Pathways to Tax Reform Revisited

There is widespread agreement in Washington that the income tax needs to be reformed, although little agreement about how to do it. A common thread in most reform proposals is that they would slash most so-called tax expenditures—spending programs run through the tax system. This follows a long tradition. Stanley Surrey viewed cuts in tax expenditures as the “pathway to tax reform,” and in 1973 made the case in a book of that title. This article revisits Surrey’s pathway, examining various proposals to eliminate, reduce, or reformulate tax expenditures as part of tax reform, including overall limitations on tax expenditures, converting most tax expenditures to credits, and more radical reforms that would vastly reduce the number of people who would file tax returns. The efficacy of introducing a new tax such as a value-added tax or carbon tax to supplement to the income tax is also examined.