More than three decades have passed since the U.S. last accomplished comprehensive tax reform.
Almost everyone agrees another overhaul is needed now. The Unified Framework for Fixing Our Broken Tax Code released by Republican tax writers this morning proposes some laudatory goals and contains some good ideas.
Unfortunately, it does not, in its current form, represent a framework for comprehensive tax reform.
All tax policy is based on difficult trade-offs, and comprehensive reform must balance these competing interests. One of the Framework’s goals is “broadening the tax base” by eliminating special interest breaks and loopholes. Yet the suggestions for broadening the tax base are scant while those for reducing or eliminating taxes are many.
Also lacking are details to determine whether the Framework represents good or bad tax policy, resulting in proposals that don’t line up well with its stated goals. For example, the first stated goal is “tax relief for middle-class families,” with a number of Framework proposals to provide such relief. But depending on details, others could substantially raise taxes on the middle-class.
Another goal is to eliminate worldwide taxation while also promising to tax “at a reduced rate and on a global basis the foreign profits of U.S. multinational corporations.”
Meanwhile some “proposals” are totally unspecified such as “additional tax relief that will be included during the committee process.”
But there is detail on tax rates, which would be reduced from 39.6 to 35 percent for high income individuals. And the Framework also proposes elimination of the estate tax, a measure that would benefit only the very richest Americans.
Making the difficult tradeoffs required to achieve comprehensive and durable tax reform requires input from across the political spectrum, and engagement of the American people.
The last time the country achieved this goal, the White House and Congress undertook multiple comprehensive analyses, held dozens of public hearings, and worked in bipartisan groups. This nine-page Framework is merely a start.
We hope that the president and congressional leaders will use this as a step towards a truly bipartisan process.