While the Republican base may be fed a steady diet of fake culture-war controversies, the one policy impulse that drives the GOP’s elected representatives more than any other is the idea that no injustice is more appalling to the conscience than rich people having to pay taxes.
Where the system allows the wealthy to escape contributing to their country, it must be maintained; where it forces them to pay, it must be altered.
So it’s no surprise that the “moderate” Republicans negotiating a bipartisan infrastructure bill agreed under conservative pressure to remove a Democratic proposal to pay for it in part by giving the Internal Revenue Service more resources to go after tax cheats. Republican opposition now threatens the entire bill.
In the end, the boost for the IRS looks likely to happen one way or another. If it isn’t used in the bipartisan bill (which Republicans will probably abandon, sending it to defeat), it will probably be included in the larger reconciliation bill Democrats will pass without Republican support.
But this raises an important question Democrats should consider as they make their policy plans for the next few years: What should real tax reform look like?
Republicans are often the ones using the phrase “tax reform.” But they use it to describe cutting taxes for the rich, as though their only goal is to make the system more efficient and fair.
But Democrats can seize the “tax reform” mantle if they choose. They can unite around a number of straightforward, easily understood ideas that are both good policy and good politics:
• Enforce the law, even against the rich. You have to give Republicans credit for their commitment to principle on this point: Even though standing up for the ability of rich people to avoid taxes is absolutely terrible politically, they still do it, because they believe in it so strongly.
They’ve executed a multiyear project to defund the tax police, leaving the IRS understaffed, overstretched and outgunned by wealthy people with high-priced accountants and tax lawyers. The result is a “tax gap” of hundreds of billions of dollars every year between what is owed to the government and what is actually paid. So a boost to IRS funding will increase fairness, improve the government’s bottom line and leave Republicans arguing that rich people should be allowed to cheat on their taxes.
• Relieve Americans of the burden of tax filing. Democrats should make this offer to the public: What if April 15 was just another day?
Most Americans don’t actually need to spend time and money filling out tax forms; they have one source of income where taxes are deducted from their paychecks, and they take the standard deduction. The government already knows what they earned and what they paid.
Which is why in dozens of countries, the government does your taxes for you: They send you a summary, and if it’s correct you do nothing, and if you need to change or add things, then there’s a form you file.
Why don’t we have such a system in the United States? One key reason is the lobbying power of Intuit, the corporation that owns TurboTax, and the other tax software companies. Democrats should relish a fight with them to create a return-free system that tens of millions of families would benefit from.
• Tax all income the same. This ought to be a core progressive goal: Rather than having a system where you pay taxes on your wage income at one rate, taxes on your investment income at a different rate, and taxes on inheritances at yet another rate, tax it all the same. It would be simpler and fairer, and once again it would leave Republicans arguing for tax advantages for the wealthy.
• Fairness, fairness, fairness. This should be the guiding light for every Democratic proposal: Does it make the system more fair? It’s the foundation of good policy and good politics on the issue, especially when levels of inequality in the United States are so appallingly high.
It means increasing rates on corporations. It means creating more tax brackets at the high end (there’s no reason someone earning $50 million a year should pay the same rate as someone earning $500,000). It means eliminating loopholes only the rich can take advantage of.
And in the end, it means raising more money. We have one of the lowest tax-to-GDP ratios in the developed world, but it doesn’t have to be that way. With more tax revenue we could do more to improve life for all Americans.
Looking back, it was inevitable that in the infrastructure negotiations, Senate Republicans would revolt against the idea of collecting more taxes from the wealthy, even if the wealthy in question are tax cheats. But that isn’t a failure. It’s an opportunity for Democrats to begin a new long-term campaign on taxes, one that will be good for them and good for the country.