Toward Tax Reform

To second Bruce, the 1986 tax reform really started in January 1977 with Treasury's groundbreaking Blueprints study under Secretary Bill Simon, which proved you could establish a consumption-based income tax without altering the income distribution.  It was much simpler and more efficient too.  A year later, Senator Bill Bradley and Congressman Dick Gephardt introduced the first version of their tax reform plan, which I formulated at the Joint Committee on Taxation using the Treasury tax model.  These plans were actively discussed and reformulated for years.  In 1981, Ronald Reagan swept into office and pushed through the Roth-Kemp tax cut (which I also formulated) with 10-5-3 depreciation.  This created considerable political and economic pressures that led to tax reform in 1986.  In particular, Bob McIntyre of the labor backed Citizens for Tax Justice created a furor publishing lists of large corporations that legally paid zero tax.  Treasury worked up a revised tax plan in early 1984, but Secretary Donald Regan kept it under wraps to avoid hurting President Reagan's reelection that year.  Then in early 1985, Ronald Regan surprised everyone and endorsed tax reform.  That set off quite a legislative competition over the next year and a half between the Treasury plan and the Democratic Bradley-Gephardt plan. A well-crafted compromise, The Tax Reform Act of 1986, was enacted on October 22, 1986.   It raised taxes on corporations, eliminating negative tax rates on investment, and cut taxes for most individuals, dropping the top rate from 50% to 28%.  It also greatly simplified the Tax Code.  Looking back on it, this 10-year tax reform effort was a model legislative and economic policy effort.  No such process has benefited health reform.  Therefore, we will be condemned to lurch from one partial and ineffective reform to another, as we back our way toward a better health system.