Reformers At Loggerheads

By Global Tax Weekly

Surely I can’t write today without mentioning Dave Camp’s tax reform draft, which will presumably go the way of his colleague Max Baucus’s equivalent drafts. That two such intricately crafted prescriptions for a future US tax system will fall victim to bi-partisan politics may seem an indictment of democracy as she is practised nowadays, and indeed the Economist asks this week whether democracy is failing us. Of course it concludes, as did Winston Churchill, that democracy is a bad system – but that all the others are worse. Democracy suffers from its reliance on the level of education of voters, which is still far below what it would be in an ideal world. But ask this question: are the bulk of voters better or less informed today than they were a hundred years ago? The fact that they are now incomparably better informed accounts for the fact that they despise politics and politicians, which are cast in an 18th or 19th century mould. It’s not democracy that needs to change, it’s politics. The broken state of the Congress may be a reflection of the ossification of the American party system, or it may even be healthy: countries seldom suffer from a lack of legislation; usually it’s the opposite, that is they suffer from an excess of it. And as an example, notice that many of the problems that preoccupy today’s legislators, from Dodd-Frank to Obamacare, result from a period of one-party dominance. If the Republicans win the Senate this fall, only the President, for all his faults, will stand in the way of another wave of ill-considered legislation.

I’m not arguing for stasis in tax regulation: of course the corporate tax rate needs to come down; of course entitlements need to be trimmed; of course etc etc. The problem is that politicians have not succeeded in putting the issues clearly to voters, despite Messrs. Camp and Baucus’s best efforts. Until the parties (two of them or hopefully more than two) offer a sophisticated electorate a choice between clearly understood and presented alternatives, which is certainly not the case at present, it’s probably better that nothing changes.

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