Sisyphus in the Senate

As Michael J. Graetz of the Yale Law School has written, the political class "uses the income tax the way my mother employed chicken soup: as a magic elixir to solve all the nation's economic and social difficulties." Americans, gripped by cognitive dissonance, want tax simplification—and all the current complexities that benefit them.

Under Wyden's plan, all Americans—and all corporations—would use a one-page form. There would be three rates (15, 25 and 35 percent) instead of today's six (10, 15, 25, 28, 33 and 35) for individuals, and a single rate for corporations. The alternative minimum tax, which this year will ensnare 23 million taxpayers, would be abolished. The standard deductions (currently $5,000 for single filers, $10,000 for married couples) would be tripled. No fool he, Wyden flinches from severe flatness that would end the most popular deductions, for mortgage interest and charitable contributions.

The time is ripe for reform, for two reasons. The 2001 tax cuts will expire in 2011, so Congress cannot avoid re-examining the existing tax code, which nobody, given a blank slate, would re-create. And Democrats, who control Congress, are suffering stinging disapproval for underachieving.

Liberalism's favorite four-letter F word—"fair"—always bedevils tax reform. Liberals want to redistribute wealth, the creation of which they impede. Although Wyden is basically a business-friendly liberal, he has a concept of fairness that arguably tilts toward egalitarian outcomes more than is conducive to economic growth and hence to happiness and equity. But if conservatives and liberals could agree on flatter, simpler taxing, various distributive outcomes could be negotiated.

Conservatives like tax cuts as means for restraining—or so they think—government spending ("starving the beast"). Liberals like tax benefits as ways to spend without seeming to. Therefore tax simplification serves a third objective, one that Wyden is perhaps too polite to stress—reform of Washington's political culture.

Simplification would confiscate the intellectual capital of K Street, the habitat of Washington lobbyists, who toil to put complexities into the tax code for the benefit of clients. At the end of World War II the income tax was considered the nation's fairest tax, but now is considered the least fair. K Street helped cause that change.