October 31, 2005,
Ladies and Gentlemen, a Tax Reform
Consider this ten-point plan.
EDITOR'S NOTE: This piece appears in the November 7, 2005, issue of National Review.
The president’s tax commission got some bad news on October 15. The Washington Post editorialized in its favor: “[T]he reform panel is heading toward politically explosive but sensible suggestions.” Every time in the last decade that the Post’s editorial page has commended Republicans for advancing wise but politically risky policies, it has turned out badly for Republicans. The Post praised Newt Gingrich for trying to rein in Medicare costs in 1995. It praised President Bush in 2005 for being willing to reduce future Social Security benefits. Each proposal cost Republicans dearly.
The current case looks to be no different. The tax code allows people to deduct interest on mortgages worth up to $1 million. The commission reportedly favors gradually limiting the deduction to mortgages of up to $350,000. That’s probably sensible policy. The federal government shouldn’t be propping up the value of McMansions. But the affected voters, many of whom are Republicans, would probably not agree. Perhaps none of that would matter if President Bush still had an 80 percent job-approval rating. But he’s running at less than half of that.
The commission’s plan is supposed to simplify the tax system, encourage economic growth, and raise roughly the same amount of money as the current tax code. Proposals that meet these parameters generally don’t have much chance of enactment. Yet it may just be possible to devise a politically viable plan that advances conservative policy objectives. Paradoxically, it becomes easier to think up such a plan if another objective is added to the mix: Tax reform should be pro-family, too.
Republicans tend to describe any tax relief as “pro-family,” but the term should be understood in a specific sense. That the tax code penalizes investment is something that the commissioners understand. But they do not seem to understand that the tax code punishes investment in children. In previous generations, the tax code made more allowance for the costs of raising children. But decades of inflation have eroded those provisions. Federal policies let childless people free-ride on the financial sacrifices of parents, who raise the children who will one day pay for everybody’s Medicare and Social Security. A pro-family tax cut would address that problem, too . . .
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