The following blog was adapted from a speech given by Mr. Graetz at the Tax Foundation’s 2021 “Tax Prom,” where Mr. Graetz was awarded the Distinguished Service Award.
I always begin my classes in Federal Income Taxation by reminding my students that the tax law is the primary link between people and their government—they all will have to wrestle with the tax law.
In 2020 an unprecedented 159 million Americans voted in the presidential elections. The IRS that year received nearly 170 million individual income tax returns, many for two or more people—and if we add business and non-income tax returns, the number of returns swelled to 240 million. Far more people file tax returns than vote.
Historically, tax issues have often been more concerned with the public’s connection to their government than with the taxes themselves. The Boston Tea Party is now remembered as a symbol of Americans’ historic antipathy to taxes, but it was actually more about the crucial importance of the people’s relationship to their representative government, not the additional 3-penny cost of a pound of tea. Fights over taxation are often about political power, what kind of government we want, what kind of country we will be.
On July 7, 1969, Congress was deliberating the 1969 Tax Reform Act, the most important tax legislation between 1954 and 1986. The country was bitterly divided then over the Vietnam War.
These divisions grew until the U.S. left Vietnam in 1975. In May 1971, thousands of antiwar protestors effectively shut down Washington, proclaiming: “If the government won’t stop the war, we’ll stop the government.”
But the national divisions did not poison the tax legislative process—that didn’t happen until much later. Democrat Wilbur Mills, the powerful Ways and Means Committee chairman, worked closely and congenially with the ranking Republican John Byrnes. In the three years that I worked with the committee, Mills always announced a “consensus” of the Democrats and Republicans on the committee. He took only one committee vote—none during the massive 1969 tax reform—and lost that in 1971 by one vote over a depreciation provision when Democratic colleague Joe Waggoner of Louisiana sided with all the committee Republicans, saying: “Let’s give Nixon what he wants, and when it doesn’t work, we can blame it on him.”
The Senate Finance Committee worked very differently under the charismatic leadership of Russell Billiu Long. Long—who Ronald Reagan described as “one of the most skilled legislators in history”—took a vote every five minutes or so, insisting that no vote was final until the last vote on the entire bill. You probably have heard of Russell Long, if at all, only for his famous poem: “Don’t tax you. Don’t tax me. Tax the fellow behind the tree.”
Republicans and Democrats on the Finance Committee frequently divided along partisan lines, but they were always congenial. The key issue dividing the two sides then was over increasing the personal exemption. It was political. Democrat Al Gore Sr. had made increasing the exemption his signature issue in his hotly contested reelection campaign. When the issue came up in the Finance Committee, Gore began pontificating: “I’ve been to the people this year more than anyone on this committee, and the personal exemption is the issue that they care most about.” Fellow Democrat Gene McCarthy, sitting a few seats down from Gore, referring obviously to his anti-Vietnam War campaign against President Johnson, said: “Last year I saw many more people campaigning than you have, and no one ever mentioned the personal exemption.” The committee’s ranking Republican, Utah’s Wallace Bennett, instantly quipped: “And we hope that both of your campaigns with the people end the same way.” The committee burst out in laughter. Partisanship was certainly present then, but so was mutual respect, civility, friendship, and good humor across the aisle.
Two decades later, things had changed. Tax politics in Washington had become more brutal and more relentlessly partisan. Tax issues had risen to the forefront of Republican and Democratic domestic policy differences. The ranking Ways and Means Republican Bill Archer said that he hardly knew the committee’s chairman Dan Rostenkowski, and Archer insisted that the White House legislative liaison negotiate with Rostenkowski.
That year Newt Gingrich nearly brought down George Herbert Walker Bush’s presidency. Newt claimed that he viewed the tax issue as the best issue dividing Republicans from Democrats and insisted that he broke with Bush over the president’s agreeing to a nickel-a-gallon increase in the gas tax as part of a bipartisan deficit-reduction agreement. But his congressional colleagues were more candid: they said that Newt had concluded that a visible, successful, public break with President Bush would improve the Republicans’ chance of capturing a House majority. Gingrich said later: “The number one thing we have to prove…was that if you explicitly decided to govern from the center, we could make it so unbelievably expensive you couldn’t sustain it.”
Three years later, Bill Clinton passed partisan legislation raising taxes with only Democratic votes. The next year, Republicans won a House majority for the first time in forty years. Fierce unrelenting partisanship had become a way of life in Congress.
The 2017 tax law passed with only Republican votes and if there is a tax bill this year, it will be enacted with only Democratic votes. The Republican Party has moved further to the right, while Democrats are moving left. The center hardly holds. Moderates in both parties are becoming endangered species.
In homes across America, families now fear for their livelihoods and rightfully worry about their children’s futures. Economic insecurity is ubiquitous. Far too many Americans face very steep barriers to economic mobility. For many families, this country is no longer the land of opportunity. But the two parties are still fighting over whether the top individual tax rate is 35, 37, or 39.6 percent—surely a trivial matter.
In this young century, we have faced terrorist threats, a financial crisis that nearly toppled the world economy, and a global pandemic. These are challenging times. But these are challenges we must face. I believe that as a nation we must find a way to bridge our partisan divides to succeed—facing these kinds of challenges is what we must come to work every day to do.
Michael J. Graetz is the Columbia Alumni Professor of Tax Law and a leading expert on national and international tax law.
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