Tax code needs to raise more money: Another view

Steve Wamhoff | USATODAY

Sens. Max Baucus and Orrin Hatch, the Democratic chairman and the ranking Republican on the tax-writing committee in the Senate, have asked their colleagues to take what they call a "blank slate" approach to tax reform.

By this, they mean senators should first assume Congress eliminates all tax expenditures (subsidies provided in the form of tax breaks), and then make the case for keeping any tax expenditures they want to preserve.

If a senator thought we should keep the deduction for mortgage interest, he'd better have a good argument to defend it. If another senator wanted a tax break for capital gains, she'd better have a good reason why.

My group, Citizens for Tax Justice, has long criticized tax expenditures that allow companies such as General Electric to avoid paying taxes and allow multimillionaires such as Mitt Romney to pay a lower tax rate than many middle-income people. We recognize how unfair and inefficient many tax expenditures are.

But Baucus and Hatch have not addressed a crucial problem — our desperate need for increased revenue to fund public investments. In a letter to their colleagues, Baucus and Hatch explain: "While members of the Senate have different views on whether the revenue raised from eliminating tax expenditure or other reforms should be used to lower tax rates, reduce the deficit, or some combination of the two, we believe that everyone should understand the trade-offs involved when adding tax expenditures back to the tax code."

This misses the critical point. The biggest problem with our tax code is that it doesn't raise enough money. A decade from now, our current tax laws are expected to collect revenue equal to only 19.1% of the economy. But even during the Reagan years, government spending averaged about 22% of the economy. And President Reagan didn't have to face the retirement of the Baby Boomers.

So, yes, we do need a simpler, fairer tax system, and forcing lawmakers to make the case for keeping whatever tax breaks they want to retain may be a good strategy. But remember the bottom line. The most important goal should be to make sure we're collecting enough revenue to pay for Medicare, roads, bridges, schools, research and all the other investments that we need to build our country.

Steve Wamhoff is legislative director of Citizens for Tax Justice, a group that advocates a more progressive tax code.