On Revamping the Tax Code

BY ALAN GREENSPAN

I would not presume to suggest the best specific path for reforming the tax system. However, past experience suggests that as the panels work gets under way, one of the first decisions that you will confront is the choice of tax base; possibilities include a comprehensive income tax, a consumption tax, or some combination of the two, as is done in many other countries. As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growthparticularly if one were designing a tax system from scratchbecause a consumption tax is likely to encourage saving and capital formation. However, getting from the current tax system to a consumption tax raises a challenging set of transition issues.

In 1986, tax reformers considered a consumption tax base and, despite the arguments in favor of such a system, they decided to enhance the comprehensiveness of the income tax system then in place. Circumstances are different today, and the right choice will require assessing anew the tradeoffs between complexity, fairness, and economic growth.

by Alan Greenspan, Federal Reserve chairman,
in a March 3 speech to a bipartisan panel convened by President Bush.

NEWS

IRS sets start date for tax season

The IRS announced that tax season will start in late January and that it will issue refunds to taxpayers despite the partial shutdown of the federal government.

PODCAST

Why CPAs can’t wait on automation tools

What do accounting firms waiting on others to develop AI, automation, and data analytics tools have in common with a baseball fan sitting in a stadium filling with water at an exponential rate? The answer could determine your firm’s fate.