The Decline (and Fall?) of the Income Tax: How to Make Sense of the American Tax Mess and the Flat Tax Cures That Are Supposed to Fix It.

Leonard Podolin, CPA, retired partner, Arthur Andersen LLP, and former Chair of the AICPA Tax Division Executive Committee, has reviewed The Decline (and Fall?) Of the Income Tax, by Michael J. Graetz, W. W. Norton & Company Inc., 1997 (323 pages, $27.50).

This book makes for enjoyable and even entertaining reading about an important, interesting, but difficult subject-- namely, where our tax system is headed. it is especially valuable to those readers who do not have "inside-the-beltway" experience, because it explains, in always understandable and often amusing style, what's wrong with our present income tax ("The Decline"), how the political process works (or doesn't work) to change the law ("The Sausage Factory"), and, importantly, how the major proposals to change our tax system would work ("The Fall?").

Michael Graetz brings a broad and varied perspective to the subject. He is the Justus S. Hotchkiss Professor of Law at Yale Law School, was Deputy Assistant Secretary of the Treasury for Tax Policy, 1990-92, and Assistant to the Secretary and Special Counsel, 1992, in the Bush Administration, and has served on the Commissioner's Advisory Group (where I first met him). This government experience helps to add clarity and credibility to his explanations.

Graetz's book delivers a practical and politically realistic exposition, covering issues from the marriage penalty and tax shelters to bracket creep and capital gains. You probably won't like what you learn here about how our tax laws are created, but you will increase your understanding of why changes are needed. And in the process you'll learn a bit about human behavior, social science, economics and politics. The book may even add to your ability to guide your clients on a practical, basic level, as they try to understand whatever tax proposal happens to be on the table at the moment, or even to influence what actually becomes law.

Inevitably, you'll also learn a fair amount about the author's personal politics. Graetz sees a fair solution as one that taxes consumption at 10%-15%, and taxes incomes above, say, $75,000-$100,000 (so-called higher incomes) at 20%, eliminating perhaps 100 million income tax returns. But there is nothing stopping you from developing and advocating your own views. After all, isn't the will of the people what politicians are supposed to follow? Read the book to see how the process really works.

If what you are looking for is a complete and detailed explanation of the various tax proposals, you won't find it here. (Instead, you should read "Flat Taxes and Consumption Taxes: A Guide to the Debate," published by the AICPA Tax Division in 1995.) But for most CPAs, even those whose practice is heavily tax-oriented, this book provides an excellent primer, and the little time it takes to read it will pay off many times by giving you a basic understanding of where we are in our tax system, how we got here and where we may well be headed. Your clients would even enjoy reading this book.