Rahm Emanuel - Taxes Again

Rahm Emanuel, one of the few Former Clinton Administration Officials to actually win election, thinks he sees how he can raise taxes, mostly without your knowing it. He wants to Democrats to run on a platform of comprehensive tax reform.

The theme of the Bush tax code is this: With the help of their accountants and lawyers, the special interests win subsidies, shelters and loopholes, while middle-class families are buried under a crushing tax burden and piles of complicated IRS forms. Payroll taxes, which are paid by middle-class Americans, now dwarf corporate taxes as the largest component of federal tax receipts.

Of course, Emanuel also claims the code is regressive. When half of all Americans don't even pay income tax, I have no idea what sort of computational gymnastics you'd have to go through to get a regressive result.

Mr. Emanuel wants to raise taxes on the "wealthy," while cutting taxes for even more middle-class taxpayers. He wants to use the reform as cover to raise the overall amount of money the government takes in taxes, which had been at a postwar high before Bush's tax cuts. He complains about the size of the payroll tax, but his solution is to raise corporate taxes, at a time when we want companies to be paying for expanding payrolls, not expanding government.

Mr. Emanuel's "solution" to the complexity problem sounds more like a trojan horse for even more complexity. He wants to replace 2000 pages of a 45000-page tax code with a "simple tax form" for most Americans. What would this form contain? How would it differ from the 1040-EZ, already available to those who don't itemize? Ah, what deductions would he get rid of? He doesn't say. Nor does he explain how the average American will notice the difference between a 43000-page code, and a 45000-page code. Apparently, it's still ok to saddle businesses and the "wealthy" with a system so complex even the IRS can't get it right half the time.

Mr. Emanuel is open about selling this as an election-year gimmick, used to bludgeon the current President for almost a century's worth of accretions and accumulations. It's a class-warfare appeal to people's hard feelings about taxes, used as a Trojan Horse for a federal money grab. If he were serious about tax simplification, he'd propose cutting the payroll tax and letting people invest it themselves. He'd propose an expansion of Medical Savings accounts to introduce market forces into a health-care system dangerously insulated from them.

I'm all for tax simplification, and for many of the reasons Mr. Emanuel enunciates. I would dearly love to see Mr. Bush take the ball and run with this issue. Mr. Emanuel says all the right words. But like his mentor, he uses them as a cover for all the wrong policies.