The tax bill seems increasingly to have come down to a question of blame. If no bill passes, whose fault will it be? The symbolism of the bill has always had greater allure than the substance; the substance has never been fully in focus. The important part for the president was the cut in tax rates, particularly the possible cut in the top rate from 50 percent (it was 70 percent when he took office) to 35. To a large extent the rest of the plan, which is to say the bulk of it, followed from this, both to pay for the rate cuts and to help justify them. The plan was given the label reform. For the Democrats the consuming problem after that was to avoid being cast in the opposite role of obstructionists. A new rate structure versus a reputation as still the party of the old politics: that is what a lot of the heaving has been about.
Yet the bill has also taken the Treasury and Congress into all manner of substantive areas. The tax- writing committees have not been fully prepared to deal with many of them -- and almost all of them deserve to be dealt with in a broader context than simply assuring that the revenues lost and regained in a tax bill come out even. Two examples are national policy toward saving for retirement and investment in research and development. Reducing tax incentives has been proposed in one area by the president and in the other by the staff of the House Ways and Means Committee -- and the aggrieved interest groups are complaining that the plans would crush good policy to produce more cash. One need not agree with their views of the merits to agree with their view of the process.
Thus the baby-boom generation is in mid-career and moving toward retirement at a time when there is also a national need for a greater rate of savings and capital formation. Is this a good time or bad to tighten taxation of retirement savings? Whatever the answer, the question should at least be asked in terms of the future strength of retirement funds. So also with research and development: there is a pressing national need for more of it. But the Ways and Means staff would reduce the value of the existing research and development tax credits in various ways and tighten current write- off rules -- and that ought to be a research as well as a revenue decision.
The tax bill is foundering, not just because of where members stand on the broader issues of "reform" -- everyone is for reform -- but because of internal problems such as these. It may be that the tax code or the existing provisions in it are not efficient ways to subsidize retirement or research -- that these things should be done, if at all, directly through the expenditure side of the budget. But none of the missionary work for that has been done. To prevent loss to the Treasury, the tax bill would reach into too many areas of national life in ways whose consequences have not been foreseen. That is not a sensible way to proceed.