On this, the morn of All Hallow’s Eve, it is fitting that we investigate the hidden meanings, the veiled purpose, and the masked intent behind the names given to our tax laws.
Who was that masked man? Who is that behind all those goblins, devils, ogres and witches disguises lined up at our door? Don’t be afraid, they're all good, even that masked man. But something sinister is lurking about. That apprehension you feel comes from fear of the unknown. We don’t really know what our tax laws are about given their names.
While hidden meaning and subtle nuance has always existed when legislative bodies name the laws they enact, this has become a blood sport for Congress. Not only are tax debates hot and bothered, but behind all of those smiling face masks suggesting friendship and compromise, deep, bitter political divide and hidden agendas are masked even further by names designed to obscure legislative intent.
For the first 75 years under the 16th Amendment, most tax laws included the term ‘Revenue Act’ in their name. Given the subject of these laws was taxes, this common term made some sense. In the modern era, a time of political correctness complicated by euphemistic expression, the names given to various tax laws have become nearly impossible to interpret.
The first designation, the first misnomer I want to strip away is that of reform. My last post concluded with the introduction of the Tax Reform Act of 1986 had been enacted. With a foul taste in my mouth, I ended that post just as the plot was thickening, like a pot of caramel for caramel apples.
As reform measures go, this was a major step. It has been reported that the intent of this law, given impetus by a the Treasury Department’s tax-simplification proposal, was to simplify the income tax code by eliminating many tax shelters and other preferences. Leaving aside the very fair question, hasn't that been done already, it is unclear whether this measure accomplished its primary goal.
Wikipedia reports that, as of 2014, the Tax Reform Act of 1986 was the most recent major simplification of the tax code, drastically reducing the number of deductions and the number of tax brackets. Perhaps, although I do not believe reducing the number of brackets has anything to do with tax simplification.
The word ‘Reform” has been used at least seven times over the past three decades. Seven times! Why can’t Congress get it right? Frankly, I do not believe it is that Congress cannot get it right. I believe it is because members of Congress do not know the meaning of reform. Surprising. Shocking really, given that most members of Congress are lawyers and words are the tools of their trade.
In my last post, I offered some definitions of the word. In none of those can you find tinkering or adjusting or fine-tuning. Reform suggests a fundamental change. We have never done that, not even with the oft praised Tax Reform Act of 1986. Frankly, our tax code is, and has for a long time, been a hot mess.
Like children roaming neighborhoods tonight filling bags and sacks and pillow cases with goodies, let’s gather other examples of the misunderstanding Congress creates with its mystifying approach to choosing names for its creations.
The Omnibus Budget Reconciliation Act of 1990 was passed to reduce the Federal Budget Deficit. Nothing threatening in that name. Forget that it increased both individual tax rates and Alternative Minimum Tax rates, it lowered or restricted deductions and added or increased a host of excise taxes. Maybe it should have been called the Pay More Tax Act of 1990. At the risk of expressing a cynical view, this misnomer might have been due to President George H. W. Bush’s 1988 campaign promise not to raise taxes. Nah, maybe it was just a poor choice of names.
An APB was put out for the tax law passed in 1993. This law, the Omnibus Budget Reconciliation Act of 1993 was signed into law by President Clinton. Attempting to avoid prosecution, it employed a host of aliases, aka the Deficit Reduction Act of 1993 and the Revenue Reconciliation Act of 1993 (at least Part XIII.)
But this law also raised rates. Some say significantly so. How about we call this the Pay Even More Tax Act of 1993? Had Congress waited a generation, we might have called it the Pay More Tax Act, Jr.
Congress has the opportunity to witness a variety of entertainers at this or that gala. One such entertainer is Bill Engvall. It is possible that Congress took his now famous punch line, “here’s your sign” and modified it to its own use.
Here’s your mask.
So began a series of laws, up, down and sideways, with none of them referring to Revenue. We were promised tax relief, tax reform, economic growth or a job. But the truth of these laws was masked behind a name which hid its true purpose.
In 1997 we had the Taxpayer Relief Act of 1997. Yes, this law lowered rates which had been increased under the two previous laws. Can't really call it relief. Not sure about you but I still need my Rolaids. How do I spell relief? R E A L T A X R E F O R M. Real, meaningful and lasting.
Henceforth, the names of our tax laws would include a given name, surname and several middle names, masks, one and all. In 2001 Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001, fondly referred to as Egg-tra. Do you like your eggs over easy or sunny side up? I am not sure if we were going to get economic growth or had to get out a calculator to reconcile the relief we had been previously given. Here’s your mask.
Nonetheless, this tax law contained some fairly serious tax cuts. Many were phased in over the next 9 years and many had sunset provisions by which they would expire. Sort of your basic on again-off again tax law scenario. A report published by the Heritage Foundation asserted the cuts would result in the elimination of the national debt by 2010. How did that work out?
And yet Congress continued their efforts. Now we had the Job Creation and Worker Assistance Act of 2002. One of the major provisions was the increase of the carryback of Net Operating Losses. There’s something that I know creates a lot of jobs.
Well, maybe not. The following year, Congress gave us the Jobs and Growth Tax Relief Reconciliation Act of 2003. Jobs, jobs and more jobs. Even I am starting to get confused. It now appears Congress takes its cue from theater, giving us two masks. One is a smiling comedy mask and the other a frowning tragedy mask. But the tragedy of Congressional ineptitude is no laughing matter.
But ya gotta love our Congress. Because we were still not getting job growth they intended it passed the American Jobs Creation Act of 2004. More jobs and yes, here’s your mask.
It gets even better. Next we have the Tax Increase Prevention and Reconciliation Act of 2005. I still don’t know what it is I am supposed to reconcile but I am pleased to learn that we have a law that prevents tax increases. Well, actually no. What this law did was to extend EGGTRA provisions that were set to expire. Thus began the annual, extend the tax cuts before December 31st roller coaster ride that operates yet today.
Not yet satisfied, Congress passed the Tax Relief and Health Care Act of 2006. Don’t be confused, this is not Obamacare that you have heard so much about. Anyway, this law extended some tax credits retroactively. Sort of like retreating to the rear. Mask, anyone?
Recognizing their previous efforts to create jobs, grow the economy and offer tax relief had been unsuccessful, Congress enacted the Economic Stimulus Act of 2008. Truth be told this should have been called the Something for Everyone Tax Giveaway Act. That is what it did. Beginning with $300 for almost every taxpayer, it provided billions for various companies that found themselves in deep do-do.
Even this latest effort was obviously insufficient as only 8 months later Congress passed the Emergency Economic Stabilization Act of 2008, known as the law that created TARP. We are talking about the giveaway of serious billions here!
These last two measures were done under Republican Administrations. Not to be outdone, Congress, during President Obama’s first year in office passed the American Recovery and Reinvestment Act of 2009, also known as ARRA or the Stimulus or The Recovery Act.
Confused, dazed, shell shocked, Congress believed it had not yet done enough damage so next it approved the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Great! More relief and more jobs! By that time, one might suspect America would be at 110% employment with the creation of so many jobs. Actually, no! Not so much!
Remember that on again-off again roller coaster. One of the major provisions of the Act of 2010 was to extend yet again certain sunset provisions of EGGTRA. Guess what! Congress had to do so even still and did with the passage of the American Taxpayer Relief Act of 2012. Even more relief for over relieved taxpayers.
The Patient Protection and Affordable Care Act was passed by Congress and signed into law by President Obama on March 23, 2010. Obamacare! Before a year had passed, this law was amended by the Health Care and Reconciliation Act of 2010. At first glance, these laws had nothing to do with taxes. Rather, the original name conjures images of security guards patrolling hospital corridors and handing out coupons.
Make no mistake, this law added new taxes, created new refundable tax credits for individuals and generated new business tax credits. It mandated tax penalties for those who choose not to obtain coverage and employers who do not offer coverage to eligible employees. Despite being portrayed as health care reform, it is clearly a major piece of tax legislation, adding to the already confusing, complex tax code. You guessed it. Here’s your mask.
I can’t begin to get into the issue of the Taxpayer Bill of Rights. We are now on version three. Our founder’s were able to express our most basic rights in 10 short Amendments that have lasted centuries. The first Taxpayer Bill of rights was included in the Technical and Miscellaneous Revenue Act of 1988. Version III came about in 1998, when Congress passed the Internal Revenue Service Restructuring and Reform Act of 1998. Just keep running that play ‘til ya get it right.’
And they do not have it right today. Not any part of it. Relief! Reform! Really?
I have some advice for Congress. You want to create jobs and stimulate the economy? How about not changing the rules of the game every year! You want to give taxpayers real relief? Try not turning the tax code into a lottery!
Hi ho Silver, Away!!!