Tax reform

Historical Roots of Modern Tax Reform: The French Enlightenment

One of the earliest comprehensive efforts to theorize tax reform within a modern economic framework emerged in 18th-century France, driven by the Physiocratic school of thought. Led by François Quesnay and Victor de Riqueti, Marquis de Mirabeau, the Physiocrats developed a systematic critique of the fragmented and regressive fiscal policies of the Ancien Régime. Their 1760 treatise, Théorie de l'impôt ("Theory of Taxation"), proposed a radical simplification of the tax system through the introduction of a single tax on landowners—the only class they considered to produce a true surplus.

Quesnay’s Tableau Économique presented a visual model of economic circulation and identified agriculture as the sole productive sector capable of generating net wealth. Influenced by Enlightenment ideals of natural order and rational governance, the Physiocrats argued that excessive and arbitrary taxation—particularly on trade, labor, and consumption—distorted markets, impoverished the peasantry, and hindered economic development. Their vision sought to reduce social tensions by distributing the tax burden according to productive capacity, thereby stabilizing the kingdom’s finances and reinforcing political legitimacy.

However, their proposals were met with resistance from the privileged classes and the institutional structures of the Ancien Régime. The exemption of the clergy and nobility from direct taxation, and the reliance on tax farming and feudal dues, rendered meaningful reform politically unviable. While some reform-minded ministers such as Turgot briefly attempted to apply Physiocratic ideas during the reigns of Louis XV and Louis XVI, they were quickly dismissed under pressure from vested interests.

The failure to implement these Enlightenment-inspired reforms contributed to a deepening fiscal crisis and popular resentment. The monarchy’s inability to equitably restructure taxation played a central role in the lead-up to the French Revolution, demonstrating how fiscal injustice can provoke systemic political transformation. The Physiocrats’ legacy, although unrealized in their own time, helped shape subsequent tax thought in the modern era, influencing economists like Adam Smith and early liberal reformers across Europe.

Australia

Tax reform was an increasingly significant issue on the Australian political agenda.{{cite news | access-date = 13 January 2013}}{{cite news | access-date = 13 January 2013}} Combined annual deficits of the Commonwealth and State and territory governments will rise from 1.9% of gross domestic product in 2011–12 to 5.9% of GDP by 2049–50.{{cite web | access-date = 13 January 2013

In July 2013, PricewaterhouseCoopers proposed significant tax reform in the context of an ageing population and slowing of the Australian mining boom.{{cite AV media | access-date = 13 January 2013 | archive-url = https://web.archive.org/web/20130815023401/http://pwc.com.au/tax/assets/Protecting-prosperity-22Jul13.pdf | url-status =dead | archive-date =2013-08-15}} For example, over 115 other taxes raise less revenue than one tax: the Goods and Services Tax.{{cite web | access-date = 13 January 2013 | archive-url = https://web.archive.org/web/20130815023401/http://pwc.com.au/tax/assets/Protecting-prosperity-22Jul13.pdf | url-status =dead | archive-date =2013-08-15}} This report received widespread coverage in the Australian press.{{cite news | access-date = 13 January 2013}}{{cite news | access-date = 13 January 2013}}{{cite news | access-date = 13 January 2013}}{{cite news | access-date = 13 January 2013}}

United States

There have been many movements in the United States to reform the collection and management of taxes.

During the late 19th century, American economist Henry George started a global movement for tax reform. The aim of the movement was the abolition of all forms of taxation other than the Single Tax on land value. The effects of the movement on taxation policy, although diminished, can be seen in many parts of the world including Australia, New Zealand, Hong Kong, Taiwan and Singapore. Efforts to promote this form of tax reform in the United States continue under the aegis of organizations such as The Henry George Foundation of America.

In 1986, landmark tax reform was passed in the Tax Reform Act of 1986. In the 1990s, reform proposals arose over the double-taxation of corporate income, with a large report in 1992 by the Internal Revenue Service (IRS).

During the Bush administration, the President's Advisory Panel for Federal Tax Reform recommended the removal of the Alternative Minimum Tax. Several organizations are working for tax reform in the United States including Americans for Tax Reform, Americans For Fair Taxation and Americans Standing for the Simplification of the Estate Tax (ASSET). Various proposals have been put forth for tax simplification in the United States, including the FairTax and various flat tax plans and bipartisan tax reform proposals.

In 2010, Fareed Zakaria proposed what he described as a "grand bargain" with tax reform for economic adversaries Paul Krugman and Niall Ferguson; an attempt to bridge their political divide with the creation of a simple and indirect Federal Sales Tax. Representative Chaka Fattah of Pennsylvania introduced a bill, H.R. 4646, called the Debt Free America Act that would introduce a 1% financial transaction tax and eliminate federal income tax. He has introduced bills calling for similar tax reform since 2004, but the bills have never made it out of committee.

President Obama's tax reform proposals are highlighted in his administration's 2013 United States federal budget proposal and in a framework for corporate and international tax reform presented by the administration. While some of these proposals have become irrelevant due to the “United States fiscal cliff” agreement at the end of calendar year 2012, these policies present a center-left approach to tax reform. In general, the proposals involve some marginal tax rate increases, some marginal tax rate decreases, and base broadening by closing, canceling, or limiting tax loopholes, deductions, credits, or other tax expenditures for top income earners and corporations.

In December 2017, the Senate passed the Tax Cuts and Jobs Act of 2017. On December 22, 2017 President Trump signed into law the tax reform bill passed by the House and Senate.

The business community avidly lobbied in support of the bill, which included corporate tax cuts among more comprehensive reform. The National Retail Federation was a leading voice in this effort, since previously, retailers paid one of the highest corporate tax rates.

Tax choice

Main article: Tax choice

Tax choice is the theory that taxpayers should have more control with how their individual taxes are allocated. If taxpayers could choose which government organizations received their taxes, opportunity cost decisions would integrate their partial knowledge. For example, a taxpayer who allocated more of his taxes on public education would have less to allocate on public healthcare. Supporters argue that allowing taxpayers to demonstrate their preferences would help ensure that the government succeeds at efficiently producing the public goods that taxpayers truly value.

References

References

1. "Revenue Neutral Law & Legal Definition".
2. Mirabeau, Victor de Riqueti & Quesnay, François. ''Théorie de l’impôt''. 1760.
3. Quesnay, François. ''Tableau Économique''. 1758. Translated and discussed in: Meek, Ronald L. ''The Economics of Physiocracy: Essays and Translations''. Cambridge, MA: Harvard University Press, 1962.
4. Kaplan, Steven L. ''Bread, Politics and Political Economy in the Reign of Louis XV''. The Hague: Martinus Nijhoff, 1976.
5. Meek, Ronald L. ''The Economics of Physiocracy: Essays and Translations''. Cambridge, MA: Harvard University Press, 1962.
6. Spengler, Joseph J. "Physiocracy and French Pre-Revolutionary Taxation." ''Journal of Political Economy'', vol. 49, no. 4 (1941): 517–545.
7. Vardi, Liana. ''The Physiocrats and the World of the Enlightenment''. Cambridge: Cambridge University Press, 2012.
8. "Henry George Foundation found to offer the only true basis of Economic Freedom and Social Justice".
9. Fleenor P, Williams J. (2006). [http://taxfoundation.org/article/options-reforming-us-corporate-income-tax Options for Reforming the U.S. Corporate Income Tax]. Tax Foundation.
10. [http://www.washingtonmonthly.com/features/2010/1012w.ratzkin.html Salvaging a Domestic Agenda: Toward Bipartisan Tax Reform] {{Webarchive. link. (2010-12-27 , ''Washington Monthly'')
11. [http://transcripts.cnn.com/TRANSCRIPTS/1007/04/fzgps.01.html FAREED ZAKARIA GPS]
12. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4646ih.txt.pdf 111TH CONGRESS, 2D SESSION - Bill H.R. 4646, FEBRUARY 23, 2010
13. (8 September 2010). "1% Transaction Tax".
14. Bickley, James. "Tax Reform: An Overview of Proposals in the 112th Congress." Congressional Research Service. 26 Oct. 2012.[https://www.fas.org/sgp/crs/misc/R41591.pdf]
15. (December 1, 2017). "Senate approves major tax cuts in victory for Trump". Reuters.
16. (December 22, 2017). "Trump signs tax bill before leaving for Mar-a-Lago". CNN.
17. Roundup, A WSJ. "What a Tax Overhaul Means for Your Industry". WSJ.
18. Parmley, Suzette. "National Retail Federation hails Senate's passage of tax reform bill". www2.philly.com.
19. "Tax morale and conditional cooperation".
20. "Do Earmarks Increase Giving to Government?". Cbees.utdallas.edu.