Tax reform. Seems simple, unless you can’t agree on what needs to be reformed. Everyone would agree that the tax code, all twenty volumes and 13,000 pages, needs some editing and simplification. But reform in the mind of most conservatives is about reducing tax rates, flatter taxes, and a less progressive structure. Liberals look for higher capital gains taxes, elimination of loopholes, and more progression. There is as much as $1Trillion in additional tax revenues on the table that both sides will have to give in if this is going to work. Dump the estate tax, eliminate loopholes, subsidies, and rebates, drop marginal rates, rest the AMT, eliminate individual deductions, and
In the meantime the special interests are already lining up to lobby the piss out of Congress to protect their cheese. Gas and Oil is fighting to maintain its exploration subsidies, multinationals want to eliminate taxes on foreign earned income, R&D and technology companies want their tax credits maintained, hedge fund and private equity executives want lower capital gains rates, and the mortgage industry wants to protect the mortgage deduction to name a few.
But is there any intestinal fortitude in Washington to do the right thing? Are the Republicans so entrenched in their ideological bunkers they will let this opportunity pass by? I think they are fighting true reform via compromise because they believe they will capture both the Senate and the White House next year and then they are free to do what they want.
The last true tax reform was the 1986 Tax Reform Act, the hallmark piece of legislation from the Reagan Years. Major reform that simplified the tax code, reduced the number of brackets, lowered rates for ordinary income while raising rates for investment income, eliminated tax breaks, and the AMT was revised. This happened because of bipartisan efforts of Gephardt, Bradley, and O’Neill. Sadly, the odds of that happening are as long as Ronald Reagan getting the Republican nomination in 2012.
Not holding my breath.