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The Simple Politics of Tax Simplification

Here’s a letter to the Washington Post:

George Will writes that “tax simplification would reform politics by shrinking opportunities for transactions between private factions and the political class.  This class confers favors as much with the tax code as with appropriations.  ‘You can drain the swamp,’ says [Sen. Ron] Wyden.  ‘They did it in ’86′” (“A tax reformer’s uphill push,” April 6).

Alas, matters are more complicated.

In 1986 Milton Friedman, along with my late Nobel-laureate colleague Jim Buchanan and many other economists, while applauding the tax simplification enacted that year, pointed out that it was politically feasible only because by the mid-1980s the tax code had become so flooded with fiscal favors dispensed to special-interest groups that there was little room left for politicians to dispense any further such favors.  So politicians drained the swamp.  They did so, however, not to shrink opportunities for them to exchange political favors with private factions, but to make such exchanges once again easy and profitable.  The swamp was drained, in short, only so that it could be refilled with the foul water and stench of interest-group politics.

This reality is no argument against tax simplification, but it does counsel realism about the motives of politicians who seek it and about the permanence of that simplification.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030​​