Tax reform is back on the policy agenda as President Obama and Republican hopeful Mitt Romney each submitted two different frameworks for tax reform. While both parties say they want to change the current system, any tax reform package must have bipartisan consensus to succeed and in the current political environment that seems like a distant possibility.
Yet a forum recently held by the Common Ground Committee, a non-profit group dedicated to changing our culture by promoting civil discourse on controversial policy issues, might just prove that there is actually some agreement on both sides of the political aisle.
Jared Bernstein, senior fellow at the Center for Budget and Policy Priorities and former adviser to Vice President Biden debated this issue with Art Laffer, the father of "supply side" economics and former economic adviser to President Reagan. The goal: to debate the facts with the ultimate challenge of identifying points of consensus without compromising core principles.
What they agreed upon might surprise you. Here are their areas of common ground:
- The current tax system is too complex. We need a simple, fair tax code. Currently there are too many loopholes and too much incentive for tax avoidance.
- We need to raise revenues. Higher tax revenues are necessary in order to reduce the debt, even if Congress and the White House are able to cut spending. Whether the increased revenues are best obtained by lowering the rates and broadening the base or raising rates on the wealthy is still a point of contention.
- The concept of a flat tax has merit. There is agreement that a flat tax would simplify things and generate ample revenue. Furthermore, one could be designed that does not hurt lower income workers in that they pay too much of their income in consumption.
- Tax policy should not favor any form of income. This point gets to the heart of fairness: a loaded word but important consideration. The 15 percent carried interest deduction that allows hedge fund managers to pay less in taxes than the 36 percent that others pay on wage income does not make sense. All income, regardless of how it is earned or what sector it is earned in should be treated the same.
- Those who have more should pay more. Certainly someone who earns more in income should pay more in taxes. While there is still debate on whether that means a progressive tax or a proportional tax, the basic principle is a point of common ground.
- We need to bring down corporate tax rates but close loopholes to ensure at least revenue neutrality. There could be agreement to bring corporate tax rates from 35 percent to somewhere in the mid-20 percent. But you need to be aware that in doing so someone will lose -- business may not want to give up their special preferences.
- 1986 style tax reform was a great model. The combination of base broadening and rate reductions raised revenues and was the largest simplification of the tax code to date, drastically reducing the number of deductions and brackets. Truly a bipartisan undertaking, it was not perfect but was ultimately better than what it replaced.
- It will require change in Washington to get something done. We cannot achieve the goals we want to achieve if blocking compromise is what gets you up in the morning. The blame game is no longer working.