Tax day is now behind us — and we are no closer to real tax reform than we were at this time last year, or the year before, or the year before that. We have a tax code that is so complicated that literally no one can understand it. At last count, the version of the tax code that most tax practitioners use was 74,608 pages. That's roughly 329 times as long as most English translations of the Bible — with no good news! It is unfair by definition: if no one can truly understand it, and if different tax advisors produce substantially different tax impacts from one taxpayer's income and expose statistics because they have different interpretations of the regulations, then it's not fair. It's also inefficient. How many times have you heard of individuals or companies making decisions based on tax impacts rather than the economic merit of the underlying transactions?
So if most people agree that the tax code is indecipherable, inequitable and inefficient, why is serious tax reform dead? Because the would-be reformers are going about the process in the wrong manner. They're in love with one replacement system or another — flat tax, VAT tax, Fair Tax, 9-9-9 or some new hybrid — that fails to get enough public or legislative support to reach the critical level of majority support. So the competing replacement ideas create a logjam, and nothing moves. So here's a new idea to break the logjam: split the tax reform process into two steps, rather than one.
Bring all the reformers with their competing plans together and agree first of all that the current system has become unworkable and therefore must be scrapped. In Washington-speak, the term for ending a piece of existing legislation is to Sunset it. So step one is to Sunset the Tax Code. That requires a specific date. The date should be far enough into the future not to create uncertainty in the financial markets — but close enough to the present to create a real sense of urgency to enact a replacement system well before the current code is sunset.
Sunsetting the code at such a date certain thus sets the stage for a robust, fully public debate on what the replacement system should be. In other words, it sets the stage for the debate between the competing replacement systems that at present can't quite capture the public's attention. Setting a date to end the current system and another earlier deadline by which the new system must be in place will break the logjam and get us moving toward true, broad-based tax reform that can and must be better than our current dysfunctional tax code.
A bill to do just that has recently been introduced in Congress. It was authored by Bob Goodlatte, Congressman from Virginia and Chairman of the House Judiciary Committee. It has been referred to the House Ways and Means Committee for consideration. In Ways and Means, Congressman Kevin Brady of Texas has agreed to be its champion. The bill has picked up 80 co-sponsors. One of them is a Democrat, so it's already at least technically bipartisan.
Listeners to American Radio Journal can learn more about this simple but powerful idea by going to SunsetTheTaxCode.com on the Internet. And while there, you can look at suggested text and edit it into individual letters to your Member of Congress and two Senators in support of the idea. This is an idea whose time has come: Sunset the Tax Code. Let's not be in the same stuck place where tax reform is still dead a year from now. Let everyone who has a tax reform idea all join together and agree to Sunset the current code first, and then hammer out a better, simpler, fairer and more growth-oriented replacement system. The process may still produce a messy final product, but there's almost no way it can be worse than what we have now.