The Tax Reform Act of 1986 was a Godsend for anyone who likes a growing economy. The simplification that took place reduced the maximum tax rate to 28% and most of the income for middle class workers was taxed at 15%. This spurred economic growth that last for the next 25 years and gave every American who worked for a living the opportunity for greater prosperity and a happier life.
It didn’t last for long, however. Papa Bush was almost immediately rolled by George Mitchell to break his “read my lips…” promise and then Horn Dog Clinton piled on with a tax increase that put the top rate up to 39.6%, along with taxing social security benefits for the first time. Soon the tax code was once again a gawd-awful mess.
That may be why we could see another tax reform act sometime soon, at least if this quote from George Mason University professor Donald Boudreaux nails it, as I think it does:
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.
Of course, honest tax simplification can never actually happen because that would diminish opportunities for graft.