To pass tax reform, Trump and Congress can look back to 1986
© Getty Images

As Congress and the White House pivot toward comprehensive tax reform, it’s 1986 all over again in Washington. That’s the last time our tax code was overhauled, and whatever your favorite memories or pop culture references of that year happen to be, the dreadful reality is that waiting three long decades for tax modernization has been far too long. Since that time, our economy has transitioned into the information age, and global competition has exponentially intensified.

We simply cannot wait any longer for tax reform. As distant as 1986 may seem, however, it’s not so remote that leaders in Washington can’t draw upon its lessons today. Namely, tax reform is invariably a difficult endeavor, but the Reagan tax reforms demonstrate that it’s a surmountable challenge whose efforts prove worthwhile. In 1986, just as today, the nation found itself saddled with a tax code more than 30 years old, with rates so high and rules so complex that U.S. economic competitiveness and growth suffered.

ADVERTISEMENT
President Reagan and congressional leaders understood the challenges of tackling more than 26,000 pages of tax law calcified with loopholes, complex rules and prosperity-crushing rates on businesses and working families alike. Then, as now, the tax code offered a textbook example of Washington’s worst dysfunctions. Reagan faced the additional challenge of a divided Congress, stubborn defenders of the status quo, and an army of skeptics who doubted any real progress could be made.

 

Reagan, however, possessed a critical ally in that battle: the American people. A groundswell of pro-reform public support existed, which tax reform advocates harnessed to steer both parties toward the most significant simplification of the tax code in modern American history. The resulting Tax Reform Act of 1986 reduced the number of income tax brackets from 14 to two, significantly cut both corporate and personal income tax rates and made filing returns simpler. It constituted a historic legislative accomplishment.

Since that time, the Internal Revenue Code has atrophied. Subsequent Congresses and presidents found countless ways to undermine the achievements of 1986, adding tens of thousands of pages of rules and loopholes, raising rates and failing to make the basic updates required for our tax code to keep pace in the 21st century economy. Today, the U.S. suffers the developed world’s highest corporate rate, which kneecaps American business competitiveness. While other developed nations have reduced their rates and reformed their codes, we've stagnated.

Accordingly, while Americans of different political persuasions may disagree on details, we can all agree on the need for transformative tax reform to remain competitive in the challenging global marketplace. American companies and workers shouldn’t continue to be shackled by the highest tax rate on job creators in the developed world, as well as punitive provisions that discourage domestic investment and growth.

By recognizing the most salient lessons of 1986, however, President Trump and leaders in Congress can achieve pro-growth, transformational tax reform this year. First, they must harness American popular support. In that regard, public opinion is clear. A recent American Action Network poll shows an overwhelming majority of Americans, an astonishing 77 percent, believe that tax reform will positively impact economic growth and their own financial circumstances.

Trump and Republican leaders must therefore reinforce that consensus by communicating tax reform in terms of dollars and cents, articulating its power to positively impact the economic outlook of every citizen in this country. Americans expect stronger economic growth, wage growth and a clearer path to prosperity for middle-class families, and tax reform is a critical means to achieving it.

Second, lawmakers must understand that unanimity is an impossible ideal, and the perfect cannot be the enemy of the good. Washington remains notorious for its bouillabaisse of egos and special interests, which can jeopardize this prime opportunity to finally achieve reform. Various elected leaders and interested parties will inevitably battle over rates and potential loopholes, and attempt to avoid difficult political choices through cynicism and chicanery.

We simply cannot afford to forfeit this once-in-a-generation opportunity for lasting, transformative reform in the name of attempting to please every single politician or special interest. We must therefore recognize the lessons of 1986 and find inspiration in President Reagan’s example. By doing so, we can harness the will of the American people to achieve the sort of comprehensive tax reform our job creators and middle-class families need and deserve.

Timothy Lee is senior vice president of legal and public affairs at the Center for Individual Freedom, a nonprofit organization founded in 1998 to advocate for the principles of free markets, limited government and international liberty.


The views expressed by contributors are their own and are not the views of The Hill.