A Good Day for Tax Reform
With Tax Day rapidly approaching and our nation’s fiscal problems being fiercely debated, the timing of today’s events couldn’t be more perfect. We’re talking about this morning’s event – Tax Reform Now: Cutting Rates and Deficits – and the publication of two new papers, each of which present a unique approach to tax reform.
Capping Individual Tax Expenditure Benefits, written by Martin Feldstein, Daniel Feenberg, and CRFB president Maya MacGuineas, presents a new approach to tax reform: capping the amount that tax expenditures as a whole can reduce each individual's tax burden. More specifically, the paper's analysis focuses on the effects of setting the cap at two percent of the individual's adjusted gross income. It estimates that in 2011, this reform would raise $278 billion in revenue and simplify the tax code by pushing 35 million people into the standard deduction. The paper looks at how this approach would affect individual tax expenditures and revenues in general, as well as the effects of setting caps at different levels. (Click here to read the full paper)
Less is More: The Modified Zero Plan is written by CRFB policy director Marc Goldwein and Paul Weinstein and published by the Progressive Policy Institute. The paper explains the evolution of the Fiscal Commission's "Modified Zero Plan" for tax reform, a plan which both authors helped to develop while on the Commission staff. The Modified Zero Plan would reduce and consolidate tax rates, eliminate the Alternative Minimum Tax, eliminate most tax expenditures, reform provisions for housing, health, charitable giving, and retirement, and raise $800 billion in revenue over the decade. The authors argue that this approach would encourage economic growth, simplify the tax code, reduce the tax gap, increase progressivity, and improve the nation's fiscal situation. (Click here to read the full paper)
The Modified Zero plan was also the focus of one of the panels at today’s tax event hosted at Johns Hopkins University, Tax Reform Now: Cutting Rates and Deficits. Much of the conversation about the plan focused on its potential bipartisan appeal; a plan that lowers rates across the board, broadens the base, and manages to raise more revenues (not to mention makes the system fairer, simpler, and more efficient) is a reform that could have something for members of both parties. Co-sponsored by the Moment of Truth project and the Progressive Policy Institute, the event also featured a panel on designing enforcement mechanisms or triggers in order to force action on tax reform. Both panels featured expert speakers and offered interesting and thoughtful insight into reforming our tax code.
The event also featured several prominent speakers, including Sen. Michael Bennet (D-CO), Fiscal Commission member Dave Cote, as well as Sens. Ron Wyden (D-OR) and Sen. Daniel Coats (R-IN), who recently proposed their own tax reform bill. All of the speakers emphasized the urgency of comprehensive, bipartisan tax reform. Many also praised the tax reform proposals put forth in the final report of the Fiscal Commission.
The event was a wonderful success and really showed how much bipartisan support there is behind comprehensive tax reform. Hopefully momentum behind this issue will continue to build and real progress will be made in the near future.
PS: Click here for some of CRFB's ideas on tax expenditures.