There has been some rumbling in Washington D.C. that the best way forward for tax reform would be a bipartisan bill that would implement a permanent reform to the tax code. Chris Edwards, the Cato Institute’s director of tax policy studies and a friend of mine from our meetings at Cato events, says Republicans should go it alone on tax reform. He writes:
[T]his year, with these two parties, bipartisanship on taxes is not going to happen. The GOP can and should go it alone on major reforms.
Back in the 1980s, numerous Democratic leaders pushed for tax reform, including Rep. Richard Gephardt of Missouri. He penned an essay for the Cato Institute in 1985 on the topic, and today it sounds far more Republican than Democratic.
Gephardt said that the “most important” goal of reform was to “stimulate the growth of our economy” by having “greater efficiency” in the tax code. Gephardt called for lower tax rates across the board, and he sponsored a leading bill to cut the top personal rate to just 30%. Today, the top rate is 40%, and many Democrats want it higher.
In his article, Gephardt said, “If we are going to pass a tax reform bill, we desperately need to avoid the distributional debate.” But today, distribution is the Democrats’ central theme. The recent letter from the Senate Democrats states flatly: “We will not support any tax plan that includes tax cuts for the top 1 percent.”
But why not? That group—which is chock full of job-creating entrepreneurs—pays an increasing share of the burden. In 1986, the top 1% paid 26% of all federal income taxes, and today they pay 39%.
Gephardt did push for “fairness” in tax reform, but he meant getting rid of narrow breaks that micromanage the economy and favor certain groups. “I am not qualified to act as a central planner and I do not know anybody on either [congressional tax] committee who is,” he said. Gephardt also stressed the importance of tax simplification.
With such views, many leading Democrats reached agreement with President Ronald Reagan on the landmark Tax Reform Act of 1986. The act—which closed loopholes and slashed tax rates—passed the House 292-136 and the Senate 74-23, with strong support from both parties.
Three decades later, a lot has changed. For one thing, Congress has been busy undoing the 1986 reforms—it has added narrow breaks back to the code, and it has raised the top personal tax rate from the post-1986 28% to today’s 40%.
Read more here from Chris.
