Real tax reform means we all give up some of the goodies

Now that Congress is back in session, this year’s budget is passed, and we’ve all had a look at the President’s birth certificate and Osama bin Laden’s villa in the Pakistani suburbs, it’s time to get down to some real work: comprehensive tax reform.

The last time the nation’s funding mechanism was overhauled was a quarter century ago, when the Tax Reform Act of 1986 simplified the tax code and cut off some rampantly abused shelters and unsustainable exemptions. It was hailed as a triumph over special interests, but over time lobbyists’ loopholes have crept back into the code.

Back then, taking away the deduction for credit-card interest profoundly changed how consumers calculated the “real” cost of big-ticket items, and kicked off a frenzy of paying down revolving debt. But taxpayers eventually adjusted – so well, in fact, that we needed the CARD act.

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What about today’s entrenched tax deductions? For example, do we really need to deduct mortgage interest paid on all our properties? Experts say most likely not, at least not as generously as we do. But which politician is willing to be the first to take on the powerful lobbies of real estate and mortgage lenders – and consumers who have made that deduction the foundation of their financial plans?

That’s why we all need to share the pain fairly. Republican Rep. Paul Ryan’s proposed budget cuts services to the lowest income taxpayers without addressing systemic revenue shortfalls; the President’s deficit reduction plan calls for automatic, across-the-board cuts and tax increases if the deficit doesn’t decline fast enough.

With support from 64 Senators of both parties the so-called Gang of Six developed a bipartisan proposal to cut the federal deficit by $4 trillion over 10 years. Based on the plan put forward by the President’s deficit reduction commission in November, it includes spending cuts, a tax-code overhaul and reductions in interest paid on the national debt. It could be introduced by the time this appears in print.

We applaud the effort, with a caveat. The Simpson-Bowles commission put a lot of work into both sides of the balance sheet – cutting spending and raising revenue – and garnered the bipartisan support of 11 of the 18 commissioners precisely because everyone had “skin in the game.” Any tweaking to make it less painful for one at the expense of another will defeat the purpose.

We hope we can all give up our fair share of the goodies for the good of us all.