What does a second-term president who no longer needs to pander and whose approval rating is soaring do when the Republican opposition, riding a wave of anti-IRS sentiment, proposes a radical IRS restructuring he thinks is wrong and therefore opposes?
If he is Bill Clinton, he caves.
After a month of opposition and with a finger to the wind, President Clinton abruptly changed course on Tuesday and joined the mob endorsing the Republican reform. True, Clinton wasn’t alone. House Minority Leader Richard Gephardt defected just moments before Clinton did. But Gephardt has an excuse. He wants to be president. Clinton already is. And can’t be again.
The administration would, of course, deny crass political motives. It points to changes it got from House Ways and Means Committee Chairman Bill Archer (R-Texas), such as having the IRS commissioner still be appointed by the president, rather than by a new 11-member IRS oversight board.
But for weeks the administration had opposed the very idea of a civilian-dominated oversight board. It has now capitulated, endorsing a board with very formidable powers, including the right to approve the IRS’ strategic plans and recommend an IRS budget to Congress. This after the director of the National Economic Council, Gene Sperling, had called it “extremely misguided . . . a recipe for conflicts of interest, less accountability and less trust.”
The other important reform, shifting the burden of proof from the taxpayer to the IRS in tax court, was denounced with vehemence. Treasury Department spokesman Howard Schloss had claimed its effect would be “excessive burdens on honest taxpayers” and “more burdensome audits and investigations.”
But that was days–and polls–ago, a lifetime in this administration.
So much for standing on principle. What about the merits of the case? Is it a good reform? Now that Clinton and Gephardt have made it unanimous by signing on with the Republicans, Krauthammer’s First Law of Politics kicks in: When all of Washington agrees on something, it is undoubtedly wrong.
An IRS review by Sen. Bob Kerrey (D-Neb.) and Rep. Rob Portman (R-Ohio), submitted to Congress just last June, concluded that the IRS did not suffer from widespread or systematic abuses: “The commission found very few examples of IRS personnel abusing power.” The system is not broken. Sure, after a casting call, Congress came up with anecdotal cases of abuse. But that tells us nothing. There is not an agency in government or in business or anywhere that does not experience individual abuses.
The problem is not tax collectors out of control. It is tax writers out of control. The IRS does not write the rules it must enforce. Congress and the president do. And the rules are now an insane 9,451 pages long. It is so extraordinarily complicated that no taxpayer can ever be sure that he has fully complied with the law.
So what does the 105th Congress do? Worsen the tax code. The balanced-budget bill so trumpeted by Republicans and Democrats is a scandal of loopholes, preferences, coercion and complexity. The capital gains form alone has now become so complicated–it has gone from 19 lines to 54, from two rates to four–that the IRS, which received the final details of this fiasco only recently, will not finish programming its computers to handle the new schedules electronically until February.
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The IRS reform undoes none of this. No one knows whether a civilian review board will actually improve the operation of the agency. And you don’t have to be a genius to predict that shifting the burden of proof to the IRS will produce a drop in tax receipts and encourage a whole new round of tax avoidance. This is a tax cut for envelope pushers and cheaters.
This is not exactly the kind of income redistribution that the “fairness” Democrats crow about. And it is not the kind of tax cut Republicans should be pushing.
To his credit, Chairman Archer is also pushing for radical reform of the tax code, something Clinton and the Democrats are resisting. Archer’s solution is to root out entirely the income tax–itself a standing invitation to government to probe practically every transaction of your life–and replace it with a consumption tax.
If that is too radical for you, there is the flat tax. And if that is too radical still, we should at least go back to the 1986 tax reform that, in a rare and exemplary act of rationality, simplified the tax code by eliminating dozens of loopholes and creating just two tax rates.
Congress and presidents have ever since conspired to systematically trash that reform, amending it more than 4,000 (!) times. Having created an appalling mess, they now blame it on the tax collectors.