4 surprises for tax day

As the deadline to file federal (and many state) taxes approaches, here are four surprises to consider:

1. Taxes are not a big concern for the American worker. Earlier this year, the Pew Research Center asked people about their “top priorities” for the White House and lawmakers. Seventy-five percent said the economy, while the same percentage said terrorism. Tax reform fell close to the bottom, at 45 percent. (In 2013 and 2014, more than half of Americans listed tax reform as a “top priority.”) Karlyn Bowman, the highly regarded American Enterprise Institute scholar of public opinion, told me that the tax issue “has no urgency this year. So, yes I think the tax revolt is dead. Taxes rank very low when people are asked what will be important in November.” A more recent Pew survey found that many Americans believe the “U.S. economic system. … unfairly favors powerful interests.” Among supporters of Sen. Bernie Sanders, 91 percent believe that, followed by 73 percent of Hillary Clinton (D) supporters, 61 percent of Donald Trump (R) supporters, 51 percent of Ohio Gov. John Kasich supporters and 45 percent of Sen. Ted Cruz (Texas) supporters.

The challenge is the apparent disconnect between voter discontent and an obvious solution to the “unfairness”: tax reform.

{mosads}2. Promising a consumption tax used to be a third rail of American politics. Many years ago, Ways and Means Chairman Al Ullman (D-Ore.) proposed a value-added tax (VAT) — the most widely known consumption tax — which was a major factor in the loss of his congressional seat in 1981. As noted in The New York Times back in 1998, former Treasury Secretary Larry Summers — then, as now, a professor at Harvard University — notably said that the VAT isn’t viable since “‘Liberals think it’s regressive and conservatives think it’s a money machine.’ If they reverse their positions, the V.A.T. may happen, he said.”

If there is one hot-button issues that sets off a Grover Norquist of Americans for Tax Reform, creator of the congressional “no tax increase” pledge, it’s an add-on VAT. But after tax day 2015, there was an unusual bipartisan report that came out of one of the Senate Finance Committee Working Groups on Tax Reform. It concluded that a consumption tax is worth giving serious consideration because it produces more growth than an income tax.

Cruz and (and former presidential candidate Sen. Marco Rubio) would turn the tax code inside out, taxing spending rather than income to encourage saving. That’s a far cry from a consumption tax becoming as American as apple pie, but it’s a surprise.

3. Tax reform is more important than running for president. This week, Speaker Paul Ryan (R-Wis.) took himself out of the 2016 running. There is an unreported reason for him doing so: tax reform. It has been Ryan’s passion since he worked for Jack Kemp at Empower America in the 1990s. Running for president and losing would most certainly kill one of his most desired public policy objectives.

4. There is a silver lining for tax day 2016. All Americans get three extra days to file their tax returns this year. Emancipation Day, commemorating the end of slavery in the District of Columbia, is a holiday in the nation’s capital; this year, it falls on April 15 and the IRS is closed for the day. Taxpayers in Maine and Massachusetts have until April 19 because IRS offices there will be closed on Monday due to Patriots’ Day, a statewide holiday celebrating the Battles of Lexington and Concord. Perhaps Americans will use these historical events to reflect, ponder and become inspired to demand real tax reform in 2017.

Bloomfield is president and CEO of the American Council for Capital Formation.