The Presidency

By Hugh Sidey

In every era there are a few issues that redefine the nation's purpose. In past decades they have been matters of war, race and poverty. The idea that a taxreform program could become a struggle that would touch the American soul seemed a fanciful fiction of accountants. But something odd is happening in Washington.

Men like Treasury Secretary Donald Regan (once a financier), Internal Revenue Commissioner Roscoe Egger (an accountant) and former Assistant Treasury Secretary John Chapoton (a lawyer), who in past incarnations tried to exploit tax loopholes and shelters for moneyed clients, have taken the case for Uncle Sam. They are now troubadours for the national purpose through tax reform, and they have captured the patriotic fervor of Ronald Reagan. One of the reasons that the President agreed to switch the portfolios of Regan and White House Chief of Staff James Baker was to get maximum horsepower behind his drive for tax reform and the related issues of economic growth and Government spending restraint.

The new program, with the indigestible title Tax Reform for Fairness, Simplicity and Economic Growth, is gaining adherents, though swarms of lobbyists for just about everything from corporations to charities are still determined to kill or alter it. The special interests love the brier patch of the current tax code, which takes up 33 feet of shelf space and has enough shadowy havens to hide almost anything. "It was easier to get tax legislation than take other action," says Chapoton. Before long, the U.S. tax system was setting industrial policy. "Investments were being based on tax considerations," explains Egger. "Prices in real estate became of no concern. Tax benefits were being sold." Decisions in business, Egger points out, "should be based on economics, not on taxes." The overhaul proposed by Treasury, says Tax Scholar Charles McLure, who was a principal draftsman, is "a free-market manifesto." Ronald Reagan is a client.

Another factor is the disillusion over the current code. IRS officials say more and more people are bucking the system in a variety of ways, from petty cheating on tax forms to holding off IRS agents with shotguns. Whether we like to admit it or not, the U.S. is great because it has always found money to meet its problems. The Treasury calls this special quality "taxpayer morale," the willingness of citizens to finance Government activities. That morale has rested on the belief that everyone was paying a fair share. Now that collective faith is in jeopardy.

Successful American Presidents have carried the nation forward because they have rarely if ever had to worry about resources. Perhaps Reagan, intimidated by deficit concerns, feels more limited than his predecessors in the Oval Office. Thomas Jefferson instantly accepted a deal to buy the Louisiana Territory from France for $15 million, money the new nation did not have. Jefferson was convinced that Americans would pay, and they did. Abraham Lincoln at first hoped the Civil War might take a few million dollars and a few weeks to win. But after four years he had the world's biggest army and a conflict that cost a million dollars a day. Franklin Roosevelt plunged the nation billions of dollars into debt to ease the Depression and fight World War II. Concern about paying the bills was one of his lesser burdens. It took John Kennedy only a few minutes to decide he could find $40 billion to finance a trip to the moon. Lyndon Johnson's exultation that we could have "guns and butter" was true, though he mismanaged the account.

In France, Italy, Argentina and many other nations, tax evasion is a way of life. Their economies and standing in the world are significantly affected by that lack of citizen commitment. "If that ever happens here," warns Egger, "it will be almost impossible to turn back."