How Should We Reform Taxes?

by Patrick Appel

Bruce Bartlett has some ideas. He points out practical problems with the flat tax, which Andrew has long favored:

[T]he flat tax always required a trade off between the exemption level and the rate. The higher the exemption, the greater the number of people paying no income taxes at all, which broadened support. But that required a higher rate to bring in enough revenue, which reduced support. Experience showed that the rate could not be much above 20% or support for the flat tax simply evaporated...Finding a rate and an exemption that fully satisfied every political requirement proved to be impossible if the flat tax were to be implemented in a revenue-neutral manner--neither raising nor lowering the overall tax burden.

Bartlett is enticed by the Wyden-Gregg plan:

[It] would be highly desirable to clean up the tax code, eliminate special tax provisions, and try to establish more uniform effective tax rates across income classes. That is what Sens. Wyden and Gregg propose. Here is a list of the credits, deductions, exclusions and other tax preferences they would abolish. A key benefit would be abolition of the Alternative Minimum tax in return.

It's too soon to say whether the Wyden-Gregg proposal is a viable vehicle for tax reform, but it's a good start.

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