Tax reform argument should be about values, not economics

Until now, backers of reform have focused primarily on economic arguments: A reformed tax code would increase growth or create more jobs. But they may do better on tying tax reform to moral issues, such as fairness. 

Maybe the best way for tax reformers to get political traction is to focus on values, not economics. That, at least, was one take-away from three political scientists who spoke at a Tax Policy Center panel yesterday.

Until now, backers of reform have focused primarily on economic arguments: A reformed tax code would increase growth or create more jobs. But they may do better on issues such as fairness, according to Karlyn Bowman of the American Enterprise Institute; Chris Faricy, an assistant professor of political science and public policy at the Maxwell  School at Syracuse university; and Bill Galston of the  Brookings Institution.

In the current environment, none of the panelists felt reform would happen any time soon. Its best bet:  A president who uses it as a springboard to prove he or she can break though partisan gridlock and get things done in Washington.

Bowman noted that tax reform is not a top priority for the public today, an attitude that could make reform easier than higher-profile yet more controversial issues. Still, other public attitudes could make a rewrite more challenging that it was 30 years ago.

For instance, she noted that when Congress was debating the 1986 tax reform, most people thought their own taxes were too high, President Reagan was enormously popular, and more than 40 percent of the public told pollsters they trusted government. All of these attitudes made it relatively easy for Congress to enact reform, despite overall public indifference to the specific legislation.

Today public attitudes are quite different. Half of those surveyed think the amount of tax they pay is “about right.” And only about 15 percent say they trust government.  If people have relatively few complaints about their taxes, will they be willing to let a government they so distrust rewrite the law?

Faricy’s research shows that public support for deductions and credits is “wide but not deep” and very much driven by broader political views.

For instance, he found that most people favor tax subsidies. But when they are told that higher income households are more likely to benefit from the subsidies than others, support fades among independents and Democrats. But conservatives and Republicans continue to support the preferences. That partisan split could make reform more difficult.

Galston noted that in 1986, Ronald Reagan made both an economic and a values-oriented argument for reform that resonated strongly with the public.

Galston suggested that while tax evolution may not attract the public’s attention, “tax revolution” might. One strategy:  A broad-based carbon tax tied to cuts in payroll taxes. Such a move could tie tax reform to support for environmental protection.

Yet, even that idea would bump against the public’s resistance to more modest measures such as a gas tax increase.

Bowman, Faricy, and Galston agreed that any reform must have strong bipartisan support, and that winning such backing in the current political environment would be a massive challenge. However it is presented, tax reform has a tough uphill battle. But understanding its challenges can help start the process.