froth. In addition to industries trying to carve out their niches, regular taxpayers will also be clamoring, Hess said.
“Once you start getting into the details, they say ‘Hey, that can affect my mortgage,’ ” Hess said.
J.D. Foster agrees.
A senior fellow in the economics of fiscal policy for the conservative Heritage Foundation, Foster says half of Americans don’t pay federal income taxes. Most people believe that it amounts to corporations using loopholes, but Foster said that average Americans take advantage of such things as the mortgage deduction and child tax credit to reduce their tax liability.
“They don’t like the current system, and they think it won’t be painful,” Foster said of a rewrite. “Taxes are painful.”
The political environment is also missing. Reagan worked closely with Senate Finance Committee chairman Bob Packwood, R-Ore., and House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., to hammer out a deal.
“We had a president who wouldn’t quit,” Foster said.
The political reality today, where House Republicans and Senate Democrats can’t even agree on an annual budget, doesn’t provide much hope for tax reform, said Larry Sabato, a political scientist at the University of Virginia.
“Our system is designed for delay and defeat of major legislation,” Sabato said. “Tax reform has to be a top presidential priority and the leaders of the House and Senate must be on board. How often does that happen?”
Boustany said the Senate Finance Committee and House Ways and Means Committee has already held a joint committee meeting on the subject and estimates that it would take about three years to overhaul the code.
“I think there is incentive from multiple groups to move forward,” Boustany said. “I think there is momentum.”
Reagan called for the tax reform at his 1984 inauguration, something President Barack Obama would have to do if re-elected in 2012 to make a serious rewrite of the code.
“One of the stars has to be in the White House,” Hess said. “He’s just got too much on his plate now.”
The frustration with Americans over taxes stretches back to the Boston Tea Party in December 1773. Much of that angst continues today, Foster said, paraphrasing the late U.S. Sen. Russell Long, D-La.
“Don’t tax me, tax the fellow behind the tree,” he said. “There isn’t a large forest out there with people hiding behind it.”
Gerard Shields is chief of The Advocate’s Washington bureau. His email address is GerardShields@aol.com.