Bruce Bartlett
I don't normally have an interest in giving Democrats useful advice on anything. I disagree with almost everything they stand for. Nevertheless, I recognize that some major policies that I favor simply cannot be accomplished without meaningful bipartisanship. One of these is tax reform. For this reason, I am going to explain how Democrats can reclaim credibility on this issue in a way that might be mutually beneficial. The stimulus for this advice column is Rep. Dick Gephardt's decision to step down as minority leader in the House of Representatives, presumably to run for president. I've always viewed him as a truly moderate Democrat, who got pushed farther and farther to the left by the necessity of his position. As the center of gravity in the House Democratic Caucus has moved continuously leftward since 1974, Gephardt, as their leader, had little choice but to move leftward himself. In the past, however, Gephardt has shown a willingness to chart his own course. In this respect, one of his most important achievements in Congress was to co-author the Bradley-Gephardt tax reform plan in the early 1980s. The Bradley in this legislation was former Sen. Bill Bradley, Democrat of New Jersey. The Bradley-Gephardt plan was important because, historically, Democrats had used the idea of "tax reform" as nothing but a code word for soaking the rich. In the tax reform acts of 1969 and 1976, Democrats were only interested in taking away supposed "tax loopholes" used by the "rich." There was no quid pro quo. The rich got screwed, but there was no benefit to anyone else. To their credit, Bradley and Gephardt recognized that this approach was no longer viable in the Reagan era. So they combined loophole closing with a reduction in marginal tax rates. This effort was central to building political support for the Tax Reform Act of 1986, which lowered the top income tax rate to just 28 percent -- if only briefly. Without the Bradley-Gephardt bill, I doubt that President Reagan's tax reform effort would have ever gotten off the ground. Consequently, the top rate would have been 50 percent when Bill Clinton took office. The 1993 tax increase might well have put the top rate back to 70 percent, where it was when Reagan took office, rather than the 40 percent level Clinton imposed. Unfortunately, since Bradley and Gephardt's legislation, Democrats have been AWOL on the issue of tax reform. They seem to be happy with the status quo and prefer attacking Republican initiatives to coming up with anything of their own. But this is an untenable position politically. The Tax Code is a total mess that desperately needs to be cleaned-up and simplified. Defending this monstrosity, even in a de facto sense, is the equivalent of defending Saddam Hussein. Fortunately for the Democrats, Republicans haven't pressed them very hard on the issue. The latter were too busy enjoying the perks of majority status in the House by adding new provisions to the Tax Code to benefit their constituency. But the result has been further tax complexity, unfairness and misallocation of investment. Democrats should take a lesson from Republicans when they were in the minority. The latter found tax reform to be a very popular message. This led to the development of many comprehensive reform plans that were supported almost exclusively by Republicans. Interestingly, the only Democrat tax reform plan to come forward in the last 15 years was authored by Gephardt. His plan would have put the vast majority of Americans into a 10 percent tax bracket, with the rich paying more, paid for with further loophole closings. This plan would have to be radically rethought in light of the 1997 and 2001 tax bills. Nevertheless, an opportunity exists today to do almost exactly the same thing Ronald Reagan did in 1986. He mostly closed corporate tax loopholes and raised taxes on corporations to pay for individual tax rate reductions. The same thing could be done today. Corporations have been getting away with murder by creating and expanding their use of tax shelters. Sooner or later, there will have to be a legislative fix. Therefore, why not take the opportunity to just redo the 1986 tax reform? Raise revenue from corporations and lower tax rates again. With Treasury Secretary Paul O'Neill talking about politically unpopular ideas such as imposing a value-added tax in order to abolish the corporate income tax, there is the opportunity for a Democrat like Dick Gephardt to outflank him. All he has to do is talk about lowering marginal tax rates and many Republicans will follow him, rather than support an obnoxious new VAT. The tax reform issue is there for a sharp Democrat to pick up and run with, as Jimmy Carter did in 1976. It could jumpstart the now-moribund "New Democrat" message that elected Bill Clinton twice. If Gephardt is smart, he will make it his key domestic policy initiative.

Bruce Bartlett

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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