Democrat one-ups Obama on tax reform 

Senator Ron Wyden of Oregon has an article in today’s Politico calling for a rate-cutting, preference-cutting tax reform, along the lines of the bipartisan 1986 tax act that was signed by Ronald Reagan. Wyden co-sponsored a similar measure with Republican colleague Judd Gregg, who did not run for reelection in 2010. Wyden pointedly goes farther than Barack Obama did in his State of the Union address, where he called for a similar reform of the corporate income tax:

 “For example, over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries.  Those with accountants or lawyers to work the system can end up paying no taxes at all.  But all the rest are hit with one of the highest corporate tax rates in the world.  It makes no sense, and it has to change. 

“So tonight, I’m asking Democrats and Republicans to simplify the system.  Get rid of the loopholes.  Level the playing field.  And use the savings to lower the corporate tax rate for the first time in 25 years –- without adding to our deficit.  It can be done.” 

To which Wyden writes:

“As in 1986, tax reform shouldn’t just focus on the corporate income tax. Unlike health reform, there isn’t a single American who can say he or she likes the current tax code.

“Right now, American taxpayers spend more than $163 billion and 6.1 billion hours each year just preparing their tax returns. The code is so complicated that when Congress passes tax relief for working families, many Americans aren’t even aware of it.

“By simplifying the tax code and eliminating specialized deductions and loopholes that allow some groups to pay less of their fair share than others, Congress can afford to hold down rates for everyone. If Congress can come together behind real tax reform this year, by this time next year, average Americans could not only be paying less in taxes they could finish their taxes in less than an hour — with a one-page 1040 form.”

There’s obviously a shout out here to his fellow Democrats: voters won’t be aware that you’ve cut their taxes unless you simplify the tax code.

The 1986 tax act was passed after more than a year of negotiations, with strong leadership from House Ways and Means Committee Chairman Dan Rostenkowski and Senate Finance Committee Chairman Bob Packwood. It’s far from clear that their current counterparts—Republican Dave Camp and Democrat Max Baucus—are as committed to this. But Wyden, who has a knack for coming up with sensible bipartisan policy initiatives, seems to be, and he’s on the Senate Finance Committee. Plus, he was just reelected by a 57%-39% margin in a tough year for Democrats.

What are the chances for a tax bill of the type Wyden is proposing? Not good, certainly; but not zero either.

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Michael Barone

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