NCPA - National Center for Policy Analysis

Will Gephardt Revive His Tax Reform Plan?

November 20, 2002

Democrats can reclaim credibility on tax reform by adopting a plan like the Bradley-Gephardt tax reform plan of the early 1980s, says Bruce Bartlett.

It was one of the most important achievements of Congressman Dick Gephardt (D-Mo.) and former Sen. Bill Bradley (D-N.J.).

Historically, Democrats had used "tax reform" as nothing but a code word for soaking the rich.

  • In the tax reform acts of 1969 and 1976, Democrats were only interested in taking away supposed "tax loopholes" used by the "rich."
  • But Bradley and Gephardt combined loophole closing with a reduction in marginal tax rates, which would have put the vast majority of Americans into a 10 percent tax bracket, with the rich paying more.
  • It helped build political support for the Tax Reform Act of 1986, which lowered the top income tax rate to just 28 percent -- if only briefly.

Ronald Reagan's 1986 tax bill mostly closed corporate tax loopholes and raised taxes on corporations to pay for individual tax rate reductions. An opportunity exists today to do almost exactly the same thing, although Gephardt's plan would have to be radically rethought in light of the 1997 and 2001 tax bills.

Republicans have added new provisions to the Tax Code to benefit their constituencies, creating further tax complexity, unfairness and misallocation of investment.

With Treasury Secretary Paul O'Neill talking about politically unpopular ideas such as imposing a value-added tax in order to abolish the corporate income tax, there is the opportunity for a Democrat like Dick Gephardt to outflank him. All he has to do is talk about lowering marginal tax rates and many Republicans will follow him, rather than support an obnoxious new VAT.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, November 20, 2002

 

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