We need nonpartisan institutions, dedicated to objective analysis. That’s what the Washington, D.C.-based Tax Policy Center does — they score and analyze tax proposals so we can figure out what they’ll mean for taxpayers. But it’s increasingly difficult for nonpartisan organizations to get heard.
Unbiased analysis is a passion of mine. It’s also a passion of the respected economist Len Burman, an institute fellow and former director at the Tax Policy Center, and a former senior Treasury Department official in the Clinton Administration. (OK, he’s also my cousin, but that doesn’t make him any less smart.) If you want to know how Washington works, Len has seen a lot of it from the inside. So I interviewed him.
You have been the head of the Tax Policy Center for two stints totaling more than a decade. It’s a nonpartisan organization. Can you describe what it does, and how it’s possible to be a nonpartisan organization in Washington?
We created the Tax Policy Center to try to educate the public about taxes. Our theory was that good analysis clearly conveyed without any spin or bias would lead to better policy. It’s important because we need a working tax system to finance the government. Also, we use the tax system is a way of providing public services. For example, the earned income tax credit is the biggest cash assistance program for working age families. The tax code includes hundreds of billions of dollars of subsidies for health insurance, homeownership, and retirement savings. Do these subsidies make the economy work better or more fairly fairer? Are they worth the cost in terms of larger deficits and increased tax complexity?
We certainly can be nonpartisan, and we are. We have high level staff who have served in both Democratic and Republican administrations (and many others who have never held political appointments). Our advisory board is similarly diverse. Our only rule is that analysis must be evidence-based and we try to avoid language that reasonable people on the left and right might perceived as partisan.
Partisans are sometimes unhappy with us, but that is to be expected. Generally, they like us when our analysis supports their proposals and are unhappy when it doesn’t. In the same TPC session in which a Trump representative, Peter Navarro, attacked us for being partisan and incompetent, he also read approvingly from the parts of our reports that he liked (including critiques of Hillary Clinton’s proposals).
What do you think are the stupidest elements of the tax code, that would be easiest to fix?
There are lots of stupid elements and none of them is easy to fix politically. The alternative minimum tax (AMT) is the poster child for pointless complexity. After you have calculated your income taxes under the regular rules, you must calculate taxes under a different set of rules and tax rates. If that calculation produces a higher tax bill, you pay the difference as AMT. It was originally intended to rein in tax shelters, but it mostly hits upper middle income households. If Congress thinks that certain provisions produce an unwarranted tax benefit (and some certainly do) it should just repeal or modify those provisions. A bunch of phaseouts in the tax code are complicated and confusing. For example, itemized deductions are reduced for taxpayers with high incomes. It is actually an obfuscated income surtax (about 1.2% for taxpayers in the top bracket), but confused taxpayers think it reduces the tax savings associated with charitable deductions. The phaseout might reduce donations, which is clearly counter-productive. It would be much better—and simpler—to ditch the phaseouts and explicitly adjust tax rates.
Can you describe in a general way what the likely effect of Trump’s tax plan would be on families and businesses in the US?
Trump’s tax plan would cut marginal tax rates on individuals and businesses, with most of the benefit accruing to those with very high incomes. It would cut federal tax revenues by more than $6 trillion over the next decade. It would move the tax system in the direction of a consumption tax, which many economists think could boost growth. It would cut tax rates on new investment, which would also stimulate the economy in the short run, but unless spending is cut dramatically, rising debt would push up interest rates which would eventually deter investment and harm the economy. The plan would also eliminate the estate tax.
When you did your analysis of Trump’s tax plan, his campaign attacked you. Is that unusual? What do you think it says about the changing political climate?
It was unprecedented. We have heard privately from campaigns in the past—both Democratic and Republican—that they were unhappy with aspects of our analysis, but I think most understood that we could not conform our analysis to campaign spin.
On one level, we take the attacks on TPC as a sign of our success. If people weren’t paying attention to our analysis, we wouldn’t be worth attacking. The Trump campaign’s attacks are on another level. I am hoping they are idiosyncratic to the Trump campaign and don’t say anything about the changing political climate, but only time will tell.
You were a senior official in Bill Clinton’s Treasury Department, under Treasury Secretary Larry Summers. What was it like to be a senior government official? Was was the best part of that? What was the worst?
One of my favorite songs in the musical, Hamilton, is “Room where it happened,” expressing a yearning to be in the room when important policy decisions are made. I got to be in the room where it happened for every tax proposal in the last two years of the Clinton Administration (and, surprisingly, there were a lot). I got to shoot down a lot of bad ideas and, even in cases where my wise counsel was rejected, I had my say. I had a fantastic staff and I learned a huge amount about the tax system. The experience gave me the credibility and knowledge to be able to start the Tax Policy Center.
The worst part: being on call 24/7, which took a toll on my family life. Next worst: when I lost the internal policy argument, I sometimes had to give speeches supporting policies that I thought were ill advised. I never said anything that I thought was false, but spin is a form of deception. I didn’t like that.
Donald Trump has come up with some very dumb and dangerous ideas. But let’s stick to tax policy. Which of his ideas do you think would be the most dangerous for the economy, and why?
$7 trillion in additional debt at a time when the retirement of baby boomers and rising healthcare costs will put unprecedented demands on the federal government is a really bad idea.
Why can’t economists talk in language that regular people can understand?
I like to think that some of us can. Part of the problem is that we use mathematics and models to make sense out of complex economic systems. Sometimes that stuff is just hard to explain. We have a language that is very efficient for communicating within the profession. Translating for people that don’t have the background in economics either requires a lot of explanation or a lot of simplification. Our peers will often take us to task if we oversimplify.. “You said X, but X isn’t true under certain circumstances.” (We also like to use symbols, like X.)
That said, I think it’s important to communicate with real people, particularly if you want them to support better policies. I am willing to oversimplify a bit, especially where simple stories are consistent with empirical evidence, but I also think it’s important to cite the rigorous research that supports the anecdotes. That’s why I love hyperlinks. I can present a simple intuitive story with links for those who want to examine the rigorous underpinnings of my analysis.