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Amity Shlaes Makes the Case for Tax Reform

12:00 AM, Apr 5, 1999 • By JONATHAN R. COHEN
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Like most utopian projects that rely on big government to abolish social ills, equalization of school funding -- and its promise to rescue poor school districts -- begins as an attractive idea. But, put into practice through the tax code, the result is invariably disastrous.

In Vermont, for example, the recent attempt to equalize school funding created a system in which the portion of each town's property taxes assessed for education is collected by the state and then paid back to the towns in grants amounting to $ 5,000 per pupil. Wealthier school districts may not spend more than $ 5,000 per pupil without incurring tax penalties.

As Shlaes chronicles, the net effect has been to degrade, not improve, the quality of Vermont's public education -- for both the wealthy and the poor. Equalization punishes the wealthier schools by taking funds away from their enrichment programs, while at the same time raising expectations that can't be met for improving the curriculum of poorer ones.

The only achievement of the tax changes in Vermont has been the institutionalization of a low-grade but pernicious war between rich and poor, conducted by students, parents, and politicians.

There is a difficulty, as Shlaes notes, in getting Americans to focus on the tax code during an era of great prosperity. Indeed, Vermont's problems must seem very distant to many people, as the stock market flirts with the tenthousand mark.

One could, of course, make the argument that our prosperity would be even greater if taxes were not holding us back from even higher rates of growth. But voters don't seem particularly exercised by that argument at the moment.

And yet, even though, in the prosperity of 1999, Americans seem more or less resigned to the amount they pay in taxes, they would be in loud revolt if they understood the damage done by how their taxes are collected. In The Greedy Hand, Amity Shlaes has performed the service of discussing in concise and digestible bites the high cost of our tax system, how it got that way, and why we must do something about it. Her work may even be enough to get voters to think about the subject not just in April, as they sweat over their tax returns, but also in November, as they head to the voting booth.

Jonathan R. Cohen is the publisher of Commentary.