I know everybody - at least most Republicans running for President - wants to be Ronald Reagan. But guess what? It isn't the 80s.A piece in yesterday's New York Times, entitled "Sunday Dialogue: Time for Tax Reform?" posed the following question: should capital gains and dividends be treated like ordinary income? One response suggested a return to the Reagan days and to once again tax capital gains and ordinary income alike.
But it's time, I think, to get over our nostalgia and realize that reform styled on the Tax Reform Act of 1986 is not the answer.In 1986, we cut tax rates and broadened the tax base - in effect, "cleaning out the closet." That won't work now for at least three reasons. One is that we can't reform the system in a revenue neutral way - a "principle" of '86-style reform - because, with surging deficits, we need to raise more revenue. Next, we can't cut taxes for individuals and pay for it by raising taxes on corporations because, in an increasingly global economy, we need to reform the corporate side as well. And, third, we need dramatic reform to deal with the broken mess I described above. Cleaning out the closet won't work in 2012; we need to take down the whole house of cards that has become our tax system since 1986 or it will eventually collapse on itself under the weight of its own absurdity.
View TaxAnalysts'® Chris Bergin's opinion in its entirety on TAX.com.
Discover the features and benefits of LexisNexis® Tax Center
For quality Tax & Accounting research resources, visit the LexisNexis® Store