US Policy Experts Urge More Progress On Bipartisan Tax Reform

by Leroy Baker, Tax-News.com, New York

20 February 2009

Declaring that US tax policy is urgently in need of reform, the Tax Foundation, a non-partisan fiscal policy think tank, has released a paper by four experts with diverse perspectives on fiscal and tax policy that makes specific recommendations to bring simplicity, transparency, efficiency and equity to the United States tax code.

In the Tax Foundation Working Paper, entitled 'moving Forward with Bipartisan Tax Policy,' Robert Carroll, Vice President for Economic Policy at the Tax Foundation, joined John E. "Buck" Chapoton and Diane Lim Rogers of the Concord Coalition, and Maya MacGuineas of the Committee for a Responsible Federal Budget to present a "middle ground" and "sensible" approach to tax policy.

"Federal policymakers face a choice: they can either continue to operate in a 'reactive' mode, proposing tax legislation haphazardly, resorting to temporary fixes, and acting hastily when tax legislation is due to expire," say the authors, who have served with both Democratic and Republican Administrations and members of Congress, "or they can take a 'proactive' stance, instituting farsighted reforms that will lead to an efficient and fair tax system for the long term."

In the midst of the current economic downturn and debate over how to "stimulate" the economy in the short term, the authors argue that any plan to grow the economy needs to meet clear long-term objectives and not be a backdoor mechanism for implementing permanent deficit-financed policies.

The authors also urge adherence to some basic principles, including: broadening the tax base while lowering rates; reducing economic distortions in the tax code; encouraging national saving; and making the tax system more transparent.

With these principles in mind, the authors recommended the following broad approaches for reform:

• Create a more transparent and straightforward tax code
• Promote saving by shifting toward a progressive consumption tax
• Rethink tax expenditures
• Update US business income taxes
• Implement an environmentally motivated tax policy

"We believe that a productive discussion of tax reform must start where tax and budget policy considerations intersect," the authors conclude. "The approach we have laid out can serve as an excellent starting point for developing a comprehensive, bipartisan proposal that would vastly improve our tax system."

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