NPR logo A Closer Look At Past Tax Overhaul Attempts

A Closer Look At Past Tax Overhaul Attempts

The complexity of the tax code makes it easy to bash, but efforts to revamp the system have proved that it's a real political minefield. For every tax benefit, there is a constituency that doesn't want to see its demise; lobbyists and interest groups in Washington help make sure that doesn't happen.

According to Joe Thorndike, tax historian at Tax Analysts, tax overhaul happens when it must, not when it should. "Big changes only come when there are wars or major depressions," he says.

Nevertheless, frustration over the tax system often reaches a fever pitch. Here are some highlights — and lessons — of past attempts at simplification.

Hard not to gore someone's ox. A tax overhaul panel appointed by President George W. Bush examined the issue in 2005, but its recommendations seemed to land with a thud — followed by utter silence. Former Sen. John Breaux, who co-chaired the panel with former Sen. Connie Mack (R-FL), even joked that Bush must have lost the group's final report somewhere in the White House. What happened? Some blame the group's proposed tinkering with the mortgage interest deduction, which drew heavy criticism from powerful lobbying interests.

According to former Democratic Sen. Bill Bradley, who was instrumental in a successful tax overhaul effort in 1986, there's one way to avoid this problem.

"The political process is to isolate one little thing that is heavily lobbied, by people who benefit from that," Bradley tells NPR's Scott Horsley. "You need to step back and have a conceptual framework that allows you to say why the approach that one might support ... is in the general interest."

Tax overhaul fever. Every so often, tax overhaul really grabs the spotlight. Remember Steve Forbes' flat tax and his postcard-sized tax return? Or Mike Huckabee's FairTax, a national retail sales tax that was a cornerstone of his 2008 bid for president? But just as tax code alternatives are popularized and catchphrases like "tearing the income tax out by the roots" take hold, according to Thorndike, the real details of fundamental change are too nerdy for prime time. "Tax replacement proposals are presidential campaign issues. Tax reform is more inside baseball," he says.

AMT — the engine that hasn't. The alternative minimum tax was once regarded as the engine that would drive tax code overhaul. That's because the AMT, which was designed to make sure that high-income taxpayers paid their fair share of taxes, was not indexed for inflation and is ensnaring more taxpayers than intended. But so far, lawmakers have found it politically painless to patch the problem every year. Really fixing the problem is costly — estimates for scrapping the AMT are well over $1 trillion. "It turns out it's not so difficult to kick that can down the road," Thorndike says.

Major overhaul model. In 1986, Republicans and Democrats joined together to broaden the base and lower the rates, a feat that produced what's regarded as the most important piece of tax legislation in modern history. The political details are described in dramatic detail in the book Showdown At Gucci Gulch — considered required reading for tax overhaulers and reporters alike. But so far, Bradley does not see the seeds for major overhaul.

"I'm concerned because I don't see any real bipartisanship," he says. "It's not impossible that it might arise but, if you're going to do something that significant, you're going to need support on both sides of the aisle."

Commissions galore. Policymakers regularly conduct comprehensive reviews of the tax code, recommending and assessing changes. Expert panels routinely study the issue. Presidents Bush and Obama appointed groups to look at the code. President Clinton's commission on entitlement and tax reform issued recommendations in 1994. In 1996, a congressionally appointed panel led by Republican Rep. Jack Kemp recommended, among other things, a single-rate system. There have been "countless, certainly dozens" of similar examinations of tax code alternatives, Thorndike says, adding that these kind of panels don’t generally spark the tax overhaul effort. "You don't tackle tax reform through high-profile, blue-ribbon commissions," he says.

That hasn't stopped some in Congress from trying to force the issue. The Tax Code Termination Act would create an imperative for considering the recommendations of a 19-member tax overhaul commission: It would repeal the Internal Revenue Code by a date certain.