Refinancing America: The Republican Antitax Agenda

4. The Tax Deadlock Decade

71 4 The Tax Deadlock Decade The federal income tax code is un-American in spirit and wrong in principle. —Senator Peter V. Domenici of New Mexico (1994) [The tax code] is a monstrosity and there’s only one thing to do with it. Scrap it, kill it, drive a stake through its heart, bury it and hope it never rises again to terrorize the American people. —Presidential Candidate Steve Forbes (1995) Tax legislation dominated the American political agenda in the 1980s. No less than six major revenue bills were enacted during the decade. In an amazing display of sustained legislative power and political compromise between supplyside Republicans and liberal Democrats, Congress virtually rewrote the tax code in 1986. On account of the great volume of tax legislation during the decade, economist Eugene Steuerle dubbed the 1980s the “Tax Decade.”1 Unfortunately, the 1990s proved to be no less exhausting for congressional tax policymakers—to say nothing of taxpayers. In many respects, tax policy was an even sorrier affair in the 1990s. At least in the 1980s, tax policymakers (Democrats and Republicans alike) could claim the historic Tax Reform Act of 1986 as their great success, even if the rest of the decade was marred by erratic and unstable policy. In the 1990s, tax policy was just erratic and unstable, without any comparable achievement to brag about. Republicans and Democrats in Congress engaged in a highly contentious and partisan politics that was often targeted at the tax code. In general, the legislative and executive branches were controlled by different parties, and consequentially, continually at odds over tax policy throughout the decade. However, while taxation was permanently on the policy agenda in the 1990s, little was actually accomplished or resolved. Indeed, the 1990s shall be less than fondly remembered as the Tax Deadlock Decade. The 1990s began with the Democratic congressional leadership locking horns over the budget with a Republican president in the White House. By the end of the decade, the tables were turned, with Republicans in control of Con- The Tax Deadlock Decade 72 gress and a Democrat in the White House. Most everything else remained the same. The Clinton White House and the Republican Congress were constantly deadlocked over the budget. The budget cycle has pretty much become an allyear process that commands inordinate time of Congress and has subsumed a good deal of the politics that used to take place within the realm of the appropriations committees. As the late Aaron Wildavsky wryly observed a decade ago: “Nowadays the State of the Union and the state of the budget have become essentially equivalent.”2 What Wildavsky failed to mention is that this neither bodes well for the budget nor the Republic. Because the budget process has emerged as the focal point of our national politics, tax policy is even more important today than ever before. The budget is now the instrument through which the majority party governs, and the tax code is one of the few tools available to federal policymakers for exercising control over the budget process, as well as implementing economic and social policy. This is as much by default as anything else, as reducing expenditures, or even holding them to current levels, is nearly impossible for elected politicians. The income tax is thus the primary instrument of fiscal policy for those politicians who would manage the national economy—which these days includes virtually all Democrats and a good number of Republicans as well. To further compound the problem, Democrats would use the tax laws to achieve their distinctly egalitarian vision of social justice (i.e., “soaking the rich” and rewarding labor and the education establishment), while Republicans have their own singular uses for the tax code—stimulating investment, encouraging the accumulation of capital, and generally reducing taxes for their wealthy constituents. Reflecting the deep-rooted ideological differences between the parties, tax policy has become a highly partisan affair. It also has become mired in the same politics of deadlock that has swamped the budgetary process. The result is not pretty. House Rules Committee Chairman David Dreier (R-Calif.) recently described the current budget process as “a disorganized patchwork of decadesold rules and laws” that simply do not work.3 The congressman should look at the tax code. Political conflict over tax policy, like that over the budget, expresses the same fundamental cleavages that define and divide the two major national political parties. If partisanship has weakened within the electorate at large...