Tax Reform - What's on the Table and What Might It Mean for You and Your Clients?

Sep 19, 2026

Tax reform is examined as a recurring national political topic, with attention to arguments that reform could make the tax system simpler and fairer while supporting economic growth and job creation. The material contrasts income taxes with consumption taxes, explains design features versus tax type, and introduces competing proposals from an advisory panel. It also provides criteria for evaluating proposals, guidance for further research, comparison charts, draft individual tax forms, and an AICPA questionnaire to support client education.

LanguageEnglish

CategoryLetters

FormatPDF

Pages16

Reading Time6 min

AccessFree to download

Introduction

Why is Tax Reform on the National Political Agenda

Income Tax versus Consumption Tax

Design Features versus Type of Tax

The Panel’s Two Proposals

How to Evaluate Tax Reform Proposals

Where to Find More Information

Panel’s Comparison Charts

Panel’s Draft Individual Tax Form for the Simplified Income Tax

Panel’s Draft Tax Form for the Growth & Investment Tax

AICPA’s Tax Reform Analysis Questionnaire

Presentation Slides

Tax Reform-What's on the Table and What Might It Mean for You and Your Clients? Professor Annette Nellen College of Business San José State University Cal CPA Society – Tax Interest Group December 14, 2005 Table of Contents | Introduction | 1 | | --- | --- | | Why is Tax Reform on the National Political Agenda | 2 | | Income Tax versus Consumption Tax | 6 | | Design Features versus Type of Tax | 8 | | The Panel’s Two Proposals | 9 | | How to Evaluate Tax Reform Proposals | 15 | | Where to Find More Information | 16 | | Panel’s Comparison Charts | 17 | | Panel’s Draft Individual Tax Form for the Simplified Income Tax | 19 | | Panel’s Draft Tax Form for the Growth & Investment Tax | 20 | | AICPA’s Tax Reform Analysis Questionnaire | 21 | | Presentation Slides | 24 | Introduction1 President Bush and others have talked about reforming the tax code in the hopes of making it simpler and fairer while also promoting economic growth and job creation. Will such reform be fundamental, such as moving from an income tax to a national consumption tax? Or, will reform mean significant modifications to the income tax to make it look more like a consumption tax (such as by exempting some investment income) or to have it be a simpler income tax? With calls to make earlier tax cuts permanent, but with a very high revenue cost, some type of reform may be promoted as a revenue neutral alternative to our current system. As happens about once every decade, fundamental tax reform has returned to the national political agenda.2 Unlike many tax discussions that take place in Congress, discussions of replacing the federal income tax with a sales tax, a value-added tax or a flat tax are often reported as front page news. Thus, your clients may get quite interested and have questions for you. This outline and presentation are 1 Portions of these materials are based on an article by the author in the May 2005 Tax Adviser, as well as materials prepared by an AICPA Tax Reform Task Force of which the author is a member. The author maintains a Tax Reform website at [http://www.cob.sjsu.edu/facstaff/nellen_a/txrefupd.html](http://www.cob.sjsu.edu/facstaff/nellen_a/txrefupd.html). 2 For example, in 1977, Treasury Secretary William Simon issued the Treasury's Blueprints for Basic Tax Reform which proposed to stop tinkering with the tax system and instead design an entirely new system. In 1980, Congressman Ullman's Tax Restructuring Act of 1980 (H.R. 7015), proposed income tax changes as well as a 10% VAT; Cong. Rec. 4/2/80, pg. 7481. Major reform was also discussed in the mid-1990’s, with various hearings held by Congressman Archer in the House Ways and Means and work by the National Commission on Economic Growth and Tax Reform formed by Senator Dole and Congressman Gingrich. designed to help you answer these questions and educate your client as to what tax reform might mean to them, to businesses, and to the economy. This outline looks at the following aspects of tax reform: 1) Why tax reform is on the national political agenda 2) Income tax versus consumption tax 3) Design features versus type of tax 4) The Advisory Panel’s two proposals 5) How to evaluate tax reform proposals 6) Where to find more information The accompanying slide presentation has additional information about the President ’s Advisory Panel and specific ideas on how to help clients understand tax reform and what it means for them. Why Tax Reform is on the National Political Agenda Key reasons offered for revamping or replacing the federal income tax include: simplification and economic growth. In announcing his plan for tax reform in 2004, President Bush suggested that there was a need to “fundamentally reform the tax code to make it simpler, fairer, and pro-growth.”3 Some of the specific concerns often cited about our income tax include that it discourages savings, taxes corporate income twice, provides a preference for corporate debt over equi

FAQs

What issues drive calls for tax reform on the national political agenda?

The discussion highlights simplification and economic growth as key reasons. It also cites concerns such as complexity, effects on savings, corporate taxation design, treatment of inflationary gains, tax preferences that distort decisions, and the existence of a tax gap.

How does the document compare income tax and consumption tax?

It frames reform possibilities as either a fundamental move from an income tax to a national consumption tax or modifications to the income tax to make it resemble consumption taxation. It also signals that panels propose different approaches and evaluates them using defined criteria.

What tools are provided to help clients understand tax reform proposals?

The outline and accompanying slide presentation are designed to answer common client questions. It includes panel comparison charts, draft individual tax forms for proposed simplified income and growth/investment tax approaches, and an AICPA tax reform analysis questionnaire.

Sep 19, 2026

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