Bruce Bartlett's The Benefit and the Burden starts off as an examination of America's tax code. Once the book concludes, it has gone from explaining how the IRS got started to laying out a plan so that American can avoid an oncoming fiscal calamity. It is to Bartlett's credit as a writer that he makes this topic accessible, while showing great aplomb in dismantling many of the myths and misconceptions that exist about taxes.
The picture of the American fiscal state that Bartlett paints is not a pretty one. To start with, it is a state where the very definition of "income" is up for debate. It is a state where Americans overestimate how much they pay in taxes, and underestimate the amount of welfare they are paying for. (Bartlett notes that if you count tax expenditures as part of the size of government, then America spends more on social services then famously egalitarian Denmark.) To add insult to injury, America's social spending is going towards expensive healthcare and subsidizing the lives of old people instead of investing in human capital. Worst of all, this very sub-optimal social spending is mandatory and going to cause an unavoidable fiscal crunch in a couple of decades.
In light of these challenges, the costs and benefits of reforming how charitable contributions get deducted seems quaint, but it gets full and proper treatment in the book as well. The book is just that comprehensive.
Bartlett writes about the many problems with the current American tax code with an eye towards his ideal system: a tax code that is not held hostage to the whims of the business cycle, that can raise enough revenue for the government, and which is not riddled with market-distorting exemptions. This leads Bartlett to endorse a Value-Added-Tax both for its inherent benefits and because he believes it can raise enough revenue to prevent the oncoming entitlement crisis. Bartlett gives the VAT a fair examination, acknowledging its problems as well.
Despite presenting this rational option for tax reform, the book also makes clear that the hurdles that need to be overcome to achieve it are massive. A discussion of why the R&D Tax Credit has not been made permanent is a good example of the sort of dysfunction at work:
I have long suspected that Congress' on-and-off treatment of the R&D credit results from a sort of conspiracy. When it gets renewed, corporate lobbyists can take credit for adding to their client's bottom line. It also justifies political contributions to members of Congress to get the R&D credit renewed. Thus it is a sort of win-win for everyone, except that it [the credit] doesn't work the way it is supposed to.
While elites and lobbyists are Bartlett's main targets, the average American's own lack of tax knowledge is given some attention as well. The most hilarious example comes from Americans who think that they are not legally required to pay taxes:
On various radio shows where I have been a guest I have often encountered callers making frivolous tax arguments. Most do not sound as if they hold the sort of job that would put them much above the lowest tax bracket, but they insist that the income tax is confiscatory and ought to be abolished. I like to ask them whether they have an Individual Retirement Account, or 401(k) account and, is so, whether they have contributed the maximum amount. I also ask whether they have checked to see whether they qualify for the Earned Income Tax Credit and whether they have their savings invested in tax-free municipal bonds. In most cases the callers have no idea what I am talking about. They know the legislative history of the Sixteenth Amendment by heart, but have never made any effort to lean about the many tax-avoidance opportunities available to all taxpayers. Utilizing them would more than likely have eliminated the bulk of their tax liability.
Yet the most important criticism is reserved for Grover Norquist. The final chapter of the book is glumly titled "If Tax Reform Happens, It Will Be Because Grover Norquist Permits It." Norquist's influence and his veto on any tax increases permeates the entire conservative movement. It has gotten to the point that Norquisitsm is often hiding in plain sight, even when you think it isn't there.
To give an example, as I am writing this review, the editors of National Review have a lede editorial calling for Romney to embrace "pro-family tax reform" by expanding the tax credit offered for families with children. This is a good example of the sort of tax reform currently favored by conservatives: more exemptions to create market-distorting policies with no discussion at all about how to account for the loss in revenue.
A rational discussion about tax policy is not merely preferable, it is necessary to avoid a fiscal disaster. Bartlett himself notes that he only came around to endorsing a VAT when he realized that it was the only way to pay for America's old-people welfare state. It is a problem that requires politicians with political courage and political movements that can embrace reality. Unfortunately, the conservative movement in particular has a problem with embracing a tax policy that is more pro-reality.
Bartlett notes a particularly striking example of this with Norquist explaining how Republicans should take credit for the economic boom of the mid-1990's:
On March 9, 2011, The Washington Post's Ezra Klein questioned Norquist about the Clinton-era experience. His explanation was that the Republican Congress, which was elated in 1994, deserved all the credit because investors somehow or other knew that Republicans would lower the capital gains tax, as in fact they did in 1997, and this foreknowledge caused the stock market to rise as soon as they took control in 1995.
Klein questioned him further: "You're arguing that the boom in the mid-1990's wasn't because of the Internet or because we were snapping back from a recession, but because the election of a Republican congress had a major confidence effect." Norquist replied, "Yes."
It was helpful to read Bartlett's book after having finished The Gardens of Democracy by Eric Liu and Nick Hanauer. Bartlett uses a garden metaphor as well, describing a tax code that has not been tended since the last major round of tax reform since 1986 and is now over-run with weeds. The failure of America's elites to craft a fiscal regime worthy of the nation is distressing, and it will take more then just proposing an new tax regime to achieve real changes in policy.
A final note to make on the role elites have in restoring America's fiscal sanity. Bartlett notes that very few Americans seem to view taxes as a necessary burden to take on for the sake of preserving civilization:
The attitude that everyone is entitled to save as much in taxes as he or she can get away with has become so ingrained that no one seems to care any more that some people pay far less in taxes than others in similar circumstances. It's as if the concept of taxation as theft-rather than as a shared burden that all should contribute towards as the cost of maintaining a civil society-is now so widely shared that many people applaud those who have figured out how to game the system and pay less than their fair share rather than condemn them as social parasites who claim society's benefits without paying for them.
To be sure, Mitt Romney's unpopularity might refute this theory, but even so, Bartlett is talking about something important here. His book is titled The Benefit and the Burden yet it is primarily focused on the "Burden" aspect, with little to say about the "Benefit" beyond references to roads and courts. America's future health may depend on elites and the average citizen accepting that taxes as a price that we pay for civilization, and that may require debunking a lot of old but popular dogmas that still dominate our political discourse.