Tax reform key to fixing fiscal messes
By Henry Solano
The election of Donald Trump as president, whatever its other implications, may initiate discussion of meaningful tax reform, as the president-elect has declared this one of his top priorities. If done correctly, this could provide a real and lasting benefit to the American economy; and it is a discussion which needs to take place at both the state and federal levels.
Tax policy, in the structural sense of who pays for what and how much they pay, is too often dismissed as a matter best left to accountants and economists. This is a mistake, however, because it results in tax policy controlling, dictating or impeding sound public policy in other areas, rather than working in concert with policy. Revenues (or more recently the lack thereof) determine which services are prioritized, and impact — without meaningful rationale or logic — the quality or reach of government itself; whether, for instance, in the staffing of police agencies or in patching potholes.
Several principles are generally accepted as integral to tax fairness: broad based levies, multiple sources of revenue, minimal interference with marketplace decisions, ease and accuracy of collection and, perhaps most important, flexibility to respond to changes in economic conditions. By way of example, sales taxes were introduced widely in the middle of the last century at a time when more than 80 percent of economic activity was composed of the retail purchases of goods. Today we are more likely to purchase untaxed services, but our tax systems have failed to recognize this shift.
Artificial constraints on changes in tax policy, such as those required by Colorado’s TABOR amendment, fail to accommodate an economy in ever more rapid flux as technology and globalization restructure American spending and earning patterns. Policy finds itself chasing two or more steps behind change. The willingness of taxpayers to make the needed adjustments at the ballot box remains a perennially open question. We can be sympathetic to the sentiment of those who correctly complain that, “I didn’t create this mess!”
Nonetheless, a fiscal fix is needed. This should not and need not be a partisan quarrel. A public conversation about how to avoid a repetition of having to refund needed revenues once our oil and gas begins to flow again is appropriate. A similar debate is needed at the Colorado Legislature where the last tax analysis was conducted more than 50 years ago. When I worked for Gov. Roy Romer in the ‘80s and early ‘90s it was my experience that bi-partisan solutions could be and were identified in preparation for the future. Today’s statehouse stalemates must cease.
Similarly, federal tax policy has been frozen by the hyper-partisanship that disgusts so many Americans with Washington. At ground level, we are all united in our desire for a sustainable economy that promotes jobs, growth and prosperity. Therefore, a commitment to comprehensive tax reform should be at the top of the agenda for Sens. Michael Bennet and Cory Gardner, along with the entire Colorado congressional delegation. In the 30 years since the federal tax code was last re-worked, it has grown to a grotesque monstrosity of 14,000 pages. It’s not paranoia to suspect that all but a hundred or so of those pages represent carve-outs, loopholes and exemptions for special interests, unavailable to the average taxpayer.
In addition, corporate taxes are far too high in a global economy where our competitors protect their industries, especially when these rates adversely impact small businesses that cannot afford the legion of lobbyists required to extract special treatment.
Much of my professional career has been devoted to promoting a level playing field that ensures equal access for workers, businesses and entrepreneurs. It has also been focused on bringing people from diverse backgrounds together to find common ground by respecting everyone’s perspective while at the same time finding practical solutions where progress is measured by improvement — not whether the whole loaf is achieved. Simplifying and, when possible, reducing compliance costs effectively reduces taxes on the hard work and innovation of every American. If war is too important to leave to our generals, then tax policy is too important to be left to the self-interested and their lobbyists.
Henry Solano is a former U.S. attorney for Colorado and acting labor secretary under President Bill Clinton.