The spirit of '86.
Why do we need this type of tax reform? The complete list of answers cannot be listed here, but the true state of our economy is being obscured by the unprecedented steps taken in the wake of the 2008 financial debacle to mask the profound damage caused by foolish, if not unethical and dishonest, actions by those whose self-interests overrode the common good. Economic stagnation and anemic job growth are just two of many negative consequences that are evidence of this damage. Additional evidence can be seen in the bubbles that are again building and will no doubt bring a repeat of 2008 if not worse.
With increased scrutiny on income inequality and an ever growing concern for the majority of working Americans for whom these bubbles are not working, it makes sense to ensure that our tax code is not filled with loopholes that favor some individuals or businesses over others and provides a sound basis for solid economic progress for all concerned.
While the 1986 tax reform plan is generally known as the Reagan tax reform, it was really a bipartisan bill. President Regan outlined its basics in a 1984 speech, when he called for "an historic reform for fairness, simplicity and incentives for growth." But much of what resulted was the work of Democrats such as then-Sen. Bill Bradley and the man who controlled the House Ways & Means Committee at the time, Rep. Dan Rostenkowski.
As a president who embraced supply-side economics, Reagan wanted lower marginal tax rates. He had pushed through previous tax reform efforts that had lowered rates, but as 1986 began, the top rate was still 50 percent. However, because of a variety of loopholes, many wealthy individuals and corporations paid little or no taxes. This tax avoidance infuriated some, who wanted to eliminate these tax breaks in the name of "tax fairness."
President Reagan's advisers put these two ideas together and came up with a plan that would eliminate many loopholes and use the resulting new revenue to lower tax rates. It would also remove many lower-income Americans from the tax rolls.
As the plan worked its way through Congress, both Democrats and Republicans changed it to preserve some loopholes. However, the final bill that emerged was a remarkable piece of legislation that, on the whole, embodied tax policy that promoted the common good instead of special interests.
In the years since the 1986 tax reform, many of its major provisions have been weakened or undone. Lobbyists have been busy in the past 28 years inserting more loopholes, deductions and credits to benefit their clients. Tax rates have also risen. Our code is far less pro-growth than it was in 1986. Few, if any, would claim that it treats all taxpayers fairly.
There is an emerging consensus across the political spectrum that the various loopholes in our tax code need to be eliminated. These provisions benefit the few at the expense of the many. They reward actions that special interests favor, instead of actions that make the most sense for businesses and individuals.
It's time to change this. It's time that members of Congress from both parties agree to the type of bipartisan tax reform that was enacted in 1986.
I realize that asking for the same type of bipartisan cooperation today seems like a tall order. After all, we expect our politicians today to kowtow to special interest groups, not defy them. The Congress of the 1980s is different from the Congress of today, right?
Looking back at the 1986 tax reform efforts, the same dynamics that exist today existed then. A president loyal to one party faced a Congress dominated by the other. Special interest groups were plentiful and strong. They had succeeded in writing many loopholes and deductions into previous tax reform bills, and most people expected them to prevail again.
But with the steady support of a change-oriented president, members of Congress decided to embrace reform instead of special interests. The result wasn't a perfect tax code, but it was certainly an improvement over what had existed before.
The same thing can happen today. We can have lower rates. We can have fewer special interest loopholes that benefit the few at the expense of the many. All we need is for members of Congress to do the right thing, just as they did in 1986.
Jim Brown Jr. is president of the Brown Co. Remodelers Inc. of Little Rock. Email him at Jim@ The-Redo.com.