Rebuilding the Income Tax
THE INCOME TAX can be made vastly fairer and simpler without altering its fundamental structure. Some of the important problems examined in chapter 2 would remain. But this fact should not obscure the importance of the gains that are possible. To achieve these gains, however, Congress would have to enact numerous reforms that have been strenuously and successfully resisted in the past.
This chapter focuses on three major recent proposals to improve the current annual income tax: one offered by the Treasury Department in November 1984; one by Senator Bill Bradley (Democrat of New Jersey) and Representative Richard A. Gephardt (Democrat of Missouri), advanced originally in 1983; and one by Representative Jack F. Kemp (Republican of New York) and Senator Bob Kasten (Republican of Wisconsin), first introduced in 1984 and then significantly revised in 1985.1. We describe these plans, point out the major improvements they would achieve, and then describe the major problems that no income tax based on the annual taxation of realized incomes can solve.
The Treasury, Bradley-Gephardt, and Kemp-Kasten proposals all would eliminate most personal deductions, many business deductions, and most credits. By thus broadening the tax base, each could sharply lower rates from today's levels while collecting the same amount of revenue. Each proposal would reduce the number of tax brackets; each is also concerned with maintaining roughly today's distribution of tax burdens across income classes. The Treasury and Bradley-Gephardt____________________