Book Probes Tax issues Facing the Next President and Congress, Offers Policy Lessons

Contact: Simona Combi, (202) 261-5283, scombi@ui.urban.org

Washington, D.C., May 14, 2008—A revenue-spending mismatch, an overly complex tax system, the mushrooming alternative minimum tax, and the resurgent tax shelter industry are just a few of the problems the next administration and Congress will have to grapple with.

Eugene Steuerle’s Contemporary U.S. Tax Policy, second edition, details how federal tax policy since the 1950s has evolved and trains an expert’s eye on its considerable successes, shortfalls, and problems. An Urban Institute senior fellow and codirector of the Urban-Brookings Tax Policy Center, Steuerle prefaces his account with an explanation of important tax policy principles and an overview of the main actors and their changing roles. He closes his engaging narrative with a perceptive analysis of President George Bush’s unsuccessful second-term efforts to use commissions to reform Social Security and to rewrite the tax code.

“With the tax system providing not only the resources to support government spending but a quarter to a third of all subsidies, future elected representatives have no choice but to loosen and re-tie the tax-policy ropes,” says Steuerle, whose career in the tax policy arena spans three decades and includes service under several presidents, including deputy assistant secretary of the Treasury for tax analysis and economic coordinator of the project that led to the last major tax reform, the Tax Reform Act of 1986.

Steuerle exhorts readers to heed important but less-appreciated facts about the tax system, including the following:

Both political parties are united on one item: they like to give away tax breaks. These subsidies act like expenditures and look like tax cuts.

A progressive tax system, somewhat surprisingly, can be an instrument of conservative policy.  Almost all government growth in developed nations has come through adopting flat rate taxes like Social Security, which collects a lot more from those with less income.

The tax break for employer-provided health insurance, which costs more than $150 billion per year, is the largest federal health subsidy granted to the nonelderly and is growing faster than almost all other domestic programs.

The Internal Revenue Service does not just collect revenues; it administers social policy and children’s programs. The earned income tax credit (EITC) is now larger than any other welfare program, including Food Stamps and Temporary Assistance for Needy Families. In 2006, the federal government spent $41.2 billion on families through the EITC and $45.8 billion through the child tax credit, compared with $24 billion on welfare.

The tax system has come to look more and more like the expenditure system, with exclusions, deductions, exemptions, and credits expiring and coming up for regular, if not annual, consideration. By 2006, tax expenditures amounted to approximately $750 billion.

“Steuerle has written a book ... that ought to be studied by every member of Congress and, more important, addresses the insistent question: why is the federal tax system such a mess? The answer, in a word, is democracy,” wrote Robert J. Samuelson in Newsweek about the book’s first edition.

Contemporary U.S. Tax Policy, second edition, by C. Eugene Steuerle, is available from the Urban Institute Press (paper, 6 x 9”, 344 pages, ISBN 978-0-87766-738-4, $29.50). Order online at http://www.uipress.org, call 410-516-6956, or dial 1-800-537-5487 toll-free.

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