One has to wonder what made Senators Ron Wyden (D-Ore.) and Judd Gregg (R-N.H.) so eager to introduce their new tax reform plan last week. The problem is not with the plan itself, which is fine policy-wise. It simplifies the personal income tax into three rates—15 percent, 25 percent, and 35 percent—and eliminating most deductions while tripling the standard deduction, which has the potential to make the tax more progressive, as many deductions are only claimed by filers well-off enough to hire accountants or to have the spare time to file long returns themselves.
The problem is that this has been tried before. In 1986, Senator Bill Bradley (D-N.J.) and Congressman Dick Gephardt (D-Mont.) wrote and President Reagan signed a similar proposal, which paid for a sharp cut in the top income tax bracket by radically reducing the number of deductions and tax incentives. While by no means perfect, it was a worthwhile measure that ended numerous special interest carve-outs in the tax code. Or rather, delayed them. Within a few years of passage, many of the same incentives returned due to aggressive corporate pressure, and eventually we arrived at our current code, which is complicated enough to spur simplification efforts like Wyden and Gregg’s. Do today’s reformers really expect a more permanent fate for their effort?
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