As secretary of agriculture in the Reagan administration, I sat in many Cabinet debates on tax policy. The prevailing wisdom was that tax reform could not be achieved because of congressional inertia, interest group opposition and an apathetic American public. I am happy to say that President Reagan confounded the "naysayers" and made tax reform his No. 1 priority.
Currently, we are seeing a spate of skeptical media articles about tax reform. Generally, they take the position that tax reform that seemed good at first now has problems. They suggest various interests would not be helped by the legislation, and, in the short run, tax reform might further weaken our economy.I understand their concerns but disagree. In my opinion, this piece of legislation is badly needed and is long overdue. A lot of the hesitancy we're seeing is natural. You have that anytime something promises to radically change the system - for better or worse. In this case, thanks to dedicated legislators such as Sen. Packwood, Sen. Dole and Sen. Bradley and Congressman Rostenkowski, to name a few, you have a bill that rises above the clamor of the special interests. The legislation is well-balanced, carefully thought out, and is designed to provide real tax relief to individuals and businesses, while closing loopholes.
For the first time in decades, legislators and a courageous president have chosen to redefine tax laws - not as an instrument of industrial policy but instead as a neutral and fairer system to gather revenues.
What will the new law provide? There will be fewer investment decisions dictated by the tax code than by sound business judgment. Absent will be many of the loopholes that have enabled some to avoid paying their fair share. Missing will be tax policies that, in effect, stifle real productivity by creating false incentives for business investment.
Under current law, for example, resources move into agricultural overproduction because that's where the tax benefits lie. Government then has to spend billions to curb overproduction. And who gets squeezed? The family farmer because of unwarranted competition and the taxpayer who is asked to bail out the farmer.
Another example lies in the heart of our cities. Despite a glut of empty office space, new office building construction continues unabated because the tax code rewards such investments regardless of real demand. Tax policies set up to control investment decisions take away from real productivity. They work against America's economic engine - the free enterprise system. I feel that economic decisions should be made because there is a reward or a need. That reward or need should not be provided by Uncle Sam or Uncle Sugar. The incentive should be found in the marketplace.
There are many overwhelming reasons to push tax reform through the Congress to the president's desk - fairness, simplicity, lower rates and 6 million working poor off the tax rolls. The greatest reason is that a market- driven system is more productive. Market decisions provide for a better allocation of resources to give us a stronger, more-productive economy.
Skeptics also suggest we need to tinker with the legislation passed by the Conference Committee. This would be a serious mistake. The package has been hammered out over months and it is a good one. To tinker would set back the cause of tax reform disastrously. Why? First, if carefully forged compromises unravel, the proposal quickly will bog down into an endless morass of interest group politicking.
Second, changes made before the ink is even dry on the document will lead to economic uncertainty. How can business decide what it wants to do if the federal government keeps changing the rules of the game. We're seeing that with a slowdown in national economic growth because investors don't know what the tax law will be and so they delay their decisions. Tinkering only will prolong this uncertainty, and economic growth will continue to slow. A better approach is to pass tax reform and give it sufficient time so that the U.S. economy can adjust and the free market system can be allowed to work.