Moving Forward with Bipartisan Tax Policy

U.S. tax policy is urgently in need of reform. Our tax system is overly complex and has failed to keep pace with changing economic conditions. The current economic crisis has led to an escalating budgetary shortfall, which will exacerbate the already significant fiscal challenges facing the country. Moreover, looming changes written into the tax law will require Congress to make major decisions regarding the tax code. On December 31, 2010, most of the tax cuts passed in 2001 and 2003 ("the Bush tax cuts") will expire. In the meantime, the Alternative Minimum Tax will fall on tens of millions more American families. And the federal estate tax is scheduled to disappear completely in 2010 before reappearing in 2011. If these changes were permitted to take effect, which is unlikely, they would lead to sudden and significant changes in effective tax rates, after-tax wages, returns to capital, and the distribution of the tax burden. Congress needs to act, not simply to move towards a more stable tax system but to create a tax system adequate to the demands of the twenty-first-century economy.

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