How America's Vision of Progressive Tax Reform Died

["Dave Farber" <farber () gmail com>]

Begin forwarded message:

> From: Dewayne Hendricks <dewayne () warpspeed com>
> Date: September 28, 2017 at 5:59:47 PM EDT
> To: Multiple recipients of Dewayne-Net <dewayne-net () warpspeed com>
> Subject: [Dewayne-Net] How America's Vision of Progressive Tax Reform Died
> Reply-To: dewayne-net () warpspeed com
>
> How America's Vision of Progressive Tax Reform Died 
> Only by reclaiming an earlier ideal will Congress be able to counteract the influence of corporations and the 
> affluent.
> By JULIAN E. ZELIZER
> Sep 28 2017
> <https://www.theatlantic.com/politics/archive/2017/09/how-a-vision-of-progressive-tax-reform-died/541380/>
>
> After his losing effort to repeal and replace the Affordable Care Act, President Trump is now moving on to “tax 
> reform.” On Wednesday, he unveiled the outlines of his fiscal package, which will include slashing the corporate 
> income tax rate from 35 to 20 percent, lower the top income tax rate from 39.6 to 35 percent, doubling the standard 
> deduction for individual taxpayer, and increasing the lowest rate from 10 to 12 percent. The plan will include some 
> loophole-closing reforms, though the details of the package are not yet clear. Trump was blunt about his rhetorical 
> strategy at a meeting with evangelical leaders, when he reportedly said that talking about “tax reform” was a smarter 
> strategy for communicating about the initiative than talking about “tax cuts.”
>
> Trump’s definition of tax reform reveals how much has changed in recent decades. Tax reform once meant raising tax 
> rates on wealthier Americans and closing loopholes that benefited powerful economic interests, all with the goal of 
> redistributing income from the top to the middle and bottom income brackets. Until the 1980s, a progressive tax 
> system was seen as the best mechanism for diminishing the gap that existed between the wealthiest and poorest 
> Americans, while funding a social safety net to shore up the middle class and fund the military.
>
> Today, even most of the president’s opponents on Capitol Hill will probably not push back against Trump’s proposal by 
> calling for the kind of robust tax-reform agenda that had once been sine qua non for American liberalism.
>
> Before 1913, the United States didn’t even have a progressive income tax at the federal level. In times of peace, the 
> government derived most of its income from mechanisms that fell hardest on working Americans, like consumption taxes 
> and tariffs.
>
> During the early 1900s, populist and progressive reformers embraced the idea of a progressive income tax as one of 
> the most important reforms that would create a just society. In 1913, the government finally established a federal 
> income tax with the ratification of the 16th Amendment. The tax only impacted about 1 percent of the nation, but it 
> was still a major victory for progressive forces. The estate tax, established in 1916, was also meant to recast the 
> tax burden toward the well-off.
>
> During World War II, President Roosevelt and the Democrats vastly expanded the tax by increasing the number of people 
> subject to the system and instituting the policy of withholding to make collection speedier and more efficient. There 
> were other moves in the 20th century to make federal taxes more progressive. During World War I, Congress enacted an 
> excess-profits tax that put into place a graduated tax on profits made by businesses above the “normal” rate of 
> return. During the Great Depression, Roosevelt responded to Senator Huey Long’s “Share Our Wealth” campaign—which 
> criticized him for still relying too heavily on regressive consumption taxes—by calling on Congress to tax wealth at 
> higher rates to curb “entrenched greed.” During his address introducing the plan, Roosevelt proclaimed that “great 
> accumulations of wealth cannot be justified on the basis of personal and family security” in a speech that left one 
> corporate lawyer “frothing at the mouth.” Congress passed a “wealth tax” through the Revenue Act of 1935 that 
> affected the highest incomes and estates. In 1936, Congress passed an undistributed corporate-profits tax.
>
> Under Roosevelt, the Justice Department also cracked down on tax evasion, including a high-profile (though 
> unsuccessful) effort to prosecute former Treasury Secretary Andrew Mellon for failing to pay $3 million in taxes. “I 
> consider that Mr. Mellon is not on trial but Democracy and the privileged rich and I want to see who will win,” said 
> Secretary of Treasury Henry Morgenthau, who was behind the effort. The tax historian Elliot Brownlee showed that New 
> Deal tax measures raised the effective rate on the top 1 percent of Americans to 15.7 percent in 1937 from 6.8 
> percent in 1932. To finance World War II, Roosevelt initially pushed for a pretty radical tax agenda that would fall 
> hardest on the wealthiest. But by then, the backlash from the business community had set in, and much of FDR’s 
> boldest initiatives fell to defeat. He settled for another excess profits tax that didn’t accomplish his initial 
> ambitions.
>
> But progressive tax reform enjoyed a second life in the 1960s when Democrats focused their energy on the fight to 
> close the loopholes that allowed wealthier Americans and business interests to escape their obligations. 
> Loophole-closing reform became a regular demand in Democratic platforms. One of the gurus behind progressive tax 
> reform in the 1960s was a man named Stanley Surrey, an unassuming Harvard-educated lawyer who worked high up in the 
> Department of Treasury under Presidents Kennedy and Johnson. Surrey popularized the idea of “tax expenditures” to 
> show just how significant the impact was of these provisions that were normally hidden from public view. According to 
> Surrey, the federal government was actually spending money through the tax code by offering assistance to industries 
> and encouraging private capital investment.
>
> [snip]
>
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