Despite assurances from worried special interests that the idea is "a dead issue," tax reform is very much alive.
President Reagan praised the Treasury tax reform plan as the best he's ever seen, and Secretary Donald Regan assures visitors that the White House proposals to be sent to Congress early in 1985 will track closely with the sweeping Treasury plan.
Meanwhile, Regan has met privately with Sen. Bill Bradley (D-N.J.) and Rep. Jack Kemp (R-N.Y.), co-authors of the two leading alternative tax reform proposals. All three have now said publicly that the goal of tax reform is so important that they are willing to work out a compromise bill.
So a head of steam is building behind tax reform as a counter to pressure from organized lobbies to preserve the present inequitable tax system. The key to an ultimate victory for reform will be whether the public is able to put aside all of the rhetoric and bombast to understand one key fact:
Tax reform, which eliminates most deductions and loopholes in the present tax code and at the same time lowers tax rates, would reduce the tax burden for the overwhelming majority of individual taxpayers.
The National Press Club performed a valuable service by lining up Regan, Bradley and Kemp for successive speeches to explain distinctive features of their separate proposals. They all made the point that Kemp put well: "The number of paid lobbyists working against tax reform right now is a sure sign that people consider such a plan likely to pass. Interest groups don't pay high-dollar lobbyists to oppose a dead issue."
But the trouble, as a Wall Street Journal survey shows, is that the average person doesn't yet believe he or she will benefit from tax reform.
"I don't see us coming out ahead, no matter what they say," laments Rosemarie Cicone, a Fort Lee, N.J., office worker. This is a reflection, as the Treasury's brilliant tax reform narrative summary suggests, of declining taxpayer morale, triggered by the perceived lack of fairness of the present law.
To be sure, tax reform will mean that some -- those who have been getting special favors and enjoying loopholes -- will pay higher taxes. But the huge majority of persons (some 70 to 75 percent) would pay less.
Bradley told the journalists that the press has a unique responsibility: It must help inform the public that tax reform will mean a lower tax burden for most. "The special interests will try to frighten people by telling them what they'll lose without ever telling them that they get lower rates in exchange," Bradley said. "They all bet that the media will not inform people about the lower rates.
"Mark my words: since the Treasury demonstrated that it is serious about tax reform, we are seeing the 'coalition for high marginal tax rates.' Maybe it doesn't yet have a formal name or a K Street address, but it's real nonetheless."
Faced with the unexpectedly bold proposal by the Treasury, business and real-estate lobbies have worked overtime to claim that the sky is falling. Studies have been commissioned to suggest that withdrawal of the most blatant shelters will cause an economic collapse.
Some of the loudest screams can be traced to the proposal, contained in all three tax-reform schemes, to junk the investment tax credit. It was first enacted by the Kennedy administration when it was trying to placate a business community convinced that JFK was hostile.
But as the Congressional Joint Economic Committee staff says in a new report, the investment credit is a sheer giveaway that "rewards businesses for making investments they would likely make even without the credit." Combined with the accelerated depreciation allowance passed in 1981, these provisions have meant nothing less than a continuous hemorrhage of Treasury funds.
To be sure, there is nothing sacrosanct about any tax-reform package. The JEC study suggests that deductions and exclusions "that serve a useful social purpose or contribute to the fairness of the personal income tax" be retained.
For example, the JEC staff would modify the Treasury proposal to retain deductions for state and local income and real-property taxes, among a few others. It argues -- convincingly -- that while the Treasury proposal in this respect would be a simplification, "it would weaken our federal system of government" by interfering with the states' and cities' ability to raise money to pay their bills.
Meanwhile, no one should be dissuaded by the phony argument that tax reform only delays dealing with the deficit. Bradley-Gep yield an extra $25 billion in revenue in its third year. And all three plans could easily generate much more by a small increase in the proposed tax rates -- and still ensure a tax cut to most citizens.