The tax code is being crammed with special-interest provisions intended mainly to advertise public solidarity with some selected constituency, social group or cause. The Clinton administration wanted to endear itself to parents of college students, so it advocated (and Congress passed) a complex package of tax breaks for college tuition. Now it wants to flaunt its compassion for families caring for older parents with a $1,000 “long-term care” credit. The president’s budget proposes an array of new credits, including a $2,000 credit for buying a “highly energy efficient” new home.
Even a decade ago, proposals like these were termed “tax breaks,” “preferences” or “loopholes.” Our present, less critical language refers to them as “targeted” tax cuts. The implication is that tax relief goes only to the deserving. The reality is that tax relief is being dispensed through a thoroughly political process that treats taxpayers with similar incomes dissimilarly–some better, some worse–depending on whether they conform to some government-approved activity or behavior.
All this has unraveled the Tax Reform Act of 1986. That law lowered rates, eliminated many tax shelters and broadened the tax base. It was a bipartisan achievement. Ronald Reagan supported it; the then Democratic Sen. Bill Bradley was a main sponsor. Mortimer Caplin, commissioner of the Internal Revenue Service under President Kennedy, describes it as the best tax law in half a century and laments today’s drift. “The tax code has gotten more and more complicated by its overuse for social and economic reasons, rather than… raising revenues,” he says.
But resistance is slight. Every so often, Republicans hold congressional hearings to demonize the IRS or propose replacing the income tax with a flat tax or national sales tax. This is fairly hypocritical, because Republicans also plug targeted tax cuts. A few years ago they peddled a child tax credit for families. It was duly embraced by Clinton and enacted. Then there’s the Roth IRA (Individual Retirement Account), named after Senate Finance Committee chairman William Roth. And Clinton stole the idea for a long-term-care credit from Republicans.
The public barely complains about the mounting complexity. One reason is the economic boom. People feel good. No one ever likes taxes, but prosperity dilutes dislike. Another reason is a huge and unplanned shift in the burden of the income tax. The surge in tax revenues–the same surge that created federal budget surpluses–has come mostly from the rich.
In 1994, for example, the 1 percent of taxpayers with more than $200,000 of adjusted gross income paid about 30 percent of all individual income taxes (this was double their share of income, 15 percent). By 1997, taxpayers with more than $200,000 paid 37 percent of income taxes. Much of the increase reflects stock-market gains. It helps explain a paradox: although federal taxes are now near a record 21 percent of national income, the tax burdens of most people (including their payroll taxes) are below historic highs. This, too, muffles discontent.
Finally, people seem resigned to complexity–and computers make the complexity more tolerable. Half of tax filers use an accountant or tax preparer. H<&>R Block alone will submit roughly 15 million tax returns this year. Most professionals now rely on software to simplify intricate calculations. So, increasingly, do individuals. Last year 13 million taxpayers used tax software, estimates Intuit, the maker of the leading program. That’s about a fifth of the people who did their own returns. In 1999, Intuit reckons that software use will grow 30 to 35 percent.
What’s the harm, then, of all the new tax breaks? Well, the damage is real–but invisible.
For starters, many tax breaks don’t work as advertised. All the savings “incentives” (IRAs, etc.) haven’t raised saving. Indeed, the personal savings rate–savings as a share of after-tax income–has fallen to zero. Clinton’s tuition tax breaks probably won’t make college more affordable. The easier it is for people to pay, the more colleges will charge. Unsurprisingly, The Wall Street Journal recently reported that colleges are raising tuition next fall by 3 to 5 percent–more than twice inflation.
It is not simply that tax breaks are often wasteful or ineffective. They are also deceptive and corrupting. Most targeted tax cuts invite restrictions to prevent them from becoming too expensive. So people often discover that they can’t get what they think they’ve been promised. And, worse, the entire process promotes tax evasion and pushes the IRS to intrude itself more into people’s lives.
Consider the proposed long-term-care credit. About 2 million people would qualify, says the administration. But the government also estimates that 13 million people have long-term-care needs, writes economist Martin Sullivan in the journal Tax Notes. People would qualify for the credit if a doctor certifies that they need help with three “activities of daily living,” such as bathing, dressing or eating. “With $1,000 of somebody else’s money on the line,” Sullivan notes, doctors would be under huge pressure to certify. And how would the IRS police that?
Similar shortcomings afflict most tax breaks. But who cares? Tax breaks are less an arm of social policy than an aid to politics. The aim is to seem to be doing good and to increase people’s dependence on politicians. As more groups and causes acquire tax breaks, anyone left out is emboldened to seek a special break. The system becomes protected by all the constituencies that have a stake in its survival. And what was once called tax reform becomes–as I said–a lost cause.
title: “A Great Leap Backward” ShowToc: true date: “2022-12-12” author: “Arturo Mccloud”
Perhaps. But these days, small victories are possible. Zhao is one of a growing collection of scholars, artists and young professionals who are fighting to save the hutongs, or alleys, and courtyard houses that survive from a bygone imperial society. The 20th century has been hard on the skyline of ancient China, as first communist radicals and later capitalist developers swept away old city walls, temples and entire neighborhoods to make way for anything that seemed more modern. But recently, encouraged by conservationist activists, the government has been taking steps to preserve its architectural heritage from the Great Mosque in Xian to the alleys of Beijing, where pending legislation will designate 25 “protected” neighborhoods. Such regulations are “better late than never,” says Beijing-born art dealer Lawrence Wu, who lives in a magnificently rebuilt courtyard house. “There’s no way to find the charming old neighborhoods… that I knew as a child. It’s a crime.”
So much has been destroyed. During the Cultural Revolution, from 1966 to 1976, radical Red Guards were encouraged to destroy anything old or “bourgeois,” and courtyard houses were seen as both. As the population exploded, proletarian families built rickety shacks inside the courtyards, many of which are now hardly recognizable. Fearful owners burned intricate wood lattices and shattered stone carvings to make their homes seem less grand. Today most of the courtyard houses, called siheyuan, are so dilapidated and overcrowded that few Chinese would prefer them over more modern apartments. Many have no plumbing. And Beijing officials believe, not unreasonably, that “it’s not responsible” to lavish money on old homes when high-rise housing can be built less expensively, says Shu Yi, a literary historian and preservation adviser to the government.
The war of old versus new has been raging ever since the communists came to power in 1949. Yale-educated architect Liang Sicheng once wrote that he felt “as if my own flesh was being torn off” when, in the 1950s, Mao had the ancient ramparts of Beijing ripped out to make way for a new ring road. By the end of the Cultural Revolution, most gates and imperial arches of Beijing and many other cities had been demolished. Across the land, bureaucrats have since erected white-tile buildings, thinking they were symbolic of the new China. “They remind me of toilets,” says Ling Jianmin, a cultural-relics official in Anhui province.
Now, the cult of shiny modernity has triggered a countertrend. In 1997, President Jiang Zemin launched a project to widen Ping An Avenue, a famous hutong near the center of Beijing. New rules require all nearby buildings to adopt the late Ming or early Ching style, using a muted gray and white color scheme. Gaudy advertising is out, and even a glitzy karaoke club has redone its facade in somber gray. Critics pan the restoration as a scheme to attract tourists, but Shu says the government was sincere about preservation–and limited the widening of Ping An Avenue to save at least some of its courtyard homes.
In Beijing, the conservation movement is spearheaded by scholars like Shu, who fought to preserve the home of his late father, renowned Chinese author Lao She. Shu has been pivotal in drafting the new legislation that protects 25 historic Beijing neighborhoods. The historian and his friends meet informally to discuss preservation and fund-raising–the beginnings of independent activism that would have been impossible in China even a decade ago. Shu says he “can’t afford” to live in a courtyard himself; but his tiny apartment is crammed with historical and literary memorabilia. “From my window,” he says, “I can see remains of the old Beijing moat.”
Outside the capital, China has targeted some of its most ancient cities for preservation, including the Shanxi province city of Pingyao. Built largely during the 17th century by rich bankers who aspired to a courtly lifestyle, the city later fell into a deep stagnation that preserved gracious Ming-era streets in their original condition. In 1997 the United Nations named Pingyao a world heritage site, but there is still not enough money to do the restoration right. Local shopkeeper He Qingwen says that instead of employing painstaking old building techniques, conservation workers rush to get the job done. Instead of sealing old pillars with layers of cloth, horsehair and lacquer, they slap on a coat of paint. “They just want everything to look nice,” He says. “They don’t care what the sun might do after a year or two.” Sure enough, the paint is already peeling from murals on his recently restored shop.
Concerned Overseas Chinese and foreign philanthropists are stepping in to help pay for restoration. The Hong Kong-based China Heritage Fund is sponsoring the reconstruction of the Jianfu Palace Garden in Beijing’s Forbidden City that was destroyed by fire in 1923. American antiquarian Robert Ellsworth organized Hong Kong and Western donors to help preserve four rare Ming-dynasty ancestral halls in the Anhui province district of Huizhou, dotted with ancient pagodas and homes.
For every restoration project underway in the countryside, many more buildings are in decay. In the Huizhou village of Chengkan (population: 2,700), stone walkways meander past towering three-story Ming-dynasty residences. Some of these old homes still have Cultural Revolution slogans scrawled on crumbling facades, or have been used as warehouses. “We must save them,” says retired official Hu Huaduo, who began restoring monuments in the early 1980s. Even in the remote desert-oasis town of Yulin, locals are struggling to save remnants of the city wall from pollution and development. “We want to, but there’s no money,” says a wizened man in the courtyard of the City Wall Administration Office.
The cash flows more freely in Beijing. Courtyard houses are increasingly popular with the growing urban middle class, and can sell for more than a million dollars. Conservationists want the government to cut the endless red tape that complicates the purchase of old homes. “Only if citizens spend their own money to fix up their own homes can our old neighborhoods survive,” says Shu. Chinese-American lawyer Handel Lee lives in a lovingly restored Beijing courtyard complex that once belonged to the nephew of a Ming-dynasty palace eunuch. “It’s not just for me,” Lee says, “but for everyone who comes here as well, to see and appreciate.”
Lee has converted a second ancient home into a restaurant and the CourtYard Gallery, which recently displayed the work of a guerrilla preservationist who calls himself “AK-47.” Working at night to avoid police, graffiti artist Zhang Dali sneaks around Beijing spray-painting his own facial profile on walls of buildings scheduled for demolition. He returns to the scene by day to photograph his work–which sells for up to $4,000. His recent show was called “Demolition and Dialogue”–and was successful enough that Zhang hopes to save his own rented courtyard house by buying it.
The rescue effort can be frustrating. Consider Xiao Ran, a country boy who grew up to become a hip graphic designer. In 1998 he moved his studio from a noisy commercial building to an old courtyard house in Beijing. “People from the provinces like me don’t like modern constructions,” says Xiao, 24. “Look, in this courtyard I can even see the sky!” Xiao’s firm poured money into his new space, creating offices and a cozy art deco cafe where photographers exhibit their work. Then last year the government announced plans to tear down the house in September. “We can’t do anything about the decision,” says Xiao, who has not given up hope. He is looking for another old courtyard–one closer to clients, and farther from the threat of the wrecking ball.
