Republic, Lost_ How Money Corrupts Congress--And a Plan to Stop It - Lawrence Lessig [94]
The answer, Kysar suggests, has lots to do with the nature of the beneficiaries. “The principal recipients of the research credit,” Kysar writes, “are large U.S. manufacturing corporations.” In many cases, the credit “cuts millions of dollars from the tax returns of a single corporation.” So, obviously “[t]hese business entities are more than willing to invest in lobbying activities and campaign donations to ensure the continuance of this large tax savings.”33
And they do. And the politicians they make these donations to have recognized this. And the lobbyists with clients eager to ensure that these extenders are extended have recognized this.
And these flashes of recognition have now produced one of the most efficient machines for printing money for politicians that Washington has ever created—by focusing and practicing and concentrating the money to inspire ever more tax burdens on those who don’t organize well (you and me) so as to fund ever-lessening tax burdens on those who organize perfectly well (the largest corporations and the very rich). Mancur Olson would not have been happy that he was so right.34
The pattern is obvious. As Kysar quotes one lobbyist:
With the extenders, you know you always have someone who will help pay the mortgage. You go to the client, tell them you’re going to fight like hell for permanent extension, but tell them it’s a real long shot and that we’ll really be lucky just to get a six-month extension. Then you go to the Hill and strike a deal for a one-year extension. In the end, your client thinks you’re a hero and they sign you on for another year.35
The cost of this game is only growing. In December 2010, the Wall Street Journal reported on “extender mania.” As they described, in the 1990s there were “fewer than a dozen” tax extenders in the U.S. tax code.36 Now there are more than 140. The Journal, however, didn’t even notice the dynamic at the core of Kysar’s argument. But to you it should be obvious. The system is learning, evolving, developing an ever-more-efficient way to create the incentive for people to contribute to campaign coffers: create a mechanism that threatens a tax increase unless a reprieve can be bought, and at least among those who can afford the reprieve (meaning the lobbyists and the funders), you can be certain that that reprieve will be bought. December 2010 saw the huge battle over whether “Bush tax cuts” would be extended for the very rich. But that was just a small part of the struggle that was actually going on. It was instead a gaggle of special benefits that got magically extended, through a dance that included billions spent on campaigns and lobbyists by those who got the special benefit.
And thus have we produced the inverse of the world that Reagan predicted when he said he quoted Tytler. But with us, at least in the context of taxes, the problem is not the voters’ voting themselves “largesse out of the public treasury.” The problem is Congress’s learning how it can threaten the richest in our society with higher taxes, so as to get them to give the endless campaign cash Congress needs. So, modifying Tytler just a bit, we could say:
A democracy cannot exist as a permanent form of government. It can only exist until the voters [congressmen] discover they can vote themselves largesse out of the public treasury [by playing around with the tax code]. From that moment on the majority [in Congress] always votes [to sunset the tax benefits of] the candidate [the citizens and corporations] promising the most benefits from [to] the[ir campaign] treasury—with the result that democracy always collapses over loose [tax] policy.
New York real estate mogul Leona Helmsley famously said, “We don’t pay taxes. Only the little people pay taxes.”37 Now you have a sense just why.
But what about Reagan’s 1986 tax reform? you ask. You’ve already called it his most important tax legislation.