Just Taxes, and Other Options

March 1, 1984 02:38 PM | | Bookmark and Share

TAX REFORM. “The more you get into it, the more complicated it becomes,” lamented Treasury Secretary Donald T. Regan in the spring of 1983. “But there has to be an easier way.”

Indeed, it sometimes seems that almost anything would be preferable to our current Internal Revenue mess. Our federal tax system is unnecessarily complex, widely perceived as unfair, and failing miserably to raise sufficient funds to run the government. And there’s certainly no shortage of proposals for fundamental change. Flat taxes, “Fair Taxes,” consumption taxes, valueadded taxes, even no taxes—all are being pushed from various quarters as the solution to our tax discontents.

So far, the public is hedging its bets. Louis Harris’s pollsters found in 1983 that 62 percent of the Americans they talk ed to supported adoption of a simplified personal income tax with no deductions or credits. But by almost as large margins the same people opposed elimination of most of the specific tax breaks about which they were queried. A majority of the respondents to a 1983 Gallup poll thought a new national sales tax might be the best way to raise taxes, but they also said the main problem with the present system is that it undertaxes the rich and overtaxes the middle class and the poor.

We’re going to have to make up our minds, however, or they’ll be made up for us. Despite the fact that hardly anyone in Washington thinks the tax code will be junked all at once in favor of a streamlined system and despite all the maddening philosophical, technical and political conundrums that Secretary Regan has discovered, significant changes in the tax laws are highly likely over the next few years—if only to bring federal receipts more in line with spending. The need for major action could provide the opportunity to move toward a simpler , fairer, more acceptable tax system. It could also, however, easily lead to a tax system even worse than the current approach.

The American people, it appears, want a change in direction in tax policy. In the pages that follow, the leading tax alternatives will be scrutinized, with a particularly critical look at something called the “progressive consumption tax.” To start with, however , it mak es sense to review how we got to our present sorry state.

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