Campaign finance reform is dead. Long live tax reform.The influence of “big money” on national politicians has long been a sticking point for liberal populists, and reforming our political system to “get money out of politics” has been a perennial liberal cause, uniting high minded good government types with union organizers (as long as it is corporate and private money being sidelined, and not labor).Decades of work and untold millions of liberal foundation money has been spent on limiting corporate donations to political campaigns through campaign finance reform measures (like the McCain-Feingold act) — but the recent Supreme Court decision in Citizens United now has threatened the viability of these efforts.For all the brouhaha over the Citizens United decision, however, campaign finance reform was never the ideal way to reduce the influence of special interests on politicians. Despite the howling from the commentariat about “opening the floodgates” of corporate money into politics, I have never been able to see how regulating the ability of people to spend their own money on elections is anything but a violation of the most basic of civil liberties.That doesn’t mean I’m not worried about the mix of political ambition and corporate self-interest. But it might make more sense to work on this problem from the demand side: reducing the incentive for lobby groups to pump money into politics by reducing the discretionary ability of lawmakers to tinker with the tax system.Carving out tax loopholes is where a lot of the Washington action is at. From a recent New York Times report:
The Senate Republican leader, Mitch McConnell, for instance, says he is open to ending tax breaks for special interests. But when it comes to a tax break he secured in 2008 for the owners of thoroughbred racehorses, he argues that the measure is essential for the protection of jobs in his home state of Kentucky.Senator John Kerry, Democrat of Massachusetts, says he too wants to eliminate such breaks, except when it comes to beer. He is one of the main supporters of a proposal that would cut taxes for small beer makers like the Samuel Adams Brewery in Boston. […]Tax breaks for industries both large and small add up to an estimated $123 billion a year — money that opponents see as lost revenue in austere times.One of the few members of Congress willing to talk about specific breaks that could be abolished is Senator Tom Coburn, Republican of Oklahoma.He released a 626-page report in June that included a section on what he considered to be dozens of needless tax breaks that were “little more than corporate welfare,” like vacation home deductions and special deals for the makers of fishing tackle boxes. He also ridiculed a bevy of loose guidelines that have allowed business deductions for cat food, toupees and breast implants for exotic dancers.
If reformers truly want to find a solution to the influence of special interests in politics, they should begin with the tax code, strip out the existing loopholes (reducing rates to make it revenue neutral) and look for ways to make it harder for lobbies and legislators to play games. Over the years, the tax code has become littered with thousands of small exceptions, written by individual politicians to benefit interest groups and political supporters in their state. Beer brewers in Wisconsin, horse farms in Kentucky, Nascar in New York — the countless minor tax exemptions for local businesses have made the tax code confusing and unwieldy, and have given politicians ample opportunity to throw bones to their political supporters at the public expense.A reformed tax code with flatter, broader and lower tax rates with fewer exemptions would remove the incentives for interest groups to sweeten politicians through donations. Such a plan could draw bipartisan support — Republicans have long wanted a simplified tax code with lower rates, while Democrats should welcome the closing of loopholes to raise revenue even at lower tax rates.At the same time, reformers should push to make it much, much harder to carve out new tax loopholes or put earmarks in bills. The press and public interest groups should name and shame lawmakers who support these breaks and those who vote for them should expect a rash of unfavorable publicity about money paid and favors done. Reformers should think about ways to change House and Senate rules that make it much harder to attach these proposals to other bills, and perhaps should require super-majorities for any proposal that reduces revenue by any method other than reducing overall tax rates.The tax base should be as broad as possible and rates on that broad base should be progressive but overall as low as possible, consistent with the health of the Treasury. Reducing the discretionary ability of politicians to earmark and loophole will not eliminate the influence of money in politics (nothing can or perhaps should do that completely), but it will reduce the incentive to bribe. It will also promote a more transparent debate over tax policy.Campaign finance reform was a detour. Tax reform is the way to get real and lasting political reform. It is a road that many liberals and conservatives could walk together if they tried. I hope they do.