While such radical tax reforms plans as the flat tax and the national sales tax still have their ardent defenders, many Washington observers say that, with a Democrat in the White House, they don't stand a chance of serious consideration by Congress. However, the guiding notions behind both plans -- shielding savings and investments from taxes, thus boosting the economy and creating jobs -- could inform moderate reforms. Two reforms, changes in Individual Retirement Accounts and reduction of capital gains, have moved to the fore.

First, IRAs:

• Currently, only families making $40,000 or less are eligible for fully deductible IRAs, with contributions limited to a meager $2,000 per year; critics call this unfair.

• One reform plan by Sen. William Roth (R-Del.) would index the $2,000 limit to inflation, allow stay-at-home spouses to put $2,000 a year into an IRA rather than the current $250, and most notably allow the "IRA plus": you pay normal taxes placing money in an account, than after five years the money can be withdrawn tax-free.

• President Clinton has a plan similar to the Roth plan on the table which would double the $40,000 income limit on tax-free savings.

The other reform is in the area of capital gains:

• One plan, advanced by Jack Kemp during the campaign, combines indexing with a deep cut in capital gains tax rates that would end taxes on "gains" that are simply the effect of inflation.

• To avoid a huge tax sell-off in the wake of the cut, the plan offers a two-year window during which investors could qualify for the benefits of indexing without actually selling by paying taxes on what they would realize (excluding inflation) if they did sell.

• That makes the plan a revenue producer ($155 billion in its first two year, according to Kemp).

Source: Editorial, "Tax Reform: Resting in Piece," Investor's Business Daily, December 2, 1996.