Monday, March 14, 2005

Tax Reform: Guaranteed to get worse

The Constitution, via the 16th amendment, only lets the federal government generate revenue on tax of income and tariffs, and the rest falls on the states. Especially as the burden for governance has moved towards the federal government via our democratic culture, this is clearly silly. Even conservatives who feel that national defense is the only really legitimate aspect of our government, will acknowledge that this means the national government should have more taxing power than the sections. So agreed; constitutional limits make little sense in rapidly evolving economic matters.

The Bush economic team has made clear that their next goal after SS reform is reforming the tax code. They promise to be revenue neutral about it, but already this stirs a hornet’s next. Idealists insisting their own perfect tax code is our economic panacea, liberals arguing that shifting any more burden to the poor is anti-Christian, libertarians fearful this will actually be a tax increase.

Overall, there is a general cynicism by the public and a general eagerness by the lobbyists, despite that the purpose of said tax reform is to eliminate loopholes and complexity.

Care to reason why? A good computer scientist and security expert measures security by how many points of attack there are, and how strong the system is against attacks at these points.

Any major tax overhaul has to be supported by the executive, get through a couple committees in either house, and be passed by the Senate and House, and then goes to conference committee before final voting (when the final input by the executive will be just whether to veto his flagship bill or not).

Keen readers will see how many points of attack this system has. Moneyed interests that have investment in “loopholes” (which are just targeted tax cuts created by our democratic process to encourage things like savings, having children, research… not all excesses) aren’t going to let them die away, even for promises of “economic growth through simpler code”. Even if this president is as well intentioned as his proposals for overhaul sound, he is generally unable or unwilling to stop runaway “tragedy of the commons” free-for-alls among his party membership.

And as I’ll discuss in my next entry, there are some really good across the board things that could be done with the tax code too. It’s just a truism that we cannot trust our current system of government to do them well.


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