Fair, logical tax plan takes on the rich and their lobbyists

While the rest of us were fussing and cussing with our federal income-tax forms, Sen. Ron Wyden was on the stump trying to attract attention to his bid to overhaul the nation's maze of tax laws.

With media attention focused on Iraq, immigration and various foibles of the Bush administration, the Oregon Democrat has yet to make a splash. But his time could come, if the November elections produce Democratic control of either house of Congress or even a major increase in Democratic seats.

Wyden calls his plan a "simpler, flatter, fairer" tax, and it is breathtaking in its scope, and perhaps its naïveté.

The scope covers all income: wages, salaries, dividends, interest and corporate earnings. And it really does flatten the brackets — personal brackets are reduced from six to three, and a single flat rate is set for corporate taxes.

The naïveté occurs in believing that corporate taxpayers and the upper tenth of Americans who have benefited from the Bush tax cuts will agree to any reform of this nature. And it is they, not the rest of us, who set tax policy in this country.

Wyden is not a naïve fellow. He is a skillful politician whom I met 30 years ago when he was lobbying senior-citizen issues in Oregon. In 1980, he dumped a veteran Democratic incumbent in Portland's 3rd Congressional District, then moved to the Senate in 1996, replacing Republican Bob Packwood. A new member of the Senate Finance Committee, which Packwood chaired when Congress adopted the sweeping tax reforms of 1986, Wyden hopes to vault over more-senior colleagues with an issue Democrats could embrace in 2006 and 2008.

A gangly fellow with a squeaky voice and the energy of the college basketball player he once was, Wyden has always sensed when an issue is ripe, and he has an uncanny feel for media. His tax bill is still beneath the mainstream radar, but it has attracted the notice of columnist David Broder, the most influential Washington pundit, and has gained notice in professional tax journals, which will assure policymakers are attentive. His House co-sponsor, Rep. Rahm Emanuel of Illinois, sits in the inner circle of House Democrats.

Wyden promotes his plan as one that "treats income from work and wealth equally, and ends breaks that have shifted the burden onto middle-class Americans." It would do this by eliminating tax breaks for those who make their income entirely or predominantly from investments, putting them on a par with wage earners. And it would strip various corporate-tax loopholes, which allow huge corporations to escape taxes through a variety of schemes.

For the harried middle-class family, with all of its income taxed and its deductions limited, it would provide a higher standard deduction and allow a flat deduction of state and local taxes without itemizing. Deductions for home mortgages, child credits, health and retirement savings would remain. The alternative minimum tax would be repealed. A one-page form would suffice for most taxpayers, Wyden says.

There should be little need for tax preparers under this system, at least for an average family. Add another lobby to oppose the legislation.

"The people who gain (from a proposal) are invariably skeptical," Wyden told me recently. "But people who are going to lose will do everything to get you."

In his case, that will mean not only the tax-preparation industry, but also the corporations that have succeeded in placing some 14,000 tax breaks into the sweeping reforms of 1986.

Pulitzer Prize-winning journalist David Cay Johnston refers to the winners under these amendments as "the political donor class." Recalling his introduction to reporting the specialized world of taxes, Johnston writes: "What surprised me more than anything else was the realization that our tax system now levies the poor, the middle class and even the upper middle class to subsidize the rich. If you make $30,000 to as much as $1 million you are literally being taxed so that the super rich, the 28,000 (individuals) with incomes of more than $8 million, can pay less."

The nonpartisan Congressional Research Service tells Wyden his measure would lower taxes for families earning up to $150,000, by increasing the burden on the upper levels. Reducing this disparity would seem logical, but it flies in the face of the clout the rich and their lobbyists enjoy on Capitol Hill.

Lobbyists and hidden breaks are suddenly not in fashion, however — perhaps an indication that Wyden's sense of timing on an issue may once again prove to be correct.

Floyd J. McKay, a journalism professor emeritus at Western Washington University, is a regular contributor to Times editorial pages. E-mail him at floydmckay@yahoo.com