The voices of Tax Policy Center's researchers and staff
As you think about the ambitious tax ideas being proposed by this season’s presidential hopefuls, keep this in mind: Sometimes, far-reaching tax policy ideas outlive the candidacies of those who promote them. Long after their races are distant memories, ideas that opponents mock in the heat of an election season go mainstream. And some even become law.
Consider past experience as you think about the Value-Added Tax proposals from Ted Cruz and Marco Rubio (remember what I said about failed campaigns). Or when you think about Bernie Sanders’s carbon tax. Or the financial transactions taxes being proposed by Sanders and Hillary Clinton.
Next Wednesday, the Tax Policy Center will sponsor a panel discussion on four important tax policy ideas that have surfaced so far in the 2016 presidential race. Each may seem impossible today, but you never know when an idea will catch fire.
It happened with the Tax Reform Act of 1986, a far-reaching concept that was raised by President Reagan in his 1984 reelection campaign. It was hardly taken seriously by the chattering classes, yet became law less than two years later.
My favorite example, though, is the Earned Income Tax Credit, now the single most important strand in the nation’s safety net for low-income working families with children. For a while, Democrat George McGovern’s made a version of the idea a cornerstone of his ill-fated 1972 presidential campaign (full disclosure: I briefly served on his staff).
McGovern’s idea for a refundable tax credit for working families was not original. The concept of a negative income tax was first developed in the UK in the 1940s and adopted by conservative icon Milton Friedman in the early 1960s. Within a decade, former Kennedy economic adviser Jim Tobin had developed his own version.
But McGovern put the idea on the national policy agenda by making it part of his presidential platform. At the time, the idea was widely ridiculed. Some mocked it as a Demo-grant. Others said it would give $1,000 annually to every American. Long before Richard Nixon had a chance to trash the plan in the general election, Hubert Humphrey blasted it in the Democratic primaries as a budget-busting give-away.
McGovern eventually revised the idea and, by the end of the race, had stopped talking about it at all. But while his campaign was an historic failure (he won only Massachusetts and the District of Columbia and got only 37 percent of the popular vote), the idea quietly got the attention of policymakers.
In 1975, just three years after McGovern put the concept of a negative income tax on the national agenda, Congress enacted an EITC—with the backing of Republican President Gerald Ford. Reagan pushed a major expansion of the refundable credit in 1986, and with bipartisan support Congress has expanded it many times since. If you want to know more about how the credit works, click here. A nice brief history of the EITC is here.
In short, the idea has gone from a fringy plan by a doomed presidential candidate to mainstream anti-poverty policy.
So before you blow off as completely unrealistic some of the tax ideas raised by this year’s candidates, remember the EITC. And the ‘86 Tax Reform Act. It could happen again.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
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U.S. Senator George McGovern, D-S.D., is shown on TV 's "Face the Nation" on May 28, 1972. (AP Photo/Jeff Robbins)