When President Bush named his tax reform panel on January 7, the dismay among tax professionals was almost palpable. The panel includes a variety of political, business, and academic leaders, all boasting impressive résumés. But the panel is distinctly light on tax expertise.
Even before naming his panel, Bush had signaled his intention to deprofessionalize tax reform. "The members of the panel will, of course, include tax experts," he promised in mid-December. "It will also have people who aren't experts. Well, they're experts; they'll be experts in paying tax."
For more than 60 years, federal taxation has been shaped by a community of dedicated tax experts, its members drawn from law, economics, and accounting. That community has played a pivotal role in every major tax reform since World War II. Does Bush's panel mark the end of that ascendancy? Does the tocsin sound for America's fiscal technocracy?
The Nature of a Policy Community
In his influential study of the policy process, Agendas, Alternatives, and Public Policies, political scientist John W. Kingdon argued that experts play a crucial role in the policy process. Elected officials generally set the agenda for national policy, Kingdon observed, identifying problems and focusing on issues. But experts give substance to the agenda, selecting among policy alternatives and giving specificity to inchoate policy preferences.
The social science literature on policy communities -- a vast and growing field -- has stressed the diversity of those groups. Lobbyists are often prominent members, working hand in glove with bureaucrats and lawmakers. So, too, are academic experts. And the revolving door -- leading from university to government to K Street and back again -- ensures that members of a policy community speak a common language, share a unified body of knowledge, and embrace many of the same policy goals.
There is a tendency among some scholars to treat experts as outsiders in the rough and tumble of partisan politics, to cast them as apolitical technocrats. To be sure, tax experts have often helped bridge partisan divides. But experts are also vital players in the political arena, and their policy commitments are not without ideological import.
The Birth of a Policy Community
The modern tax policy community emerged during the New Deal. Bitter struggles over taxation were a hallmark of the 1930s. Conservatives accused President Franklin D. Roosevelt of trying to "soak the rich," imposing steep taxes on income, estates, and corporate profits. Liberals complained that the system burdened the poor, taxing consumption too heavily and wealth too lightly. Perhaps most striking, advocates of "social taxation" -- the creative use of tax policy to remake society and reform the economy -- bemoaned the absence of innovation from Roosevelt's fiscal agenda. At various points, FDR responded to those exogenous complaints, offering new initiatives and scuttling old ones. But ultimately, the most important arguments over tax policy occurred within the Roosevelt administration, where two groups of presidential advisers squared off with very different notions of tax justice.
Roosevelt's tax advisers were a heterogeneous bunch, including lawyers and economists, planners and antitrusters, Democrats and Republicans. Generally speaking, however, they fell into two groups. The first, composed of senior administration lawyers, endorsed "high- end" progressivity: The notion that steep taxes on the rich could be used to balance necessary, if unpalatable, taxes on the poor.1 Most of those advisers were domestic policy generalists, not experts on taxation. But throughout the early and mid-1930s, they were the principal architects of New Deal tax reform.
As a group, advocates of high-end progressivity acknowledged the regressive burden of federal consumption taxes, which increasingly dominated the revenue structure of the 1930s. But they considered those taxes a necessary evil, especially as deficits continued to mount and Roosevelt struggled to defend himself against charges of fiscal recklessness. Advocates of high-end progressivity believed that steeper taxes at the top of the income scale would lend moral legitimacy to the revenue structure as a whole, including its regressive elements. They argued for new levies on wealth and income. They also railed against tax avoidance by the rich, complaining that wealthy Americans were shirking their moral responsibilities to the nation.
Those advocates of soak-the-rich taxation -- an epithet hurled by critics but sometimes embraced by adherents -- warned of the dangers inherent in concentrated economic power. As a group, they believed that taxes could be used to check the power of big business and big money. Some even hoped to use the tax system as a tool for large-scale economic reform.
Meanwhile, a second group of advisers, composed principally of tax experts in the Treasury Department, endorsed "low-end" progressivity. They cautioned against the punitive taxation of wealth and business, insisting that soak-the-rich taxes did a poor job of raising revenue. Instead, they endorsed a broad expansion of the income tax to the middle class, confident that such a levy could pay for a much-needed rollback in consumption taxes. Those fiscal specialists understood the need for new social programs, and they were sympathetic to calls for large-scale economic reform. But they were wary of using taxes as a tool for reform; better, they argued, to focus the revenue system on raising money, which could then be used to finance other, more ambitious items on the New Deal agenda.
Advocates for low-end progressivity were central to the nascent tax policy community that developed during the 1930s.2 Composed principally of academic experts, Treasury Department officials, and congressional staff, that community was anything but homogeneous. Turf battles unfolded between administration and congressional experts, with each camp jealous of its role in the policy process. Lawyers, accountants, and economists also differed in their approaches to tax policy. And while most of those experts were Democrats, a few had Republican sympathies. But the disparate tax experts of the 1930s shared some ideological commitments and policy preferences. They embraced the standard of ability-to-pay, measuring most tax proposals against that yardstick of tax fairness. They tended to support broad but progressive income taxation, as well as taxes on inherited wealth and corporate profits. That fiscal agenda was never universally accepted, not inside the policy community and certainly not outside it. And there was always plenty of room to argue about the details of legislation and administration. But those standards of good policy, articulated in a variety of studies throughout the 1930s, had enormous influence on the development of World War II taxation, offering common ground in the midst of contentious debate.3
Advocates of low-end and high-end progressivity jousted regularly throughout the 1930s. Initially, the latter group dominated, shaping a slew of reformist New Deal tax laws. But by the late 1930s, soak-the-rich taxation was under attack, discredited by a resurgent depression in 1937. World War II ended the contest entirely, as low-end progressivity became the hallmark of wartime tax reform. In some ways, the tax system emerging from the war represented a conservative victory; since the 1920s, Republicans had been agitating for broader income taxation, while Democrats resisted the idea. But the war made narrow income taxes obsolete. The rhetoric of high-end progressivity remained part of American political discourse, but the tax system itself reflected a more moderate, more balanced approach. As America entered the postwar era, the federal tax system featured broad-based levies on individual income, flat- rate taxes on corporate profits, and a flat-rate wage tax dedicated to Social Security.
While conservatives could find much to like about the wartime tax regime, it was not a wholesale defeat for progressive politics. In fact, its champions, including the new generation of liberal tax experts devoted to low-end progressivity, considered it a major achievement. The wartime tax system, while deficient in any number of ways, nonetheless reflected canons of fairness and sound tax policy. Advocates of low-end progressivity -- most of them committed New Dealers -- had ensured that the new American state would raise its revenue with fair, efficient, and reasonably progressive taxes.
Experts of the wartime generation became charter members of the postwar tax policy community. As a group, they embraced the mass income tax emerging from the war. They considered the Haig-Simon's definition of income an article of faith. Their mantra -- "broaden the base, lower the rates" -- defined the reform agenda for the rest of the 20th century. The Tax Reform Act of 1986 marked the apotheosis of that fiscal tradition.
Deprofessionalizing Tax Policy
Ostensibly, Bush and the tax policy community have a lot in common. They both revile complexity, as well as most tax preferences (although Bush promised to protect the most important sacred cows -- deductions for mortgage interest and charitable giving -- during the reform debate). Perhaps most striking, Bush's avowed preference for taxing consumption rather than income reflects several decades of tax scholarship.
But Bush is clearly suspicious of America's tax experts. Perhaps he distrusts the tax professionals who created -- or at least enabled -- the current tax system. He seems intent on returning tax policy to the people -- or at least to the politicians. Honest, smart people should be able to make good decisions about tax policy. Hidebound "experts" -- invested in the current system or some particular version of reform -- need not apply.
That's the same attitude that kept the generals out of Pentagon reform and gave Secretary of Defense Donald Rumsfeld a free hand to plan the Iraq invasion. We can all judge for ourselves the success of that experiment in deprofessionalization. If Bush is serious about attacking the technocratic infrastructure of the modern tax system, can we expect the same sort of results? Let's hope not.
In fact, there probably isn't much to worry about. The nonexperts on Bush's reform panel will ultimately need tax professionals to do the heavy lifting. Even the president's most ardent fans recognize that the panel is unlikely to produce much original thinking. Rather, it will broker ideas put forward by the same tax experts currently in disrepute. Experts are not easily banished from the policy process. And in a modern economy -- replete with complexity that makes the income tax look simple by comparison - - experts will always be crucial to tax reform.
1 The term "high-end" progressivity was not used by contemporaries in the 1930s, nor was its complement, "low-end" progressivity. I've used those terms, however, to more clearly delineate the policy preferences of those two, discrete groups, which while ideologically sympathetic with one another, were often divided over policy prescriptions.
2 For a study of the tax policy community in a somewhat later time period, see Julian E. Zelizer, Taxing America: Wilbur D. Mills, Congress, and the State, 1945-1975 (Cambridge, UK; New York: Cambridge University Press, 1998).
3 For one very influential example of this recognized body of standards, see Twentieth Century Fund, Committee on Taxation and others, Facing the Tax Problem; a Survey of Taxation in the United States and a Program for the Future (New York: Twentieth Century Fund Inc., 1937).
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