Citizens for Tax Justice

Sarah Anderson: The best presidents for tax fairness

With all the debate over Donald Trump’s tax-dodging, I’ve been wondering how taxes have played into presidential politics in the past.

For some answers, I turned to Bob McIntyre, head of the nonpartisan research and advocacy group Citizens for Tax Justice. For 40 years, McIntyre has been on the frontlines of efforts to make our tax code fairer.

When asked what American president he considers the worst on tax fairness, his initial response was “Yipes, there are so many.”

After some consideration, he bestowed that honor on Ronald Reagan, whose 1981 tax act slashed taxes on the rich.

The top marginal tax rate dropped from 70 percent to 50 percent (before being cut even further to 28 percent in 1986). And, even more harmful, according to McIntyre, was the bill’s vast expansion of corporate tax loopholes.

Ironically, though, when I asked what president has done the most to advance tax fairness, Reagan’s name came up again — not as number 1, but as the runner-up.

While Reagan is a big hero of anti-tax Tea Partiers, later in his presidency, he agreed to raise taxes several times to address mounting budget deficits.

McIntyre was particularly involved in the fight over Reagan’s 1986 reform, after cranking out reports for a decade that documented rampant tax-dodging among America’s largest corporations and wealthiest individuals.

The loophole-closing 1986 reform was still not enough to solve the problem of insufficient revenue to pay for federal spending. But by creating a broader tax base, Reagan set the stage for President Bill Clinton’s increases in the tax rates on the highest earners.

The top marginal rate rose to 39.6 percent in 1993, where it stands today.

The combination of the 1986 and 1993 reforms was essential to the balanced federal budgets that occurred in the late 1990s, according to McIntyre.

But of course, then President George W. Bush blasted a cruise missile-sized hole through all that fiscal responsibility with a new round of tax cuts and a spike in war spending.

So who was the best president for the cause of tax fairness?

Again, the answer was surprising: Teddy Roosevelt, but not because he was a strong advocate of progressive taxes (which indeed he was). Instead, McIntyre says TR deserves the honor because of the unintended consequences of his pettiness.

To understand his argument requires a bit of a history refresher.

In 1912, Roosevelt, who’d held the nation’s highest office from 1901 to 1909, decided to throw his hat back in the ring because he was dissatisfied with the presidential performance of his former protégé, William Taft.

When TR failed to beat Taft for the nomination, he founded his own party — the progressive, so-called “Bull Moose” Party — and while he didn’t win the election, he succeeded in splitting up the Republican Party.

This, McIntyre points out, led to Democratic takeovers of previously Republican state legislatures, which was critical to delivering the three-quarters of states necessary to ratify the 16th Amendment.

“Without Teddy’s petulance,” McIntyre told me, “the amendment authorizing a federal income tax would almost certainly have failed to be adopted.”

So how does one stay motivated to keep fighting for fair taxation for 40 years? “Perhaps I have Sisyphus as my hero,” McIntyre said.

Trying to stop big corporations and billionaires from rigging the system does indeed seem like pushing a rock up a hill over and over. But until we elect public servants willing to stand up to these powerful forces, we have no choice but to keep pushing.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and is a co-editor of Inequality.org. Distributed by OtherWords.org.

Bob Lord: A tax cut for tax cheats

If the most frequently dialed federal agency in America can’t even answer two-thirds of the millions of phone calls it gets, should the government cut its budget?

Congress thinks so. That agency is the Internal Revenue Service (IRS). And lawmakers have hacked at its budget yet again.

Worse still, those cuts will cost more money than they’ll save. They’re basically “a tax cut to tax cheats,” said IRS Commissioner John Koskinen.

Regardless of your feelings about the IRS, Koskinen is right.

The government has slashed the enforcement portion of the IRS budget by nearly 20 percent over the last five years. That’s forcing the IRS to shrink the number of employees working on enforcement by 15 percent.

Talk about being penny-wise and pound-foolish. For every dollar the IRS spent in 2013, it collected $255, according to National Taxpayer Advocate Nina Olson.

Imagine that someone told a CEO that a given department was bringing in hundreds of dollars to his company for every dollar it spent. “It is difficult to see how the CEO would keep his job if he chose not to provide the department with the funding it needed,” Olson said.

Yet, she noted, “that is essentially what has been happening with respect to IRS funding.” Congress has slashed the IRS budget four times in five years. And those cuts are feeding the budget deficit that conservatives supposedly fret about.

It’s all about political expedience. Remember when the IRS faced accusations of singling out conservative nonprofits for tax scrutiny? Along with other experts, I predicted that it would spur further IRS budget cuts. Now Republican lawmakers are taking their revenge.

It’s a vicious cycle. Critics attack the IRS for making mistakes, darkening the public’s view of it. That gives political opportunists a chance to lobby successfully for cuts. A smaller budget virtually guarantees future mistakes by a cash-strapped agency.

Taxpayer services are underfunded too. The IRS now is unlikely to answer even half the phone calls it gets from taxpayers, Olson says. The average wait time is 30 minutes.

So another vicious cycle plays out as taxpayers who try to do the right thing get frustrated. Evasion rates rise. Pressure on the IRS enforcement team mounts.

On top of all that, taxpayers and collectors alike are coping with a tax code that’s more complex than ever. The IRS is responsible for implementing about 40 new provisions of the Affordable Care Act alone, for example.

And it could get more absurd.

The Republican Party is fundraising on the promise of abolishing the IRS altogether, as Citizens for Tax Justice reports. What happens when a country can’t collect taxes?

“Italy and Greece have been stuck in vicious cycles in which tax evasion runs rampant,”Washington Post columnist Catherine Rampell recently wrote. So politicians “raise tax rates to extract more money from the few law-abiding saps still out there, encouraging people to hide economic activity from even higher tax rates, and so on.”

That kind of dysfunction hurts honest taxpayers and bankrupts governments.

Let’s change course before it’s too late.

Bob Lord, a veteran tax lawyer, practices and blogs in Phoenix.  He is an Institute for Policy Studies associate fellow. This was distributed via otherwords.org.