Assessing Tax Reform

Assessing Tax Reform

Assessing Tax Reform

Assessing Tax Reform


Reform of the United States tax system has become a central political issue. Assessing Tax Reform is a concise, nontechnical book to help general readers and students understand the tax reform issues Congress is now debating. Henry Aaron and Harvey Galper lay out the major alternative proposals and analyze principles of taxation that can be used for judging them. They explore the issues surrounding a move to a comprehensive income tax, a cash-flow tax, and the value-added tax or other consumption-based taxes. They show the conflicts and opportunities resulting from large current government deficits and the move for tax reform.

In addition to clarifying the problems that must be solved if large-scale, long-term reform is to be achieved, the authors describe alternative strategies for increasing revenues quickly. They also present their own program for a fair, efficient, and less complex tax structure. They conclude with an examination of the political pitfalls that continue to make any major improvements in the tax system hard to enact.


Proposals for important changes in the tax laws are coming from many corners of Congress and from the administration. Labeled tax reform by some advocates, tax simplification by others, and less flattering names by opponents, most of these proposals share two important characteristics. They would broaden the base of the personal and corporation income tax by repealing or reducing dozens of special deductions, credits, exemptions, allowances, and exclusions; and they would lower marginal tax rates. These proposals differ significantly, however, and the differences matter greatly for various groups and industries.

While some critics would reform or simplify the present income tax system, others would prefer just to cut it back. They would replace the lost revenues with proceeds from a new source--a value-added tax, a national sales tax, or energy taxes, for example.

Understanding the competing claims of advocates of the various strategies can be bewildering unless one understands the fundamental problems any tax system must confront--how to raise revenues fairly, how to minimize tax-induced losses of economic efficiency, and how to keep rules simple enough for taxpayers to understand and comply with and for administrators to enforce. Not surprisingly, these admirable goals conflict with one another.

In this book, the twentieth in the second series of Brookings Studies of Government Finance, Henry J. Aaron and Harvey Galper help readers make sense of the cacophony of claims about tax reform. They show how each of the major plans relates to elementary principles of taxation. in addition, they present a plan based on the taxation of personal and business cash flow that, in their view, solves the fundamental problems of taxation better than the proposals now embodied in official reports and draft legislation.

The most important contribution of this book, however, is not the verdict it delivers on one tax plan or another. Rather its principal value . . .

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