Here we go again
I’ve been there before
And I’ll try it again
But any fool knows
That there’s no way to win
Here we go again.1

“The constitutionally-granted ability of Congress to tax naturally entails an ability not to tax. Congress can tax Peter to pay Paul, or it can forebear from taxing Peter…. Peter will be willing to pay politicians not to be taxed.”

Although President Bush has focused on reform of the social security system in the early days of his second term, he has also pledged to fix the tax system. Earlier this year, he created a Presidential Advisory Panel on Federal Tax Reform, to recommend ways to make the U.S. Tax code simpler. In his first term, he also made income tax rates lower and flatter. Now, there is discussion of moving to a national sales tax (which is certainly a flat tax), or to some other fundamental changes that might replace the Internal Revenue Service and its 40,000 pages of tax regulation. The President is basing his appeal for tax change on the notion that changes can be installed and will persist over the long haul. In his executive order creating the Advisory Panel, he stressed that reform should “promote long-run economic growth.”

President Bush’s appeal for revamping the tax system is based on arguments that have been around for some time now. In 1983, Robert Hall and Alvin Rabushka published a book advocating a Low Tax, Simple Tax, Flat Tax, a book that has influenced many students of taxation.2 But advocacy of simpler, flatter taxes goes way back. Irving Fisher, Henry George and many others argued in favor of simplicity and durability in taxation.

For a basic overview of the definitions of taxes, flat taxes, and the economic value of simple taxes, see “Taxation, A Preface,” by Joseph A. Minarik in the Concise Encyclopedia of Economics. See also the biographies of Irving Fisher and Henry George for their contributions to the understanding of taxation.

A simpler tax system always eludes our grasp, however. This might seem curious. It goes without saying that simple taxes are better economically. Simplicity translates directly into lower transaction costs in actually filing taxes: no midnight oil required on April 14. As President Bush said in creating the Advisory Panel, “A simple code will make it easier on taxpayers.” The opportunity costs created by complicated taxes are manifest: more lawyers, accountants and tax-preparers. And flatter taxes entail less economic distortion and smaller substitutions of work for leisure by society’s most productive people.

In short, there is nothing good, economically, to be said for our chaotic and inequitable tax system. Because lower, simpler, flatter taxes are so self-evidently good, it seems to many that such a system must be just around the legislative corner. Hope springs eternal that Congress will appreciate the gains from simple, flat taxes, and legislate accordingly. And sometimes, it truly seems that politicians have seen the light.

See also the article on Reaganomics in the Concise Encyclopedia of Economics.

One recalls, for example, the radical makeover effected by the Tax Reform Act of 1986, in the heart of Ronald Reagan’s second term. Readers of a certain age will recall that the 1986 legislation was hailed as inaugurating a new era of simpler, flatter taxes—and in particular, as representing an improved tax system that would endure. Although the 1986 legislation followed numerous prior changes to the tax code in 1981, 1982 and 1984, the 1986 act was hailed as achieving lasting tax reform. Rabushka himself proclaimed that (thanks at least in part to his book) long-term tax sanity had finally arrived, and was here to stay.3

There were many reasons at the time to question this optimism.4 Legislation of lower, flatter taxes had passed many times before: during the 1920s, the late 1940s, and the mid-1960s. But these episodes were just transient spasms, downward blips providing only temporary respite to the long-term rise in income taxes. The very fact of spasmodic changes meant that, over the long haul, the tax system was only becoming more complicated.

Why is it, then, that the ideal of durable tax simplicity proves unattainable? The answer turns on several fundamental aspects of taxation in America. What follows are the five easy pieces to understanding our current tax dilemma.

First, the constitutionally-granted ability of Congress to tax naturally entails an ability not to tax. Congress can tax Peter to pay Paul, or it can forebear from taxing Peter. It has a property right over Peter’s money, which it can exercise in various ways. This political property right over his money is naturally of interest to Peter (as well as to Paul).

But second, the ability to tax means there is another party who has a stake in taxation: the politician himself. As politicians have the ability to take money from Peter, Peter will be willing to pay politicians not to be taxed, as long as the amounts of political tribute demanded fall short of what Peter would lose under any proposed tax. Indeed, the ability of those who would be affected by legislation to give money to politicians is constitutionally guaranteed under the First Amendment.5 If a politician submits a bill to tax my income or property, I have the constitutional right to pay him (directly through a campaign contribution, indirectly by contributing to a political action committee that is supporting him) to induce him to withdraw the bill.

Not surprisingly, then, politicians routinely submit legislative bills that would take money from various persons or groups, and then withdraw them once (constitutionally protected) payments are made. These bills go by different names. In California they are called “juice bills,” referring to their ability to squeeze those who would lose from taxation unless they pay up. In Illinois, they are called “fetcher bills,” for their ability to fetch money from otherwise victimized taxpayers who pay to avoid the greater financial pain. “Milker” bills is another term used, for obvious reasons.

So, for politicians, the ability to tax is the ability to cash checks. It should hardly be surprising that, year in and year out, politicians who sit on the Senate Finance Committee and the House Ways and Means Committee outpace their colleagues in amounts of campaign dollars received.6 I sat once on a panel concerning taxation that included Congressman Wyche Fowler of Georgia, who had recently announced his bid to become senator from Georgia. Fowler had also managed to get a seat on the House Ways and Means Committee, a move that, he stated publicly, was motivated by his need to raise money for his senatorial bid.

Third, politicians therefore have an incentive to stir the taxation pot in order to generate political contributions. With every proposed change, somebody’s ox will be gored, and so somebody’s wallet will be open. The Tax Reform Act of 1986 was the fourth bit of tax legislation in six years of Ronald Reagan’s presidency. President Bush has already been to the tax well, even before debate opens on his latest proposals. Various studies have documented an accelerating rate of tax change—that is, decreasing durability of any tax legislation.7

For example, the Tax Reform Act of 1969, the first major overhaul of the 1954 version of the Internal Revenue Code, affected only 271 subsections of the Code. By comparison, six major bills legislated between 1976 and 1984 affected 5, 815 Code subsections. And then came the radical changes wrought by the 1986 act. There have been numerous tax-code changes since 1986. Historically speaking, anyone betting on durable tax rules is a chump.

But isn’t it in the interest of both the taxers (politicians) and the taxed (you and me) to conclude longer-term deals, achieving some durability in our tax system? Long-term deals lock in more sensible tax provisions and provide greater certainty as to the future, which is of benefit to both sides. Legislators (especially those on the tax committees) can charge more for longer-term tax benefits. Those who would otherwise be taxed will pay more for longer-term forebearance from the tax man. It would seem that an accelerating rate of tax change means both sides are leaving money on the table.

But, fourth, there is a second property-rights problem connected with the tax system. Politicians may have a right to shake Peter’s money tree by threatening to tax him, but politicians have no property rights to their elected office. If Senator Snort, chair of the Senate Finance Committee, will not be in office for very long, he cannot offer a long-term deal. His successor, not party to any contract with otherwise-taxed citizens, has no incentive to abide by any deal Snort makes. Realizing all this, Peter will offer less to Snort, and Snort will take what he can get.

And so, fifth, the question is empirical. Has the tenure of political sellers of tax change declined over time? Yes, it has. Gone are the days of Wilbur “Swimmer” Mills and Bob “Groper” Packwood, who presided for many years over their respective House and Senate tax committees. (Pop quiz: who succeeded Congressman Mills, and how long did he chair the House Ways and Means Committee?8)

Once one understands the relevant set of property rights, one begins to despair of any long-term relief from our current tax nightmare. The entire scene is reminiscent of Lucy holding the football for Charlie Brown. Every time she puts the ball down and he tries to kick it, she pulls it away at the last minute. And like Americans yearning for some rationalization of our taxes, Charlie Brown never gives up hope that, the next time, she’ll keep the ball in place.

But Charlie Brown’s optimism makes more sense than the pie-in-the-sky hopes that America will get enduring tax changes. Lucy at least owns the football. She can change her behavior. But politicians have no property rights that would allow long-term tax reform—even if politicians had any incentive to effectuate it in the first place. Tax relief is routinely sold to those willing to pay for it, but both sides know that these are only short-term sales. Politicians lose their offices or retire, and their elected replacements are not party to the earlier deal. They will demand a new deal from the taxed, which of course the taxed foresaw.

None of this is to say that making things better, even in the short run, is undesirable. An observer’s excitement over current prospects for change must be tempered, however. We have been through this so many times before. But here we go again.


Don Lanier & Red Steagall, “Here We Go Again” (BMI). The song was popularized by Ray Charles, reaching #15 on the Billboard record charts in June, 1967.

Robert E. Hall and Alvin Rabushka, Low Tax, Simple Tax, Flat Tax, McGraw-Hill, New York, 1983.

Alvin Rabushka, “The Tax Reform Act of 1986: Concentrated Costs, Diffuse Benefits—An Inversion of Public Choice”, Contemporary Policy Issues, October 1988, 50-64.

Fred S. McChesney, “The Cinderella School of Tax Reform,” Contemporary Policy Issues, October 1988, p. 65.

Buckley v. Valeo, 424 U.S. 1 (1976).

See Richard L. Doernberg & Fred S. McChesney, “On the Accelerating Rate and Decreasing Durability of Tax Reform,” 71 Minnesota Law Review 913 (1987); Richard L. Doernberg & Fred S. McChesney, “Doing Good or Doing Well?: Congress and the Tax Reform Act of 1986,” 62 New York University Law Review 891 (1987).

These studies are discussed in the two articles cited in note 6, supra.

Rep. Al Ullman, for six years.


*Northwestern University: Class of 1967 / James B. Haddad Professor (LawSchool) and Professor (Kellogg School of Management). Fred S. McChesney’s email address is f-mcchesney at

For more articles by Fred S. McChesney, see the Archive.