Why I introduced the Tax Code Termination Act.

The Tax Code Termination Act, my proposal to sunset the tax code, has attracted a host of opponents since its introduction in January, Tax Executives Institute among them. President Clinton, Representative Charles Rangel, and others share the Institute's view of the Act and criticize it as partisan politics, a sound-byte gimmick, ultimately irresponsible, and risking paralyzing uncertainty in business planning. The purpose of this article is to explain my rationale in proposing the Act and let you as tax professionals judge for yourselves whether these pejorative labels are deserved. My hope is that you will see the merit in my case; even if you do not, you will have a better informed perspective from which to base your opposition.

For the past three years, there has been a great deal of talk about tax reform. The public, tax professionals, and politicians all are ready to agree that there are serious problems with the tax code, not the least of which is the way Congress is continuously changing it and adding tortuous complexity at every turn. I am convinced that the way we in Washington routinely do business with regard to the tax code is a recipe for disaster. I have developed this view not only from first-hand experience in Congress, but also through careful consideration of the analysis of tax and business professionals who see and deal with the effects of the tax laws every day.

TEI itself makes this case persuasively and was right on the mark in its assessment of the Taxpayer Relief Act of 1997 saying it "rival[ed] the Tax Reform Act of 1986 for mind-numbing, eyes-glazing-over complexity" and was "hastily cobbled together from competing House, Senate, and Administration versions thereby guaranteeing that corrective legislation rather than interpretative guidance is necessary to clarify important provisions."

Unfortunately, effective corrective legislation is rarely seen and the complex tasks of interpretation are left to the IRS. It is a convenient way for Congress to please lobbyists and special interest groups with symbolic measures of little substance while leaving the IRS to bear taxpayer wrath as it struggles to make sense of the unintelligible and incomplete law it has been handed. It is no wonder that litigation is often required to resolve this mess at great loss to business productivity and wasteful diversion of critical resources. I do not need to dwell on this point. Tax executives are at the eye of the storm on a daily basis and understand it better than the vast majority of Americans.

So let me put aside the matter of complexity in the current tax law and dispense with the quoting of statistics about its length, lost productivity, unfairness, compliance costs, and the well-understood litany of problems with the current tax code. Instead, let us look at the tax policy environment and the prospects for reform.

Today, you can pick up any political publication or commentary, any news magazine or think tank catalog, any transcript of an interview with any key official of virtually every political stripe and find finger pointing and lamentation over the state of the tax code and the ineffectiveness and insincerity of the "other side" in addressing it. You can also find dozens of proposals promising economic growth, simplicity, fairness, and reduction in rates. You can find proposals that redistribute wealth in whatever direction you want while yielding improved government revenues to boot. Why, it is amazing how -- if we only adopt change X, Y, or Z -- all our troubles will be over. Politicos, interest groups, and academics are all ready to rush headlong into change whether the implications of change are understood or not. Meanwhile, there is insufficient political will to push forward with sweeping reform and we continue our cycle of endless tinkering with the present system, exacerbating rather than addressing the problem.

I propose an alternative -- a three-and-a-half year, bipartisan national debate with the year 2000 presidential election being, in effect, a national referendum on tax reform. The Tax Code Termination Act is the essential first step in this measured process to achieve lasting tax reform -- a process that does not necessarily end on the sunset date but that requires the sunset date to begin. It will preclude a rush to quick-fix solutions for political advantage and establish the conditions for a bipartisan national dialog to build sustainable national will.

Critics of the Tax Code Termination Act misunderstand this intent. They incorrectly equate a deadline for change with precipitous change. They wrongly state that the bill envisions a six-month transition -- it does not. They wrongly state that it demands quick answers on complex questions -- it does not. They wrongly state that it offers political advantage -- it certainly does not. What does it do?

First, the Act says to Congress, the President, and the American people that we will tackle the issue of tax reform and by July 4, 2001, specify the provisions of a new tax system. By necessity, this will require a national debate to build consensus, strong presidential leadership, and congressional commitment to act on, rather than just talk about, tax reform. The three-year national debate that leads up to that vote will provide the forum for a thorough examination of the implications of tax reform and the benefits and consequences of competing proposals. It wi]] remove tax code decision-making from the realm of Washington's back rooms and lobbyist influence and allow the best minds in business, academia, and government the opportunity to be heard. We will shift the dynamic from partisan political maneuvering for short term advantage to a bipartisan national dialogue to build consensus for lasting change. By having a known date well in the future, we will silence the siren song of quick fixes and ensure a fully informed national decision.

This will not happen, however, without the Act's second major provision -- a fixed sunset date for the present code, December 31, 2001. The sunset date provides a powerful and necessary impetus for action. Our current code is proof positive that, absent a fixed date of decision, we will continue with the status quo tinkering that has created the mess we now live with. The nature of this date must be clearly understood. It says that in the absence of congressional action, the tax code will terminate. It does not preclude Congress from enacting transition provisions that extend in whole or in part the current code or provide for a phased transition over time. Nor is there anything in the Act that prevents Congress from repealing the sunset date if there is insufficient national consensus for change. The key to what course is followed is the outcome of the national debate.

Experience demonstrates that there must be informed national will to achieve lasting reform. What Congress did in 1986 is a perfect example of tax reform without a deliberate, public debate to build consensus. It had significant unforeseen consequences and it did not last. We need the best thinking from academia, business, government, and the American people to thoroughly vet all aspects of competing alternatives and build a national mandate that will produce sustainable change. Three and a half years is enough time to do that. In the end, there will either be a national consensus embodied in a strong mandate for the newly elected President to move forward with the plan for reform or there will be a public recognition that there is no sufficient consensus for fundamental change.

In either case, the legislative tax agenda for the new President and Congress will be clearly set -- either enact transition provisions and timetables to implement reform or repeal the sunset date and proceed according to the national will. There is nothing in the Tax Code Termination Act that prevents the enactment of whatever timetables are necessary to reduce business uncertainty and accomplish smooth transition. The sunset date is intended to provide sufficient urgency and focus for the national debate. Clearly, something is required to move us from debate to action and that is what The Tax Code Termination Act is designed to do.

STEVE LARGENT represents the First District of Oklahoma in the U.S. House of Representatives. He was first elected to Congress in 1994, and is a member of the Commerce Committee, serving on the Energy and Power Subcommittee, the Telecommunications, Trade, and Consumer Protection Subcommittee, and the Finance and Hazardous Materials Subcommittee.