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A public policy blog from AEI
Real Tax Reform
Expert analysis from AEI's Economics Policy scholars
In his State of the Union message in 1984, when President Ronald Reagan first proposed major tax reform legislation, there was laughter in the chamber. But work was already ongoing on the effort, and AEI played an important role in advancing it.
In the mid-1980s, at the urging of the powerful Ways and Means Chairman Dan Rostenkowski, AEI and Brookings organized a half dozen private seminars for members of Congress and key policy officials on taxes and other economic issues. The meetings were private and off-the record.
In September 1985, the late John Makin, director of Fiscal Policy Studies at AEI, along with his Brookings colleague, the late Joe Pechman, bought a dozen scholars and experts together to brief House Ways and Means members on tax reform. Also attending the gathering were key Reagan administration figures on tax reform including Treasury Secretary James Baker, Deputy Treasury Secretary Richard Darman, and Ron Pearlman, assistant secretary of the Treasury for tax policy. At the conclusion of the retreat, the participants commented that while they had reached no agreement on a specific package, a number of issues had been clarified. The participants felt the prospects for passage of a tax bill were favorable. Makin and others at AEI continued to work on proposals that would reduce rates and broaden bases that eventually became part of the successful 1986 effort.
AEI’s decades-long work on fundamental tax reform has sought a tax system that produces growth and is fair. In 1985, AEI published Real Tax Reform: Replacing the Income Tax, edited by Makin, that examined the merits of various approaches. The pamphlet was based on a discussion at AEI that included the late Princeton University economist David F. Bradford, who argued in favor of consumption taxation. Bradford championed the X tax, a progressive consumption tax, in Fundamental Issues in Consumption Taxation (AEI, 1996) and The X-Tax in the World Economy: Going Global with a Simple, Progressive Tax (AEI, 2004). The torch has been passed and taken up ably by AEI Resident Scholar Alan Viard. His 2012 AEI book Progressive Consumption Taxation: The X Tax Revisited, written with Robert Carroll further develops the case for replacing the income tax system with a Bradford X tax and addresses how to design the tax. Like Makin, Viard’s counsel about issues in individual and corporate taxation, is sought by Democrats and Republicans alike. Viard has also addressed reform options within the income tax system. In June 2016, AEI published A Proposal to Reform the Taxation of Corporate Income, a paper written by Viard and Eric Toder of the Urban Institute.
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