Grotesque Complexity and Other Historical Details
In today’s Wall Street Journal, economic historian John Gordon Steele has “a short history of the income tax.” Here’s the lede, but the complete piece is worth reading in its entirety, especially to understand why today’s federal tax code “is grotesquely complex, often arbitrary, and corrupted by mutual back-scratching between members of Congress and influential lobbyists:”
“Whether the "millionaires and billionaires" are actually paying their fair share of taxes is a matter for the electorate to decide. After all, fairness is hardly an objective standard.
“Before the modern era, however, the federal tax system was manifestly unfair by any reasonable standard, grossly biased in favor of the well off. Ironically, attempting to fix that unfairness is what has brought us to the present moment, with a federal tax system that is grotesquely complex, often arbitrary, and corrupted by mutual back-scratching between members of Congress and influential lobbyists.”
If you don’t believe that “grotesquely complex” comment, consider:
"The income tax act of 1913 had been 14 pages long. The Revenue Act of 1942 was 208 pages long, 78% of them devoted to closing or defining loopholes. It has only gotten worse."
A second Journal op-ed this week discusses the “untold story” of stimulus and the Depression. It's written by economics professors Harold Cole and Lee Ohanian, and says in part:
“Proponents justify stimulus spending in part based on the widely held view that government-fueled increases in "aggregate demand" during FDR's New Deal ended the Great Depression and brought recovery. Christina Romer, former chairwoman of Obama's Council of Economic Advisers, has argued in op-eds that government should continue to spend for this reason. And in a 2002 speech as a Federal Reserve governor, current Fed Chairman Ben Bernanke claimed that monetary expansion and the turnaround from the deflation of 1932 to inflation in 1934 was a key reason that output expanded.
“But boosting aggregate demand did not end the Great Depression. After the initial stock market crash of 1929 and subsequent economic plunge, a recovery began in the summer of 1932, well before the New Deal. The Federal Reserve Board's Index of Industrial production rose nearly 50% between the Depression's trough of July 1932 and June 1933. This was a period of significant deflation. Inflation began after June 1933, following the demise of the gold standard. Despite higher aggregate demand, industrial production was roughly flat over the following year.”
The entire Cole/Ohanian essay is also worth reading.
Kudos to the Wall Street Journal for published these two articles.