Party now, pay later: New tax bill steals from future generations

As I have watched our legislators in recent weeks, a question has been haunting me and keeping me up at night: How do I tell my tax and elder law students next semester that the adults in charge of the nation are setting them up for failure?

This is not my hasty reaction to the flawed Tax Cut and Jobs Act. Rather, it is an inescapable conclusion I have reached from observing the widespread and bipartisan practice of passing on ever more difficult decisions to future generations. 

{mosads}In the United States, we discuss entitlements largely in the context of Social Security, Medicare and Medicaid, but this is just semantics. The main complaint about these programs is that they make promises far into the future that are hard and expensive to keep.

These same complaints can be made about long-term defense contracts and commitments, or tax benefits. Some of the largest social welfare programs are administered through the tax code. These programs all serve noble ends in isolation, but the underlying issue is that they are also benefits that individuals feel entitled to.   
 
During World War II, many policymakers learned the overly simplistic lesson that deficit spending was almost always fine and even desirable. With some notable exceptions, Congress has since been engaged in a race to use up future revenues before they are spoken for.

This might have all started innocently enough, but the overall effect is staggering. Mind you, I am no deficit hawk: I understand that a large nation’s budget does not work like my own, and everything does not need to be balanced in the same way. The larger problem is the generational theft of liberty and choice from future generations.

The tax cut and health-care debates were often framed in terms of liberty: putting more money in the hands of businesses and individuals and giving individuals the choice to not buy insurance. But this is just a cruel magic trick. A few dollars today only postpone the avalanche coming in the future. This was not a tax cut but rather a shift in responsibility for the payment — party now and pay later.

This is not an unsolvable problem, but the choices get less desirable every day. Some suggestions for policymakers:

1. Face reality. Macroeconomic factors indicate that we are not going to grow our way out of this. Tough choices have to be made and shared sacrifice should be the motto. Taxes should not be discussed in isolation, as they are part of a much bigger fiscal picture.

2. Take future generations more seriously. The average age of House members is 57. The average age in the Senate is 61. Our president is 71. The debate around fiscal policy is almost designed to shut out younger individuals. Complaints about the “me generation” sound hypocritical when current policy favors instant gratification.   

3. Bring policy experts back into the discussion. Believe it or not, there’s a ton of great research and policy analysis on taxation both inside and outside the government. These experts have been largely pushed aside in favor of oversimplified tax rhetoric. The tax cut bill would have benefited tremendously from their expertise.

4. Pay attention to the experiences of others. We do not tax on an island. States like Kansas and California offer lessons. So do consumption-based tax systems that other countries utilize.

5. Experiment. We should follow up on our taxing policies and eliminate those that do not work. Does accelerated depreciation really spur companies to buy new equipment or are we really just giving them an extra benefit for equipment they would have purchased anyway? Tax is spoken about like gospel when there is actual data out there that could be analyzed and used to tweak policies.

I do not believe this is wishful thinking. In the early 1980s, faced with a similar perfect storm of tax cuts, entitlement commitments and defense spending, the adults in Washington D.C. got to work. The 1986 code was by no means perfect, but it was the result of a comprehensive and honest analysis of the tax system.

I fear that the next Tom Brokaw may someday write a book about the “Greatest Spending Generation” who ignored problems at its door and passed the buck to those who came after. This is not the optimistic message that I look forward to sharing with my students in 2018.

Goldburn P. Maynard Jr. teaches courses on taxation, gratuitous transfers and elder law as an assistant law professor at the Brandeis School of Law at the University of Louisville. His research focuses on issues of wealth distribution and inequality, tax policy and America’s aging population.