With the President’s announcement this week of his intent to propose new minimum income tax rules for individuals who make over $1 million a year, the heated debate over whether this is “class warfare” or simply “good math” will no doubt pick-up. Whimsically naming this proposal the “Buffet Rule” – an attempt to highlight Warren Buffet’s recent criticisms of tax breaks for himself and his other fellow millionaires – has not made it more palatable to Speaker Boehner and other Republican leaders. No doubt we will continue to see this diversion of visions continue possibly through and beyond the upcoming election. As political pundits discuss whether this is simply a foundation for the President’s campaign platform or if he sincerely believes that this proposal has any chance in some form of passing, will likely be discussed ad nauseam.
However, in the meantime, less reported but perhaps more important tax changes may be taking place. New tax proposals, initiatives, congressional hearings, and legislation focused on tax code reform are increasing. Is this a sign of something that hasn’t occurred in 25 years? Is there potential for a complete overhaul of the entire tax system?
Not since Republican President Ronald Reagan worked with what was then a Democratic congress have we seen an extensive evaluation, new legislative agenda and then, a subsequent complete reform of the U.S. tax code. At the time it was the most extensive reform of the tax code in our Nation’s history. As with any giant overhaul, mistakes can be expected, but there is no doubt that it was a bipartisan victory for our government in 1986 and one that right now seems impossible.
In spite of this view, some in Congress are working right now towards tax code reform. The Democratic-run Senate Finance Committee has conducted numerous hearings in the last few months that deal with various aspects of the tax code and the potential costs and benefits of reform. And just this week, the Republican-run House Ways and Means Committee will hold two hearings on the tax code, both involving an analysis of specific portions of the tax system and on the system as a whole.
As we are inundated with opinions from both sides on the President’s new proposal for a new tax minimum on the wealthy and mandates from both sides on tax proposals being sent to the new so-called “Super Committee” it will be prudent for us to pay attention to the less “flashy” but perhaps just as important work of our congressional tax writing committees. The tax code reform of 1986 might seem almost pale in comparison if such a bipartisan initiative were successful today.