Magical Thinking Is No Substute for Tax Reform 

Commentaries on economics and technology.
April 22 2012 6:30 AM

Magical Thinking Isn’t Enough

Romney and Obama both owe us better plans for tax reform.

143010065
Mitt Romney speaks with voters on "tax day," April 17.

Jeff Swensen/Getty Images.

April’s dreaded tax deadline has come and gone. The system, Americans have been reminded, has become painfully complex. The fear of an audit by the Internal Revenue Service lurks in homes across the country.

At such a sensitive time, it is no surprise to hear politicians pitching the idea of “tax reform”—suggesting that they can simplify the system, close loopholes, and use the proceeds to reduce tax rates. The allure of such appeals is that a crackdown on others’ tax avoidance will mean that you personally will pay less in taxes. This tax reform, according to popular policy jargon, will be “revenue neutral”— meaning that it will not worsen the budget deficit or drive up the national debt. The broader subliminal message is that you can have whatever you currently expect in terms of government services for less than it costs you now.

The problem with this vision of tax reform is that it is magical—an attractive illusion with no basis in reality. Consider the recent pronouncements of Mitt Romney. He wants to cut tax rates, mainly benefiting those at the upper end of the income distribution. He also wants to close loopholes, but none of the details that he has offered add up to much. His boldest proposal—eliminating deductions for interest paid on mortgages on second homes—is trivial in terms of generating revenue.

Advertisement

Obama is only slightly better. While he talks less about “tax reform,” he is currently communicating the message that merely raising taxes on rich people—the infamous 1 percent —will bring the budget and national debt under control. That, too, is a pipedream.

Americans need a more transparent approach to assessing candidates’ budget proposals.

What the U.S. and many other countries need is an independent, competent, and experienced body that leans neither right nor left. Fortunately, the U.S. has the Congressional Budget Office, which scores legislation in terms of its budgetary impact, assesses official budget proposals, and formulates its own economic projections. (I serve on the CBO’s Panel of Economic Advisers, which comments on the draft forecast twice a year but does not assess budget proposals or anything else.)

Because the CBO reports to the relevant congressional committees—those dealing with tax and budgets—both Republicans and Democrats watch its every move. But the CBO, created in the 1970ds precisely to bring greater transparency and accountability to the rather byzantine congressional budget process, really is independent and run by professionals.

The CBO does not, however, score proposals by political candidates, and that is part of the problem. In the run-up to the pre-election debates between Obama and Romney, both sides should agree to submit detailed budget proposals in the correct format for CBO assessment. The relevant congressional committees also should agree to this exercise.

If one presidential candidate refuses to cooperate in this manner, that should confer an advantage on the candidate who is willing to disclose more fully the specifics of his plan. And, to make this pressure to disclose meaningful, part of one debate should focus on budget proposals, with the questions being structured around how the CBO has reacted to specifics. If either candidate does not want to bring the national debt under control, he should be pressed to explain why.

This is not a matter only for the world’s largest economies. Candidates to lead their countries should not be allowed to get away with speaking in generalities or engaging in vague rhetorical flourishes. Democracy can and should be better than that.

This article was originally published by Project Syndicate. For more from Project Syndicate, visit their new Web site, and follow them on Twitter or Facebook.

TODAY IN SLATE

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 20 2014 3:21 PM “The More You Know (About Black People)” Uses Very Funny PSAs to Condemn Black Stereotypes
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 21 2014 8:00 AM An Astronaut’s Guided Video Tour of Earth
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.