EDITOR’S NOTE -

Tax Talk doesn’t remember much about 1985. But we do remember that, after Ronald Reagan was re-elected president in 1984, tax reform was a very hot topic (remember the Tax Reform Act of 1985?). Anyway, for all the talk, it took Congress until October, 1986 to come up with the landmark Tax Reform Act of 1986. We’re not saying it will take that long for fundamental tax reform this time around but, for all the talk of Big Tax Reform, we are still only looking at two “plans” actually in writing: the one on the President’s campaign website (three pages—and we’re being generous) and the one the House Republicans released last June. As discussed in our article below, the rest is speculation, including about how a “destination based cash flow tax” (“DBCFT”) would work.

Speaking of a DBCFT, one fascinating tidbit is that the outline of a cash flow tax was set forth in a U.S. Treasury paper in 1977, the first year of the Carter Administration. One of the report’s authors, David Bradford, went on to expand the concept in papers written in 2001 and 2003 before his untimely death in 2005. Other authors (and other tax reform panels) have also weighed in so there is quite a bit of academic thought on the topic. Unfortunately, there is no practical experience.