Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Dems should tackle tax code

Public craves simplicity

Published December 3, 2006 at midnight

Text size  

More Editorials

More stories »

As Democrats prepare to take charge in both the U.S. House and Senate, there's a glimmer of hope that party leaders will push one initiative that has appeal across the political spectrum: tax reform.

We're all for moves to streamline the baffling tax laws. Compliance with the code, which forces taxpayers or their accountants to spend an average of 31 hours to fill out a return, imposes a senseless dead-weight loss on the economy.

But there's a limit to how much reform the public is willing to stomach. Americans enjoy and expect to benefit from many big-ticket tax exemptions - and frankly, some of them, such as the mortgage interest write-off (at least for a primary residence), support sound policy goals.

So long as reformers have modest expectations, and make it difficult to morph the next tax code into a full-employment program for lobbyists, pushing for simpler taxation is a worthy crusade.

To their credit, powerful Democrats seem to have cooled on the notion of immediately repealing President Bush's tax cuts, which would amount to a whopping tax increase. Instead, they are mulling moves that could close some loopholes and reduce the number of marginal tax rates.

One promising idea, from Oregon Sen. Ron Wyden, would collapse the current regime of six personal income tax rates to three - 15 percent, 25 percent and 35 percent (they currently range from 10 to 35 percent).

Wyden would tax dividends and capital gains at the same rate as regular income (they're taxed less now). He would also: eliminate the Alternative Minimum Tax, which would be a huge plus; maintain many popular deductions, such as mortgage interest, retirement savings, medical expenses and charitable donations; and keep the Earned Income Tax Credit in place.

Supply-siders concerned with economic growth might consider these changes minimal, since the top rate would remain the same. The Tax Foundation recently calculated that the types of deductions Wyden would keep make up close to 50 percent of the personal income that's now exempted from taxation.

But Wyden swears his plan would allow taxpayers to file a one-page return. The tax code could also shrink from 1.4 million words to perhaps a few thousand.

Moreover, Wyden has a promising idea to keep any new tax plan from immediately being riddled with loopholes and complications. He wants to adopt the tactics of the "porkbusters," and subject tax breaks to public scrutiny, much as critics of congressional earmarks want better oversight of spending bills.

Legislation that requires new tax breaks to be published online 72 hours before they're voted on, for instance, would give the public time to react to them before passage. It should make it tougher to muck up a streamlined tax code.

While we may not like all the specifics - lowering the top rate would make the tax system a lot more friendly to capital formation and economic growth - Wyden's proposal should launch an honest, bipartisan debate. It's about time.