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21 IRET Policy Bulletin 1 (1985)

handle is hein.taxfoundation/iretpbul0004 and id is 1 raw text is: M ECHnommo DIlC. 1331 P, IDln;in ED institute forresearch on te economics of taxation a tax-exempt 501 (C)(3) organization ennsylvania Avenue, N.W. Suite 515 Washington, D.C. 20004 (202) 347-9570 October 10, 1985 Tax Reform: Is There a Better Way?* President Reagan has presented to the Nation a tax reform program calling for the most sweeping changes in the income tax structure since its inception early in this century. In the huge array of tax changes in the President's tax reform package, the proposed reductions in the statutory tax rates for individuals and corporations, the reduced rate of tax on capital gains, and the modest dividend paid-deduction stand out as shining lights. Until early September one would also have included the proposal to index inventories for inflation under the FIFO inventory accounting system. This proposal recently was deleted from the package in the interests of raising $15.3 billion more in tax revenues over the five-year period 1986-1990. Indeed, very little in the package other than the rate reductions, the dividend-paid deduction, and the lower rate on capital gains can be justified as making significant contributions to achieving the announced goals of the proposed tax reform -- simplification, fairness, and economic efficiency and growth. These objectives are unquestionably laudable; there should be no reservations about pursuing them with all vigor. At issue is whether the tax reform program as a whole is on the right track or whether, with the exceptions noted above, it is not likely to continue to reverse the constructive thrust of tax reform initiated in the Economic Recovery Tax Act (ERTA) of 1981. Reducing marginal tax rates for corporations, no less than for individuals, should take priority second to no other changes in the income tax structure. The correct rate of tax on corporate income is zero. In the light of all three of the President's tax reform objectives -- simplicity, fairness, and economic growth -- there should be no income tax levied on corporations. *This Bulletin is based on a speech delivered by Norman B. Ture to the Mid-year Executive Conference of the National Wholesale Grocers' Association, September 14, 1985. Note: Nothing written here is to be construed as necessarily reflecting the views of IRET or as an attempt to aid or hinder the passage of any bill before Congress. I

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