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Tax code reforms of years past

John Dimsdale Dec 10, 2010
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Tax code reforms of years past

John Dimsdale Dec 10, 2010
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Kai Ryssdal: As the political to and fro over extending the Bush tax cuts continues, there’s a wrench of sorts being thrown in the works. President Obama mused out loud today that he’d like Congress to think about overhauling the whole tax code. Cut rates and eliminate a whole lot of deductions and loopholes. Some say tax reform is overdue. Nice idea, but doable?

Our Washington bureau chief John Dimsdale reports.


John Dimsdale: The modern tax code was set up in 1935 and reformed in 1954 and 1986. It seems repairs are necessary every 30 years or so.

George Yin: Every house needs to be cleaned up every once in a while. The tax code is certainly no exception to that.

George Yin was a Senate Finance Committee staffer when President Ronald Reagan reformed the tax code. The country had just gone through a wrenching recession, and Yin says special interests had turned the code into Swiss cheese.

Yin: There was a lot of tax shelter activity going on in the late 70s and early 80s that a number of people were critical of and felt that this was hurting economic growth and development.

Sound familiar? So in 1986, Reagan and Congress managed to get rid of a lot of loopholes in exchange for simpler, lower rates. But it wasn’t long before Congress granted more tax breaks, says Martin Regalia at the U.S. Chamber of Commerce.

Martin Regalia: Right now, we have a tax code that has been used for incentivizing every pet project under the sun with the so-called “sin taxes” to reduce certain types of behavior. We look for a tax code to redistribute income. Sometimes, we weigh the tax code down with too many goals.

Regalia says today looks a lot like 1986, but the deficits are far deeper, the global economy more competitive and a wave of aging Baby Boomers will want government services. That’ll make cutting a deal even tougher.

In Washington, I’m John Dimsdale for Marketplace.

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