According to an article in Politico, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) are releasing a letter to their colleagues to inform them that the Committee will adopt the approach of the Simpson-Bowles Commission’s “Zero Plan”. Under the “Zero Plan,” lawmakers eliminate all individual and corporate tax expenditures and reduce rates accordingly to meet a revenue target. Then, lawmakers must justify which tax preferences, if any, to add back in, keeping in mind that tax rates would have to rise in order to offset any costs. Thus, the Zero Plan provides a “clean slate” from which the creation of a new U.S. tax code begins.
In a 2011 PPI paper entitled “Less is More: The Modified Zero Plan for Tax Reform”, Marc Goldwein and I , former advisers to the Simpson-Bowles Commission, laid out how a Zero Plan approach can simplify the tax code, reduce marginal tax rates, maintain progressivity, and reduce the deficit.
While the Zero Plan has something for everyone to dislike, it also is the only tax reform approach that can appeal to Republicans – who like the rate cuts and the reduced number of brackets –, and Democrats – who want to increase revenues and close loopholes that help wealthier taxpayers game the system. Senators Baucus and Hatch should be commended for recognizing this and using the Zero Plan as the basis for broad tax reform legislation.
