Hanging, it is said, focuses the mind. So does that annual lynching known as tax time. So let's focus for a moment not just on what we all know - how painful that exercise has become - but on the extent to which wacky government tax policy in recent years has itself contributed mightily to the nation's economic woes. It's the kind of insight we won't, alas, be getting from our noble legislators themselves.
For example:1. From one coast to the other, commercial real estate has been a disaster area of late. The failure of project after project, which has contributed in no small way to the problems of the S&Ls and other financial institutions, is typically ascribed to the alleged overreaching greed of the 1980s, or to other such convenient bogeymen. Few politicians bother to look in the mirror and see what their own misguided tax policy has wrought.
But the simple truth is that Congress, in its much-vaunted "reform" of 1986, did something that in virtually any other area of life would have been plainly unconstitutional: It changed the law retroactively and wrote ex post facto rules for deals that had been set up in the best of faith, by decent citizens, under the then-prevailing law of the land.
The projects then became woefully uneconomical, and the inevitable result has been a debacle in the real-estate industry. But how many of our so-called leaders have acknowledged the link between dumb tax policy and bad economic results?
2. The country's overall growth rate has been slowing since the late 1980s (it's actively in reverse right now, of course), and we regularly hear complaints that the quality of American jobs is not improving as we would like. Again, in the real world, bad tax policy has been a conspicuous villain.
Since 1982 Congress has passed law after law attacking savings and investment - the keys to better tools and better jobs.
In a jealous snit for fear that the local dentist might have too good a retirement plan, Congress (whose own lavish plan looks like it was dreamed up by Michael Milken) moved to sharply limit pension deductions in the private sector. The inevitable result has been a dramatic reduction in benefit plans for ordinary workers and concern that "government" (read, "the taxpayer") may have to take a larger role.
We fret that other nations may be outstripping us technologically - and we move to raise our already notoriously punitive capital gains tax. We moan about a lack of adequate private savings - and we savage the IRAs.
3. Political mythology has replaced economic facts in looking at taxes.
We're told, for example, that the reason we have these big deficits is that taxes were cut too sharply in the Reagan era. Yet the truth is that taxes weren't cut at all in the 1980s. As the Tax Foundation reported this week, the average worker is now paying more than 35 percent of his income in federal, state and local taxes - the highest level in the history of the republic.
As for "simplification," that other great rallying cry of the "reformers," anyone who thinks today's ever more complex code (with its bizarre divisions into three different kinds of interest and its percentage limitations on this deduction or that one) has been "simplified" must be living on Capitol Hill - or Mars.
What needs to be done is plain. If we want to resume the kind of explosive growth we briefly touched off in the early 1980s, we need to lower income tax rates, provide meaningful incentives for savings and investments (such as universal IRAs, a lower capital gains tax and an end to the double taxation of dividends) and begin more forcibly to get a handle on federal spending.
Anything less, however well it plays in the ephemeral polls, will merely add to our self-inflicted national pain. The best thing for us to deduct next would be some of the destructive demagogues themselves.