Bipartisanship is an endangered species in America these days, especially in the nation’s capital. Yet it has not vanished entirely and in fact could help produce the most significant tax reform in a quarter-century.
Sens. Ron Wyden, a Democrat from Oregon, and Judd Gregg, a New Hampshire Republican, have introduced the Bipartisan Tax Fairness and Simplification Act of 2010. In a narrow sense, it is designed to address a looming issue-the expiration of the Bush tax cuts on Dec. 31.
But this measure is not a tax-law patch. Rather, the bill aims to streamline and modernize the tax code so that it is fairer and less costly for all Americans.
Consider this: The Internal Revenue Service estimates that Americans annually spend nearly $194 billion and 6.6 billion hours on tax compliance.
The last major reform of the tax code, which occurred in 1986, eliminated scores of special provisions and loopholes. But Congress almost immediately began recomplicating the code.
Here are just a few of the significant changes contained in the Wyden-Gregg bill:
n The measure would reduce the number of tax brackets to three: 15 percent, 25 percent and 35 percent.
- It would triple the standard tax deduction and eliminate restrictions on personal exemptions and itemized deductions; however, the number of exemptions and deductions for individuals and businesses would be greatly reduced.
- The progressive corporate income tax would become a 24 percent flat tax. Today, U.S. corporate taxes are second-highest in the developed world; this change would bring the U.S. rate below the average of those countries.
- The Alternative Minimum Tax would be abolished.
As for simplifying tax compliance, the senators say most taxpayers "will be able to use a straightforward and shortened one-page 1040 IRS form to file their federal income taxes."
On paper, the Wyden-Gregg plan is revenue-neutral. But by reducing the amount of money spent on compliance and by encouraging capital formation, it could have a strong positive impact on the economy.
At first glance this bill seems to offer the best chance for real tax reform in a very long time.