Henninger: Repealing Reagan

Legend had it in Ohio years ago that when a baby boy was born in the perennial high-school powerhouse city of Massillon, a small football was placed in the cradle. The kid knew what was expected of him. When Ronald Reagan signed the Tax Reform Act of 1986, Barack Obama was a 25-year-old community organizer in Chicago. Like all progressives born now in America, the young fella knew what was expected of him if he got the chance. Repeal Reagan.

For the past 25 years, the American left has lived and breathed the political goal of undoing the Reagan legacy on taxes and spending. On Jan. 1, 2013, they did it. Until 2016, tax reform is dead.

Reagan’s philosophy was an anathema to the left. It was his novel postwar idea to make people less in thrall to Washington’s investment choices and more reliant on their own ideas for using capital. The ’86 tax act reduced tax rates on personal income and also famously gutted many nonproductive “tax shelters.” In short, simplification. It was also bipartisan. The assault on loopholes—which were often promoted by pre-Reagan Republicans—was led by Chicago Democrat Dan Rostenkowski, chairman of the House Ways and Means Committee.

Though the tax carve-out habit resumed after Reagan, this New Year’s passage of the American Taxpayer Relief Act of 2012 marks the return of the progressive tax utopia, with a great many Finlandized business interests complicit. In the anti-Reagan model, the favored fish—left-wing constituencies and bloodless commercial interests—swim through streams of revenue processed by the tax code out of the general fund and back to the favored fish.

No real appreciation of the hellishness of the deals is possible unless one reads methodically through the details of the “Summary” released New Year’s Eve. Herewith, a summary of the Summary, but bear in mind: It can’t go on. This is a Ponzi scheme. Bernie Madoff, the biggest financial fraud ever, recycled $65 billion for 30 years. The bigger the pot, the longer the Ponzi can run. Ask Europe. The Obama Ponzi starts now.

The section titled “Business Tax Extenders” gets ink because it is so ripe for “Daily Show” ridicule. Jon Stewart merely has to read the text: “Credits for certain expenditures for maintaining railroad tracks.” A “seven-year recovery period for motorsports entertainment complexes.” “RIC qualified investment entity treatment under FIRPTA.” Hollywood can expense $20 million of production costs “incurred in economically depressed areas of the U.S.,” which must mean most of Manhattan is an “economically depressed area.” I’ve got to get in on this. How about an energy tax credit for walking to work?

Reading through the list, you feel like a sap. Sure, broad breaks such as the deduction on mortgage interest flow to millions, but a rational working stiff would throw over his 9 to 9 slog to try this: “Facilities that produce electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities are eligible for a production tax credit.”

The “We’re Green!” advertising slathered everywhere by appliance makers and apartment developers is built on tax breaks dug out of the general fund: There’s a $650 million credit for makers of clothes washers, dishwashers and refrigerators.

The left chokes down this degraded favor funhouse because their new tax law includes a mind-boggling array of “social” tax breaks. Some $30 billion to extend unemployment insurance, which is artificial oxygen in a respirator economy. Dependent-care credits, adoption credits, credits for tuition and tuition interest, school construction bonds, a “third child” credit and—why not?—a credit for plug-in electric motorcycles.

The entitlement time bomb called Medicare just keeps on ticking. The bill’s “Medicare extensions” output new money for “work geographic adjustments,” “super-rural” ambulance services, “low-volume” hospitals, and entities engaged in “certain activities relating to health-care performance.”

The point of Reaganesque tax-and-spending reform was to cleanse the system. Purge the inevitable, destructive sludge that slows down an economy. The message of Bowles-Simpson and Domenici-Rivlin was that the time to do that again had arrived.

We’re sticking with the sludge. The progressives are more comfortable there. And they are not alone.

The bill has $355 billion for the child tax credit, the sort of expenditure some conservatives like. But then no complaining about the rest of it. The anti-Reagan tax model is basically the “Boardwalk Empire” model. You can’t pick and choose which tax heist to join. You’re in for all of them. In time, everyone’s a tax gangster.

The New Year’s night vote came without applause or cheers. Sullen House Democrats voted and left. The progressive president boarded Air Force One for a 4,700-mile flight to his middle-class vacation in Hawaii. Why not? For a nation buying into its own Bernie Madoff paradise, it all makes sense.

Write to henninger@wsj.com