Tax Expert Says Everyone's Too Obsessed With Taxes

Edward Kleinbard knows as much about taxation in America as anyone alive. He was a tax partner at the law firm Cleary Gottlieb Steen & Hamilton, then chief of staff of U.S. Congress’s Joint Committee on Taxation, and is now a professor at the University of Southern California’s law school. But when he set out to write a book about how to fix the American tax system, it made him realize that the problem wasn’t the tax system; it’s everyone’s fixation on the tax system.

Republican obsession with taxes is the more explicit: They want simply to cut them. Kleinbard is a staunch Democrat, and his new book, We Are Better Than This, has little patience with the economic and philosophical tenets of modern American conservativism. But Democrats have their own tax obsession, as he sees it: They want to aim taxes at the wealthy, to make them pay a greater share of the take. They rail against companies that figure out ways to minimize their corporate taxes. That focus, Kleinbard argues, is misguided:

“Our greatest public finance policy mistake over the past few decades has been to obsess over tax policy, while simultaneously failing to have serious and rational debates over spending policy. We quibble over tactics without really engaging in the more difficult enterprise of forging a national consensus on our strategic objectives.”

Kleinbard’s own book, he writes, is “a confession by a longtime tax geek that I, like many others, have elevated the tactical issues of tax system design beyond their ultimate important to our society.” The issue is not how government gets its money; it’s how it spends it.

As Kleinbard points out, a progressive tax code—where rates rise more sharply the farther up the income ladder one goes—does not guarantee progressive outcomes. “The United States has the most progressive income tax rate structure [in the OECD], viewed in the abstract, yet it has by far the smallest overall impact on income inequality.” European tax systems tend to be more regressive than ours, but they spend that revenue in a much more progressive way, with a significantly greater impact on inequality. Kleinbard would like to see the U.S. government do the same, focusing on education and infrastructure spending and social insurance programs.

Of course, the upshot of increasing the revenue of the federal government, as Kleinbard would like to do, without increasing the progressivity of the tax code is that the middle class will have to pay higher taxes. Kleinbard believes that that trade-off would be beneficial, because everyone would benefit from greater public investment. That’s a hard case to make today. Public trust in the government is at historic lows. Part of Kleinbard’s point is that, by speaking the language of taxation, even progressives have contributed to that.

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