Share this story
Close X
Switch to Desktop Site

Line by line

PRESIDENT Reagan's concern that an item-by-item revision of his historic tax-reform package should be avoided by Congress makes sense politically. But that is not to argue that avoiding such a searching examination would be in the best interests of the American people -- or the United States economy. Mr. Reagan deserves credit for doing what many a president has sought over the years but, for political and practical reasons, had been unable to accomplish: produce a bold and comprehensive tax-reform plan. It is a tribute to the hard work of the US Treasury and the Reagan White House that the reform package has already drawn plaudits or mixed praise from a broad range of elected officials and economists representing the entire spectrum of American politics.

That said, the Reagan tax plan, like all major legislative reform proposals, deserves to stand or fall on its merits. In the case of taxes, it is precisely the nitty-gritty detail -- that is, what the plan means line by line -- that is important, as much so as the cumulative impact of the package as a whole. Why is that? Because taxes owed by individuals and businesses are the cumulative result of details -- a salary or earned-interest payment here, a deduction or tax credit there. The bottom line on your tax form is the final computation of all those details.

About these ads

Lawmakers should not feel hesitant -- or somehow ``unpatriotic'' -- in requiring that the final vote on tax reform be a series of questions about detail.

The administration argues that such a line-by-line assessment would threaten chances for enactment of a tax plan, since, so the White House argues, the ``special interests'' would kill a reform measure. But if the plan has merit, surely the details ought to stand on their own. In other words, there is much to be said for taking a careful look at the hard details in the new tax-reform plan to ensure that the net economic impact on the nation is as favorable as the administration purports it to be.

A number of concerns should properly be addressed by Congress:

Deficit: The administration maintains that the tax-reform plan is ultimately revenue neutral -- that is, when fully working a number of years hence it will bring in as much revenue as would the existing tax system, although tax rates will have been lowered. But some analysts of the plan maintain that there will be a revenue loss for the short term -- perhaps as much as $12 billion during the next five years.

Such a shortfall would merely enlarge the current federal deficit. Is the Treasury estimate correct? Are the economic assumptions behind just that shortfall reasonable? Or would the shortfall be larger -- and thus, contribute to an even larger deficit?

High-tax vs. low-tax states: President Reagan argues that ending the current deduction of state and local taxes is fair, because the current deduction merely subsidizes, as he says, ``the high tax policies of a handful of states.'' But the fine print is not that tidy. Most of the ``high tax'' states are found in the heavily unionized industrial north, although some Sunbelt and Western states would be affected, particularly California. California State Treasurer Jesse Unruh is quoted as saying that wiping out the state and local tax deduction ``would be an absolute, total catastrophe for California.'' New York Gov. Mario Cuomo argues that ending the deduction would subject taxpayers to ``double taxation.''

In fairness, the so-called ``high tax'' states are high-tax states in large part because they are meeting the welfare burdens of thousands of individuals who have fled to their jurisdictions because their welfare needs were not being met by the federal government or their original (low-tax) states. In other words, it is these states (which a few decades back were referred to as the ``progressive'' states) that are bearing much of the welfare costs of the nation. If middle-class taxpayers in the so-called high-tax states are to give up their state and local tax deductions -- since it is primarily middle-class taxpayers who underwrite the expensive welfare costs -- would not the federal government seem to have an obligation to pick up the national costs for welfare, truly equalizing the welfare burden among all parts of the nation and among all Americans?

About these ads

Industries: Congress should take a particularly hard look at the impact of the Reagan reform plan on specific industries, particularly the older manufacturing industries (again, heavily based in the Northern industrial states), that would lose some of their tax breaks under the new plan -- while also being called upon to pay more in corporate taxes. To ignore the impact of the tax plan on these older industries -- many of them currently reeling under the impact of foreign competition and the high value of the dollar, which makes their exports noncompetitive -- could be economically shortsighted.

Tilt: Is there a North-Sunbelt division in the new tax plan? Compare, for example, the elimination of the current deduction for state and local taxes, said by experts to primarily benefit the Northern ``rust belt'' industrial states, with the lucrative advantages retained in the reform plan for oil and gas drilling, primarily benefiting Sunbelt states. Surely, a reform plan should be taxpayer neutral.

The current US tax code was put together over the years item by item, line by line. If a new plan is to replace that existing system, fairness argues that it too should be constructed item by item, line by line. That's the way houses are built -- a wall here, a brick there. To imply that a line-by-line review is somehow ``obstructionist'' -- or a sellout to the ``special interests'' -- ignores the fundamental fact that taxes inevitably involve details and fine print.

To ignore the fine print is to invite trouble on the bottom line when April 15 comes around each year.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.