Assessing Tax Reform

By Henry J. Aaron; Harvey Galper | Go to book overview

CHAPTER SIX
Short-Run Programs for Raising Revenue

THE STRUCTURAL tax reforms discussed in chapters 3, 4, and 5 would take time to achieve. But the federal deficit, which in large measure is focusing congressional attention on the revenue system, demands prompt attention. Congress may, therefore, choose to follow a two-track strategy, passing a tax increase as one element of a program to reduce the deficit while proceeding more deliberately on fundamental tax reform. In this chapter we examine four ways to increase taxes that would not require extended debate. We judge each program by its prospects for prompt enactment and its consistency with the tax principles presented in chapter 2. The four proposals presented here are representative of the short-run tax plans Congress is likely to consider.


Criteria for Short-Run Tax Increases

By our definition, a good short-run tax increase would be easy to enact and, at a minimum, would not hinder structural tax reform. The programs examined below differ in both dimensions. Although all could be enacted and implemented within one year, some will be harder to enact than others.1. Also, some programs modestly reform the tax structure and others do not. But none would hinder adoption of the annual income tax plans described in chapter 3 or the cash flow income tax described in chapter 4.

As noted in chapter 1, taxes must be raised by about $100 billion in fiscal year 1989 to close one-half of the budget gap. Rather arbitrarily,

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1.
The revenue estimates presented here assume all proposals have an effective date of January 1, 1986, yielding less than a full year of revenue gain for fiscal 1986 (ending September 30, 1986).

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Assessing Tax Reform
Table of contents

Table of contents

  • Title Page iii
  • Foreword ix
  • Contents xi
  • Chapter One - Why the United States Must Reform Its Tax System 1
  • Chapter Two - Thinking About Tax Reform 16
  • Chapter Three - Rebuilding the Income Tax 48
  • Summary 65
  • Chapter Four - the Cash Flow Income Tax 66
  • Conclusion 87
  • Chapter Five - Sales Taxes 121
  • Chapter Six - Short-Run Programs for Raising Revenue 122
  • Summary 128
  • Chapter Seven - the Politics of Tax Reform 129
  • Conclusion 138
  • Index 141
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