Bruce Bartlett is every liberal's favorite conservative. In 2006 he published Impostor, a scathing indictment of President George W. Bush that earned him immediate exile from the ranks of the Republican faithful. Liberals responded with the kind of warm embrace reserved for apostates from the other side.
Since his expulsion from the right, Bartlett has been a prominent GOP critic, especially when it comes to economic policy. He writes regularly for Tax Notes, the New York Times Economix blog, and The Fiscal Times. Generally speaking, his opinions are strong but measured. He's a fiend for data and dispassionate analysis, but he's not one to pull punches or tolerate fools.
Bartlett has published a new book, The Benefit and the Burden: Tax Reform -- Why We Need It and What It Will Take. It's not a book for tax professionals, who will find much of it elementary. Rather, Bartlett is aiming for the average voter (or at least the average politically engaged voter, a much smaller audience). In a political system beset by ignorance and misinformation, delivering basic information to interested citizens is a worthy goal. And Bartlett does it very well.
Consistent with its educational mission, the book is subdued. Anyone familiar with Bartlett's blogging may find him unusually restrained in this volume. At many points, the book seems like an exercise in understatement.
But it's not dull. In fact, it's filled with nuggets of analysis that anyone (even a jaded tax professional) will find valuable. Here's a quick selection.
- After many years of observing the hearing process and having been staff director for a congressional committee, I still have no idea whether congressional testimony has any real impact on legislation.
Admirable candor here and clearly true. Real experts seem to matter, Bartlett says. But most of the witnesses at your garden-variety tax hearing are there as a courtesy, with politicians trying to make valued supplicants feel like they've been heard.
"Indeed, lobbyists often arrange testimony in order to give their clients a belief that they have done something meaningful to advance their interests," Bartlett writes. That's hardly news to Washington insiders, but it still says something important about the legislative process. Once upon a time, tax hearings were more meaningful, Bartlett writes. But over the past 15 years or so, they've become increasingly peripheral to the legislative process.
- If the Obama administration wants to have real tax reform, it will need to . . . put Treasury back in charge of tax policy.
Treasury was once the 800-pound gorilla of the tax policy process. The department shaped every major tax reform law of the last 50 years, but in recent years, its influence has been eclipsed by other players in the legislative arena, including lobbyists, according to Bartlett. He suggests that's partly because tax reform has been eclipsed by tax reduction. Politicians in both parties haven't needed Treasury's expertise because they've been handing out goodies to almost everyone.
Real tax reform involves both winners and losers, Bartlett writes. If Congress ever returns to the hard work of actually making good tax policy, then it will need Treasury to help with the hard choices.
On the 16th Amendment
- Contrary to popular belief, Congress was not prohibited from taxing incomes prior to the Sixteenth Amendment.
Bartlett spends more than a few pages exploring the history of federal taxation, and some of the most interesting are devoted to the income tax amendment ratified in 1913. "It would be hard to find a competent legal expert who thinks the Supreme Court would find the income tax unconstitutional today even if the Sixteenth Amendment was repealed," he writes.
I don't know if that's true in today's legal academy, but it's certainly accurate to say that many legal experts of the 1910s believed an amendment was unnecessary. Ardent champions of imposing a new federal income tax argued repeatedly that no amendment was needed. Indeed, they considered the call for an amendment to be a dangerous delaying tactic devised by income tax opponents to derail the popular drive for tax reform. And they were right.
On a Flat Tax
- Many people call any tax system with a single statutory tax rate a flat tax. While there may be some benefits to such a tax system, the benefits tend to be overrated.
This is an obvious point for tax professionals but one that never seems to penetrate the popular debate over tax reform. Even some Democrats have embraced the notion that a reduction in the number of brackets would somehow make the tax system simpler. (Remember Oregon Sen. Ron Wyden's Fair Flat Tax Act of 2007? A generally good proposal marred by its flat tax window dressing.)
As Bartlett points out, the most vital elements of tax reform necessarily involve the tax base. Abolishing progressive rates without changing the base would simply deliver a windfall to the rich and a huge tax increase to the poor.
On the FairTax
- If the FairTax is a good idea, the VAT is a far better idea.
That sentence must have been hard for Bartlett to write. I never thought I would see the day when he applied the words "good idea" to the FairTax, even conditionally. In recent years, Bartlett has been one of the most outspoken critics of a federal retail sales tax, insisting that it is deeply impractical. "The administrative problems inherent in this proposal make it impossible to take seriously," he wrote in 2007 (Tax Notes, Dec. 24, 2007, p. 1241, Doc 2007-26563, or 2007 TNT 248-33).
That sort of language has earned Bartlett an extra dose of opprobrium from the right, where FairTax fans run rampant. But as Bartlett has made clear for years, the FairTax is little more than a fantasy -- and a threat to more practical plans for consumption taxes, including a VAT.
On the subject of tax reform more generally, Bartlett notes the poor performance of liberals in most policy debates. Democrats have been reluctant to defend what they ostensibly value: a traditional income tax with a traditional tax base in the Haig-Simons mold. Instead, the party has increasingly adopted Republican assumptions and rhetoric.
"In practice conservatives have completely dominated the tax reform debate since the 1980s," Bartlett declares categorically. That may be an overstatement, but not by much.
On a VAT
- I myself long opposed the VAT on "money machine" grounds, but I changed my mind in 2004, when I realized that there was no longer any hope of controlling entitlement spending before the baby-boom deluge hit.
Bartlett has become one of the most prominent VAT champions in the public sphere. In his view, the tax would raise much-needed revenue in the most efficient way. Moreover, it would address the 47 percent problem: the large number of Americans not paying income taxes.
Whether or not you think non-payers are a problem (and I do, chiefly because I believe they pose a threat to the long-term political viability of the income tax), there's no easy way to fix it without adding a new federal tax of some sort. "It's unrealistic to think that income taxes will be imposed on such people once they have become exempt," Bartlett writes.
Bartlett is certainly right on that score. Who, exactly, is going to lead the charge for taxing the untaxed 47 percent? Democrats, who view them as a target constituency? Or Republicans, who oppose tax increases in pretty much every instance?
On Tax Increases
- Many conservatives would have us believe that there is nothing worse than higher taxes. This is nonsense.
Now this sounds like Bartlett. He maintains that the world is filled with bigger problems than high taxes, including inflation, soaring interest rates, debt default, financial repression (by which he means interest rate caps, capital controls, and the like), and slow economic growth. Higher taxes are necessary to stabilize the nation's finances, Bartlett insists, and tax reform should be designed to make those inevitable tax increases less burdensome.
On Grover Norquist
- The success or failure of tax reform lies in the hands of Grover Norquist.
Scary thought. And self-evidently true, absent a major electoral shift. Norquist is not a Tea Partier, but he and the Tea Party share a lot of common ground, especially when it comes to the inherent value of ideological polarization (and purity).
Bartlett thinks that divided government is the best recipe for meaningful tax reform -- but not the division we have today. Rather, he believes that tax reform will most likely be the shared achievement of a GOP president and a Democratic Congress.
At the moment, that particular arrangement doesn't seem very likely, especially given the probability of GOP gains in the Senate. But there may be another recipe for tax reform. If Norquistian polarization proves to be an electoral albatross, then maybe Republicans will free themselves from Grover's grasp. Signs of restiveness have been evident in the past year or so (although hardly enough to warrant real optimism).
But there's always room for hope. And Bartlett manages to muster at least a little in his conclusion: "Hopefully citizen action will hasten the day when substance triumphs over sound bites, when concern for the national interest takes precedence over partisanship, compromise stops being a dirty word, and standing for principle is no longer an all-purpose excuse for refusing to bargain in good faith."