Tax Reform Issue

Tax reform is a major issue in the upcoming presidential election. The interest of the public was sparked by the campaign of former candidate Steve Forbes, whose rhetoric brought the concept of the flat tax to the forefront of political debate. Both Democratic President Bill Clinton and Republican candidate Bob Dole have publicly voiced their support for a fairer, simpler tax system. Although media attention has centered on the flat tax, legislators have proposed a wide variety of measures aimed at overhauling the country's tax code.

The problem with America's current tax system is that it is complex, burdensome, and some insist, unfair. Taxation in the United States has a long history. Unfair taxation was the rallying cry that led to the American Revolution. After its successful resistance to British authority, the Founding Fathers vowed that the issue of "taxation without representation" would never resurface in America. Toward this end, the framers of the Constitution endowed the legislative branch with the power of taxation: "But because lawmakers are sensitive to the needs of their constituents, the tax code has become riddled with loopholes that often benefit the most powerful interest groups" (Reforms, 1996, p. 250). Consequently, legislators have been responsible for numerous tax breaks being put into effect. In the past forty years alone, about 30 major tax reforms have been enacted.

The American public has repeatedly voiced its dissatisfaction with the

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of the flat tax claim that it is so revolutionary that it could double U.S. economic growth regardless of arguments to the contrary by economic foes: "Their models aren't calibrated to measure the effects of revolutions, any more than the instruments on your car's dashboard could capture the effect of strapping a rocket booster to your bumper and firing it up" (Norton, 1996, p. 41). Nobel laureates in economics Milton Friedman and Gary S. Becker both favor the flat tax; the U.S. Treasury Department argues that a flat tax would cost the federal government $138 billion a year in lost revenue (Issues, 1996, p. 243). Republicans also argue that tax reform is needed to eliminate inequities in the current system. A flat tax would correct the problem of multiple taxation. For example, investment income is subject to double taxation as are business profits. One of the political drawbacks of the flat tax is that it would undeniably benefit the wealthy. A feature of the flat tax is that the tax rate on investment income would be zero. Since the majority of wealthy individuals derive a substantial portion of their income from investment interest, the flat tax would represent an economic windfall for this group. Small investors st

Category: Economics - T