Contemporary U. S. Tax Policy

by C. Eugene Steuerle

A tax policy specialist with the Urban Institute who has also worked at the US Treasury, Steuerle explains how the various events affecting to tax policy fit together across since the end of World War II, the role of economic factors in the shift of US fiscal and tax structure, how reform is organized, and where various forces are leading tax policy now. Annotation ©2004 Book News, Inc., Portland, OR (booknews.com)

Genres: Public Policy, Economics

332 pages, Paperback

First published May 30, 2004

Reviews

[Frank Stein · Rating 4 out of 5]

In this book C. Eugene Steuerle, a former economist at the Treasury Department's Office of Tax Policy, gives a clear and balanced analysis of the changes in the U.S. tax system from the early 1980s to the early 2000s.

Perhaps the biggest change he notes is the transformation of tax policy from a revenue raising system to a powerful arm of U.S. social policy. Through the tax code, the IRS now manages welfare programs (like the Earned Income Tax Credit), housing programs (the Low Income Housing Tax Credit and Historical Rehabilitation Tax Credit), and health programs (for everything from health savings accounts to Medicare programs), not to mention child care plans, pension plans, small business programs and infinite others. Even though most of these are off balance sheet and do not "flow through" the federal budget, they change the landscape of America as surely as if Congress was writing the checks itself.

So, understandably, this book encompasses a broad field of study, and sometimes the descriptions get too general to allow the reader to know what changes are actually taking place, but overall Steuerle turns the esoteric world of tax policy into a real narrative that any reader can follow. He also investigates several important outside forces that impinge on the tax system. For instance, he notes the power of inflation and "bracket creep" to change the nature of taxes, even after the "brackets" were indexed for inflation in 1981. Before, inflation kept pushing more and more people into higher brackets, meaning the government could appear to keep cutting taxes, even as more and more low income people became subject to them. In fact there was not a single act of Congress raising income tax rates from the end of World War II to the early 80s, despite increasing revenue. After indexing, however, and after the explosion in "mandatory" programs, there were sharp (legislated) rate increases in 1982, 1984, 1990 and 1993, all paving the way for the (temporary) end of the deficit in the 1990s. Yet gradual increases in incomes beyond inflation across the spectrum continued to place more people in higher brackets. When these are considered, the Bush tax cuts, for all their rhetoric, ended up bringing us to a system with a similar amount of revenue (as a percentage of GDP) and a similar amount of progressivity as we had 10, 20 and 30 years ago. Overall there seems to be a weird homeostasis in U.S. taxes, despite all the significant changes.

Steuerle, like a good tax analyst, uses this work to advocate for more clarity and "base broadening" in the tax code, but he is also sharply critical of the extremist supply-side position and recognizes the value of progressive taxes in sharing the collective burden. Overall, his history provides valuable insights into what why taxes have become so central in America's political debates.

[Andy · Rating 5 out of 5]

This book should be required reading for every student of political science, public policy, economy and government. It should also be required of all Hill staffers, politicians, and political appointees. If that were achieved, our political situation would be so much better off.

To broadly paraphrase Eugene Steuerle: “Tax policy has become the primary tool used by elected officials to change taxpayer’s behavior; it is a labyrinth of programs exerting influence in almost every political sphere, and it remains inseparable from the broader budget process. Major forces are changing the policy world’s ground rules, often for the worse, and that must be addressed head on. The U.S tax policy process is simply part of democracy’s broader story: it is prone to waste, bureaucracy, cronyism, and borderline corruption when no wolf is at the door, but it’s good at handling emergencies and responding to powerful forces. No matter how much badly designed tax policies stand as evidence that getting it ‘right’ is difficult, when good policies are enacted and revisions well timed, they remind us that political honesty, tenacity, and integrity can help create a better, more efficient and equitable system. The powerful dynamic of the democratic process remains at play in tax policy no less than in the rest of our civic, political, and economic life. To quote Edmund Burke: “Issues of taxation and finance reside at the very heart of debates over liberty and government”.”

[Jon · Rating 5 out of 5]

This is a really good book on the political history of tax policy. It really gives the where's, why's and how's of our current tax situation. An excellent addition for a law student taking a first Federal Income tax class or anyone else wanting to learn about how our tax system came to be the way it is. It doesn't address the specifics of the tax code, nor does it address the scholarly arguments about taxes. Steuerle simply talks about the major bills that have been passed over the past forty to fifty years and the political wrangling that led to them.