What Tax Reform Will Really Look Like, Part 3 (of 3)

So Congress came up with the Tax Reform Act of 1986. How could the public not finally rest assured after hearing their representatives tout this new Act?  Listen to their confident rhetoric:

"This bill adopts a tough, certain, exacting minimum tax. We are not going to see stories about this corporation or this rich fellow or this rich woman earning a major amount of money and paying nothing in taxes...What is at stake here is us demonstrating to the American people that we are willing to make the tough choices, make the tough decisions and give them a tax system that they can count on, that is fair, that will finance this government in the right way." Rep. Byron L. Dorgan, (D) North Dakota

"Ordinary citizens - those people without the use of high-paid lawyers and fancy tax shelters - have had to witness a parade of newspaper headlines heralding the...hundreds of millionaires who paid no federal income taxes. This proposal will make that kind of unfairness a thing of the past." -Sen. John F. Kerry, (D) Massachusetts

"Madam Speaker, the vote today is for fairness and equity. For decades, the Congress has called for tax reform. This is our chance. We have railed against the abuses of a tax code that allows millionaires and the rich to escape tax-free, while the working men and women of this country pay for everything." -Rep. William B. Richardson, (D) New Mexico

"By instituting a tough, inescapable minimum tax, we have assured that no matter what special tax incentives wealthy individuals or profitable corporations use, they will be required to pay a minimum amount of tax." -Sen. John H. Chafee, (R) Rhode Island

"Fairness is the hallmark of this bill. We have strengthened the minimum tax for corporations and individuals. No longer will we hear about those who escape their tax responsibility. Taxpayers and corporations alike will pay their fair share." -Rep. Frank J. Guarini, (D) New Jersey

"It wasn't too long ago that my constituents were outraged because of news stories that detailed how wealthy individuals and corporations were escaping taxation by cleverly manipulating the law. Under the tax bill, this will no longer take place." -Rep. George C. Wortley, (R) New York

"It makes me angry that 250 families earned over $1 million last year and paid no taxes...This bill makes sure that does not happen anymore." -Rep. Richard A. Gephardt, (D) Missouri

"[This bill] includes a strong minimum tax provision that assures that wealthy individuals and profitable corporations will pay at least some taxes." -Sen. Charles Mathias, Jr., (R) Maryland

"Every year, the story is printed in the papers - and I paraphrase - 844 Americans last year made over $1 million and paid no taxes. That, justifiably, galls the average taxpayer who is making $15,000 a year and paying $1,000 in taxes. This bill closes those loopholes." -Sen. Bob Packwood, (R) Oregon

From America: Who Really Pays the Taxes?: "In 1989, the latest year for which statistics are available [and only three years after the above bill became law], the number of persons with incomes above $200,000 who paid not one penny in federal income taxes crossed the 1,000 mark for the first time, reaching 1,081. That was up 64 percent from 1986."

So, reader, if history is any indication, what might we expect when the Buffett Rule (or tax reform by any other name) becomes law? I say, nothing.

(Source: America: Who Really Pays the Taxes?, by Barlett and Steele, 1994)

Now, in case you want more current numbers, this is from the New York Times, June, 2011: "There are 78,000 tax filers with incomes of $211,000 to $533,000 who will pay no federal income taxes this year. Even more amazingly, there are 24,000 households with incomes of $533,000 to $2.2 million with zero income tax liability, and 3,000 tax filers with incomes above $2.2 million with the same federal income tax liability as most of those with incomes barely above the poverty level."  

The question must be asked: Are we paying our politicians to just talk a good game?  This is why when we hear or read of any Democrat or Republican talking about tax reform, our first response must be to recall our tax reform history, roll our eyes, and smile cynically.  What we do beyond that, who can say?  But if history is any indication on that score, we’ll likely just roll over and take it…again.