Tax code reforms of years past

A calculator and a tax guide.

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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.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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