4 Ambitious Ideas for Tax Reform

These proposals will outlast election-year rhetoric.

pen, glasses and calculator on the tax form
(Image credit: LIgorko)

Americans don’t agree on much, but on one issue there’s broad consensus: The tax system is a mess. Nearly 60% believe the tax code is so flawed that Congress should overhaul it, according to the Pew Research Center. This discontent hasn’t gone unnoticed by the presidential candidates. Amid the name-calling and rancor are some ambitious ideas to reform the tax code that could resonate long after Election Day, even though their advocates are no longer in the running. Among them:

A consumption tax. Proponents say taxing goods and services would allow the government to reduce or eliminate taxes on capital gains and dividends, which would encourage savings and investment. In Europe and Canada, consumption taxes take the form of a value-added tax, or VAT, which is imposed at each stage of production and distribution of a product or service. Although the tax may not be as visible as a tax on income, it’s reflected in the retail price consumers pay. A big proponent is Texas senator and former Republican candidate Ted Cruz, who proposed a single 10% income tax rate and a 16% “business flat tax” on all business profits, rents and royalties.

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Sandra Block
Senior Editor, Kiplinger's Personal Finance

Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.