Tax reform’s hard choices

Opinion: May 8, 2012 at 12:00a.m.

Los Angeles Times: Republicans and Democrats agree that the federal tax system is broken, but they couldn’t disagree more strongly about how to fix it. That’s true largely because each side clings to a different set of theories about how taxes affect the country, only some of which bear much relationship to reality. Hoping to dispel a few of the myths pervading the debate, a Washington think tank offered a report last week laying out a dozen facts about tax reform. The bottom line: Good fiscal policy comes at a steep political cost.

Because the report was released by the Hamilton Project, an economic policy initiative by the left-of-center Brookings Institution, conservatives may find it easy to dismiss the findings. Nevertheless, there’s ammunition here for policymakers on both sides of the partisan divide. For example, the report notes that eliminating tax breaks for oil companies, corporate jets and corporate takeover artists — three frequent targets for Democrats — would have a trivial impact on the federal deficit.

On the other hand, the report rejects the conservative Republican notion that tax cuts yield so much economic growth that they practically pay for themselves.

The most commonly touted tax reform these days is one that would lower rates while reducing the number of credits, deductions and exemptions. But many of these were designed to promote things society values, such as health insurance, homeownership and capital investment.

Unless policymakers are willing to curtail such popular breaks, they won’t be able to lower rates much without raiding the Treasury.