Senators Wyden and Gregg to Introduce Tax Reform Plan

On February 27, 2010, Senator Wyden (D-OR) announced that he and Senator Gregg (R-NH) will introduce a proposal next week they have been working on for two years to reform the federal tax system. Per Senator Wyden, this will be "a comprehensive tax reform bill that will make the federal tax code simpler and fairer for all Americans and businesses of every size." He implies that this will contribute to the discussion on how to address the 2001/2003 tax cuts that expire at the end of this year.

I hope they are correct. It would be a shame to miss what should be a good opportunity, with the expiration of the tax cuts this year, to have a discussion on how reform of the entire system - such as broadening the base to enable lower rates than we'd otherwise have in 2010, would be good. But, I'm doubtful this discussion will take place when the Administration and apparently a majority of Congress (given the recent enactment of new Paygo legislation) are not worried about how to pay for making the tax cuts permanent (other than for high income individuals) because they are using a baseline that "continues current policy" meaning it is assumed that they will be made permanent.

I think any possibility of tax reform will require:

1. A more honest discussion in Washington that the tax cuts only remain if re-enacted and how much that costs (using a real baseline).
2. Public awareness campaign on how the law really works including that the tax cuts are expiring, how much the numerous special deductions, credit and exclusions "cost" and how the tax law could be simpler, more equitable and more neutral and efficient if we eliminated many of these (rather than continually adding more) and kept the lower rates.

What do you think the prospects are for major tax reform this year?