Railing at Accounting Today for engaging in "politics" in an editorial critical of some tax and economic policies of the Obama administration (June 7-20, 2010, page 9), Harry Bose engages in some politics of his own in attempting to make his case. His response is more amusing than informative.

Bose admits to pulling a 1981 CCH Master Tax Guide off his shelf, looks at tax rate schedules and at top marginal rates - and then proceeds to blame President Ronald Reagan and subsequent administrations for tax cuts he claims to have brought great harm to the economy.

Bose specifically focuses on two matters that took place on Reagan's watch - the Tax Reform Act of 1986 and the reform of Social Security retirement ages, rates and income indexing for contributions. Bose ignores a few facts in his analysis.

Since its creation, Social Security has been, and remains, structured to be actuarially self-sustaining through worker contributions. The facts are that a bipartisan commission (of the same type Obama created to address the deficit) determined during the Reagan administration that retirees would live longer and that the workforce in numbers per retiree would significantly decline over the next several decades, and increases in retirement age and contributions would be needed to provide promised benefits. The commission actually recommended increases that would provide excess funds for many years that would then decline as that workforce retired. In other words, a couple of generations of workers got to pay for themselves as well their predecessors. The fact that Congress spent those funds is another story (and certainly not mentioned by Mr. Bose). In any event, Reagan did not actually initiate the proposals or pass them (a Democrat Congress did).

Secondly, Bose attacks Reagan for lowering the top marginal tax rate to 28 percent. But he ignores just about everything else that accompanied that reduction in the Tax Reform Act of 1986. Frankly, that is astonishing coming from one in a profession that prides itself on "objectivity." The 1986 tax reform process was by just about every measure a huge success. Marginal tax rates are not the panacea of revenue capture; historically, in any income tax system, broadening the tax base has resulted in far greater "revenue capture." Under the 1986 act, among other technical matters, the "rich" could no longer write off hundreds of thousands, if not millions, in interest on multiple residences; doctors couldn't shelter millions of earned income with accounting losses from real estate. The fact that the 1990s tax shelter industry involved "technical" anomalies in the tax law, instead of "hard assets" and fundamental accounting arbitrage, is tribute to the success of the Tax Reform Act of 1986.

Tax revenue as a percentage of GDP did not decrease dramatically following enactment of the 1986 tax law, and the law itself arguably led to a greater rate of economic growth and productivity than the higher marginal rates.

Additionally, Mr. Bose advocates a return to the marginal tax rates of the Eisenhower administration, when the top marginal tax rate was 91 percent. Most of the wealthy of today would gladly trade today's system for that of the 1950s, with its unlimited charitable contribution deductions for gifts including appreciated stock and other property, prepaid interest deductions, installment method of accounting, myriad deductions, oil and gas drilling tax incentives, 25 percent capital gains, an absence of the Alternative Minimum Tax, and numerous other "incentives" that reduced the effective rate to one lower than today's for any high-income earner who chose to avail themselves of sophisticated planning.

Mr. Bose's comments should not be taken seriously, particularly by younger members of the profession, who should be encouraged to gain an understanding of tax policy history if they are concerned about the issues.

Kip Dellinger, CPA

Santa Monica, Calif.

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