A Stitch in Haste

This is what one chamber of Congress does to the tax code when it's in a hurry:

--Lets taxpayers with incomes of $65,000 or less ($130,000 for couples filing a joint return) deduct $4,000 for higher education costs. The deduction is $2,000 for those earning up to $80,000 (or $160,000 with joint returns). The cost is $3.3 billion over two years.

--Extends through 2007 a research and development tax credit that offers a 20 percent credit for new activities. The cost is $16.3 billion over five years.

--Extends through 2007 the welfare-to-work tax credit under which employers can get a maximum credit of $3,500 for the first year of employing a person who has received public welfare.

--Extends through 2007 the deduction of up to $250 for teachers who personally buy classroom supplies. The two-year cost is $379 million.

--Extends through 2007 the option of taxpayers from states without income taxes to deduct state and local sales taxes. The seven affected states are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. The cost is $5.5 billion over two years.

Can you imagine what they do when they're able to take their time about it?

Now, after we get through the obligatory libertarian harumphing, consider the alternative: a national sales tax.

Does anyone honestly believe it would be any different?

Some advocates of replacing the federal income tax with a national sales or consumption tax insist that these tax preferences and loopholes would vanish if we switched to a consumption. Why?

Does anybody honestly believe that Congress will impose a national sales tax on baby formula? Or food in general, for that matter? Or rent? Or a trip to the emergency room?

Now imagine the sales taxes that Congress would pass: Buy an American car instead of Japanese — get a sales tax break. Buy a desktop computer (a middle-class device) — get a tax break. But Blackberries — a vanity of corporate executives? Tax them. Coach airfare? Tax free. First Class? Tax it. Whole Foods tax-free; KFC taxed.

And so on.

Remember always: these are politicians we're talking about. It is preposterous to presume that they will behave any differently under one tax regime than they will under the other.

And it's not only preposterous but also flat-out dangerous to think that we can go from a federal income tax today to a federal sales tax tomorrow without going to both taxes the day after tomorrow. Are you willing to take that chance?

The problem is not primarily how we tax, it's how much we tax. And how politicians are allowed to manipulate whatever tax system we happen to have.

Lower taxes generally, and the loopholes will take care of themselves.