There is nothing simple about tax reform. Our current system is a smorgasbord of rate brackets and credits and deductions designed to promote growth, but also benefit special interests and preserve favored incentives. The new tax reform plan from two senators -- Democrat Ron Wyden and Republican Judd Gregg -- aims to strip the clutter. It could make filing taxes as simple as reviewing a one-pager from the IRS. It would reduce the number of tax brackets from six to three (at 15 percent, 25 percent and 35 percent); eliminate the dreaded Alternative Minimum Tax; triple the standard deduction while killing dozens of exemptions; and significantly reform corporate taxes.
But is it a good idea? I spoke with Roberton Williams, a senior fellow at the Tax Policy Center. Yesterday I published the first part of our chat, about how the dramatically simplified tax system could make filing taxes so easy it could threaten the existence of tax preparers like H&R Block. Today we continue the conversation about the nuts and bolts of a bold new vision for our tax structure:
What's the single most significant change you see in this plan?
The biggest change is on the individual side, the general simplification that makes the income tax more understandable. If you go back to 1986 the last time we did a major tax reform, we had 15 tax rates and we went down to 3. It brought the rates down a lot, and got rid of a lot of exemptions for special interests. Lower rates, fewer rates, broader base.