Reform or Redesign? The Future of the Personal Income Tax

Abstract

Deep uncertainty marks the present condition, and inevitable change characterizes the future state of the personal income tax in this country. While political considerations eventually dominate, success will hinge on Congress first taking the most critical step of redesigning the existing tax structure. Evans and Tower evaluate the merits of the present paradigm based on the volatility of the federal tax base and the coordination of federal-state relationships. The resulting analysis reveals that although there many weaknesses in the current structure, the key features for successful redesign are clearly in place. Based on their findings, the authors propose a framework for a streamlined personal income tax design that enhances stability and harmonization. Though these goals are within reach, proposals for a new model, such as a Value Added Tax, threaten to impede efforts to restore the integrity of the current regime. Evans and Tower conclude that Congress must coordinate its efforts by beginning with a redesign of the personal income tax system and then focusing on the design fundamentals of any new proposal.