This reader pinch-hits for Ramesh:
Jonah –
I was interested to see your recent comment in the
Corner:
“But it seems to me as a matter of both politics and
theory that raising tax rates in exchange for tax
simplification shouldn’t be ideologically verboten.
The obvious argument is that by closing loopholes,
reducing the corrupting power of politics in tax
policy, eradicating inefficiencies and rationalizing
the whole system you will make the economy more
efficient and productive. Therefore if the price of
achieving this comes in the form of marginally raising
rates, it might well be worth it. For example, I would
gladly pay, say, $500 dollars more a year — even
above what I might save from firing my accountant –
in exchange for removing the worry and hassle of tax
time.”
I agree with you in theory. Here’s the problem,
though — Reagan agreed to just such a deal in 1986,
with the result that lots of deductions were
eliminated to broaden the tax base and rates were
significantly reduced. Unfortunately, when the wheel
turns and the politicians (usually the Ds, but not
always) want to raise taxes, they’ll jack the rates
back up but won’t restore the lost deductions — which
is exactly what happened in 1990 (aka the tax bill
that probably lost GHW Bush the 1992 election).
Broadening the tax base in order to reduce rates would
truly be a wonderful thing, but since base-broadening
tends to be a one-way ratchet (at least as far as the
middle class taxpayer is concerned), the merits of the
strategy could be seriously questioned on a practical
level.
Love your stuff!
Best regards,
Keith