Five Easy Steps to Tax Reform
By Grover Norquist

Before September 11 of last year, Social Security reform sat at the center of the Bush administration's economic agenda. The war, a plummeting stock market, and resistance from congressional leaders, however, has most likely postponed Social Security reform until after the 2004 elections. So now the administration has signaled another issue for its big push in 2003: fundamental tax reform.

The drive to cut and simplify taxes has been building momentum within the GOP for two decades. In 1981, President Reagan won a 25 percent cut in marginal income tax rates. This supply-side trim was sold as an economic stimulus package to create jobs, wealth, and increase government revenues. (It did all three.)

Then the 1986 Tax Reform Act reduced America's top tax rate to 28 percent, while eliminating many deductions and credits. The capital gains tax, though, was destructively raised from 20 to 28 percent. In 1990 and 1993, Bush Senior and then Bill Clinton raised personal income tax rates to 39.6 percent.

George W. Bush's 2001 tax cut was not sold as a supply-side economic stimulus. While Reagan had promised to increase government revenues via the economic growth his tax reductions would bring, Bush's message was much more fundamentally conservative. Bush the younger warned that Congress would spend the surpluses then overflowing Washington unless the money was returned to individual taxpayers.

Back in the mid 1990s, the flat tax debate caught fire, as reflected in Steve Forbes' 1996 Presidential campaign and the speeches of House Majority Leader Dick Armey. Then a quiet fell over the debate, and conservative activists began to ask, "Whatever happened to the flat tax? Why don't we talk about it any more?"

But the flat tax didn't die: It became a consensus issue that lay dormant as long as a Democratic President had the veto at 1600 Pennsylvania Avenue. That barrier has now fallen.

There are two routes to a single-rate tax. For one, the President or a Congressional leader could draft a flat income or sales tax and present the entire package to the country for approval. The second route is what tax reformer Ernie Christian calls "The five easy pieces." If we eliminate the estate tax, stop taxing capital gains, end the Alternative Minimum Tax, make all savings tax free, let businesses write off investments in a single year rather than forcing them to depreciate expenditures over a long period, and then charge everyone the same rate, we will have a flat tax, Christian says.

This five-step program has the advantage that each of its elements has its own built-in constituency, while support for an official flat tax is far more diffuse. Farmers, homeowners, and small businesspeople have already convinced Congress to do away with the estate tax. Similar cajoling is taking place around the other five steps. My organization, Americans for Tax Reform, has established caucuses in Congress for each of the separate reforms. The coalition of groups supporting the Zero Capital Gains Tax, for example, now includes the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Federation of Independent Businesses, and the National Restaurant Association. The 107-member caucus is led in the Senate by Georgia Democrat Zell Miller and Alabama Republican Richard Shelby and in House by California Republican David Dreier and Texas Democrat Ralph Hall.

Ohio Republican Rob Portman, who has championed expanding IRAs and 401(k)s, leads a caucus to protect all savings from taxes. Texas Republican Kay Bailey Hutchison and Pennsylvania Republican Phil English lead the caucus to abolish the Alternative Minimum Tax for both individuals and businesses. In this fashion, the building blocks of the "five easy pieces" strategy are already in place. It will run parallel to the Bush administration's efforts next year.

And even if tax eliminators win only a few of the battles, it will be a major move in the right direction. What Mae West said of sex is true of tax cuts: All tax cuts are good tax cuts. Even bad tax cuts are good.