Needed: Another Round Of Tax Reforms
May 30, 2001
Some economists are a lot less than thrilled by the tax package that has emerged from Congress. They charge that Congress rushed into the debate with far too many political objectives and far too few economic principles -- and they are anticipating another round in the tax debate.
Here are some areas they suggest need attention:
- The estate tax is repealed in 2010, but only for one year -- and the provision that assets be inherited at their purchase price rather than market value would leave beneficiaries with horrendous bookkeeping burdens.
- Abolishing the corporate income tax would be economically judicious, but perhaps politically infeasible -- but the administration should push for an end to the complicated and capricious depreciation of plants and equipment, allowing large companies to write off capital investments as soon as the expense is incurred.
- Short- and long-term capital gains should be taxed equally -- rather than imposing a penalty rate of 35 percent on short-term gains -- a process which distorts the timing of asset sales.
Critics say that the trouble with the tax law of 2001 -- like those of 1990 and 1993 -- is that Congress had no thought of its ultimate destination. They urge Congress to take that issue up well before changes are necessary in 2010.
Source: Alan Reynolds (Cato Institute), "Tax Cut 2001: A Little Bang for a Lot of Buck," Wall Street Journal, May 30, 2001.
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