How to Get Real Tax Fairness

This Op-Ed originally appeared at Ten Miles Square, a blog of The Washington Monthly magazine.

Leaders from both parties and both chambers of Congress have vowed to wipe the tax code clean and scrutinize every deduction, credit, and expenditure. They claim to be on the lookout for good ideas that can serve as pillars for meaningful – and fair – tax reform.

If they are serious about this endeavor, one central objective of tax reform should be to help close the ever-widening gap in wealth between the families at the top and at the bottom.

We know tax rules have been amended over the years to favor higher-income families, playing a substantial role in reinforcing economic inequalities. Current tax rules create costly tax shelters rather than well-crafted incentives. Each year the government allows more than $140 billion to go untaxed through preferred treatment of savings accounts like 401(Ks) and IRAs. Yet we know from a Congressional Budget Office study that two-thirds of these benefits get funneled to the top 20 percent of earners who make the bulk of the contributions to these tax-advantaged accounts. The lower 60 percent of income earners—the very families that could use the support—are allocated just 16 percent of the tax benefits.

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