Cokie Roberts Answers Your Tax Questions

DAVID GREENE, HOST:

Many of us suffered through Tax Day yesterday and may be wondering if the tax reform that President Trump is promising is going to make the system any simpler. Now, for years, presidents have been arguing for a more straightforward tax code. I mean, here's Ronald Reagan calling for a massive overhaul back in 1985.

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RONALD REAGAN: Over the course of this century, our tax system has been modified dozens of times and in hundreds of ways. Yet most of those changes didn't improve the system. They made it more like Washington itself - complicated, unfair, cluttered with gobbledygook and loopholes designed for those with the power and influence to hire high-priced legal and tax advisers.

GREENE: Got to love gobbledygook. Well, here we are more than 30 years later, and not much has changed despite Reagan's success in convincing Congress to pass a tax bill in 1986. Filling out tax forms spurred a lot of questions for our weekly Ask Cokie segment. And the star of that segment, Cokie Roberts, is on the line. Hey, Cokie.

COKIE ROBERTS, BYLINE: Hi, David.

GREENE: So one person who has been listening to us and who wrote in on Twitter, someone identifies his or herself as V.A. Ellis. And it gets right to President Reagan's point. The question is, why did we make the tax system so complicated?

ROBERTS: Well, we didn't necessarily make it complicated. But it certainly has become complicated over time, though it is true that some deductions, or loopholes if you will, were there from the very beginning. All interest payments were deductible, including what was then the very rare home mortgage. And just a few years later, the charitable donation deduction was added.

So what that underlines, David, is the fact that the tax system is not just for collecting revenue. It is also for achieving certain social goals deemed desirable at any given time. And by the way, that was the fear of opponents of a federal income tax when Congress passed it in 1909. Massachusetts Congressman Samuel McCall argued that the chief purpose was, quote, "not financial but social, forcing citizens to be good according to the notions of virtue at the moment prevailing in Washington."

GREENE: The notions of virtue - yeah, it really does. You said that income tax was passed for the first time in 1909. Why was that year important, and how was the government getting revenue before that?

ROBERTS: Mainly through tariffs on goods coming in from overseas or selling off public lands. But any time there was a war, there was some sort of tax enacted to pay for the war - so a sales tax in 1812, a poll tax for the Mexican-American War, the Civil War - an income tax and the commissioner of internal revenue was created, but then that was repealed after the war. And a long-distance telephone surtax for the Spanish-American War, which, by the way, was not repealed until 2006.

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GREENE: That's amazing.

ROBERTS: It is. But Congress did try to do just a straight income tax at the end of the 19th century. The Supreme Court said it was unconstitutional because a provision in the Constitution said that direct taxes have to be apportioned by states. So it took the 16th Amendment to the Constitution to get an income tax. And if you can believe it, states actually ratified an income tax. I mean, can you imagine that today?

GREENE: No.

ROBERTS: By the way, if you felt oppressed yesterday, be grateful it's not the post-World War II period when the top rate was 94 percent.

GREENE: So the code gets more and more complicated over the years. And we had one listener, Lisa Steinke, and she asked - I think, a basic question - why can't we throw out the loopholes and just go to a flat tax?

ROBERTS: For a couple of reasons - first of all, a flat tax is regressive: the rich and poor pay the same amount. But more important in terms of Congress, every loophole, or as some would say, incentive, has a constituency. The real estate industry likes the home mortgage deduction. Universities, hospitals, museums, public radio stations, advocates against diseases - like charitable donation deductions. I mean, the tax code is just replete with things that have been deemed beneficial to society at any given time. And every one of them, of course, has vocal supporters.

GREENE: And when you have different constituencies, there is never a quick and easy answer. OK. Well, that is...

ROBERTS: That's right.

GREENE: That is Cokie Roberts. And just a reminder that you can ask Cokie about how government and politics work in Washington, D.C. Next week, send us your questions about a president's first 100 days. How do past presidents stack up in terms of achievements? Email us - askcokie@npr.org, or tweet us your question using the hashtag #AskCokie. Cokie, fun as always. Thanks.

ROBERTS: Nice to be with you, David.

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