Monday, March 15, 2010

Tax Reform: Right on Schedule

It's not a Presidential priority, but the country is in fact perfectly due for an overhaul of the tax code. Over time, the tax code ends up developing enough different loopholes or alternate rates or whathaveyou that after a generation or so it collapses under its own weight, at which point the obvious solution to broaden the tax base while lowering the rates. The last time we did this was 24 years ago, in 1986 under Ronald Reagan, in the famous Showdown at Gucci Gulch. Before that, the prior overhaul was the now famous-to-Republicans Kennedy tax "cut" which eliminated the by then fictional 91% bracket, but which increased revenue thanks to broadening the tax base, roughly ... 24 years prior to the 1986 Tax Reform Act. So it's about time to start thinking along these lines. Personally I think current high levels of income inequality argue for a 45% tax bracket at $1M or so in annual income, but the rest of the concept behind Wyden-Gregg is sound. Of course, Republicans are happy to negotiate a compromise and then not vote for the damn thing anyway, so who knows where this will go, but it's something that we're going to have to consider sooner rather than later.

This is good policy and good general interest politics, but of course tax-assistance software firms vigorously lobby against making it easier to compute your tax liability, so until the issue has some public salience it will be tough to defeat organized resistance.

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