Diary

Obama's Policy Proposals Are the Opposite of "Tax Reform"

Obama has consistently talked about how he is for “tax reform” all during his presidency. But clearly, he has no idea what that even means. True tax reform is a mechanism that produces a cleaner and clearer tax code. A great example of this was the 1986 IRC reform, where Reagan set the highest rate at 28% in exchange for eliminating massive amounts of tax shelters and gimmicks.

Obama’s cluelessness on the topic was evident during the State of the Union, where, instead of the simplification that Obama likes to espouse, we got a myriad of proposals that will further clutter the tax code. You can’t say you are for tax reform and then present a speech filled with the very items that true tax reform would remove, such expanded child care tax credits and new community college initiatives.

It is these very type of policies that have made the code so byzantine. Essentially the government uses the tax code to pick winners and losers favoring some but not others such as married vs non-married, children vs non-children, education vs non-education. This is the essence of crony capitalism, where politicians trade favors and barters to support certain initiatives or restrict others via new taxes or credits. They’re basically all gimmicks to aid in reelection or pander to a portion of the electorate — and then we never get rid of all the tacked-on programs and policies because no one wants to give up their special initiatives. The code is immensely complex because of it.

The tax code should never be used in this manner. It’s either a proper tax or not — but you don’t put an item into the tax code and then restrict it to certain people and not others. If someone is making more money, they are subjected to higher tax margins. Fine. But you don’t then add on more crony restrictions or surtaxes to try to squeeze out extra revenue. If a policy is good for the middle guy, it ought to also be good for the wealthier guy — who is already getting dinged accordingly (“paying his fair share”) by paying higher tax rates then those with lesser income.

Obama’s version of “tax reform” is unrealistic and firmly rooted in his vision of “middle class economics” we heard about during the State of the Union. This means using the tax code to promote “fairness” by targeting the wealthy to pay for new spending programs and credits for others. That is not tax reform — that is wealth redistribution.