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7/15/2006 12:02:00 AM

Tax reform gets more much-needed high-level attention. Tax reform is once again on the policy agenda, as highlighted by the recently released report of the President’s Advisory Panel on Federal Tax Reform that identified several alternative -- and rather different -- directions for reform. “Given the level of interest in tax reform in the United States and around the world, and the degree of controversy about the appropriate direction for such reform,” said John Diamond of Rice University’s Baker Institute for Public Policy, “the formulation of tax policy is one of the most critical issues facing our nation.”

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Last year, President Bush formed the Advisory Panel on Federal Tax Reform to identify problems in the U.S. tax code and recommend revenue-neutral options to reform the federal income tax code. John Diamond, Kelly Fellow in Tax Policy at Rice University’s James A. Baker III Institute for Public Policy, believes the high-level attention is long overdue. “With the manifest problems of the current income tax, and in the face of ever-increasing global competition, our nation is at a truly critical juncture as it must determine how it will reformulate its tax and expenditure policies,” he said.

Given the panel’s objectives, Diamond was disappointed that the Progressive Consumption Tax (PCT) did not receive a recommendation in its report, which was released in November 2005. “The panel’s objectives were simplicity, economic gains and fairness,” said Diamond. “Yet they rejected the PCT, which is estimated to have larger potential growth effects than the reforms recommended and the greatest potential for simplifying the tax code, while also maintaining an appropriate level of fairness as defined by the panel.”

On the heels of the report’s release, the Baker Institute, with the help of a generous grant from the Alfred P. Sloan Foundation, held a tax-reform conference with presentations from 40 of the world’s foremost tax authorities.

The conference -- titled “Is It Time for Fundamental Tax Reform? The Known, the Unknown and the Unknowable” -- could not have come at a more opportune time, said Diamond’s colleague, Rice Professor of Economics and Baker Institute Rice Scholar George Zodrow. “We were able to provide critical insights that will inform the vigorous and contentious debates on tax policy that will surely take place in the upcoming congressional and presidential elections.”

Diamond and Zodrow became involved in the early stages of the tax-reform review process when they received a sponsored research contract from the U.S. Treasury Department Office of Tax Analysis to analyze and model the effects of alternative tax-reform proposals. The effort culminated in the research team providing estimates of the economic effects of alternative tax proposals to the President’s Advisory Panel on Federal Tax Reform.

Diamond and three co-authors at the Treasury Department also published a detailed paper describing the methods and assumptions used to compare the economic effects of alternative reform proposals put forth by the President’s Advisory Panel. In addition, Zodrow, along with Charles McLure of Stanford’s Hoover Institution, published an evaluation of the panel’s report.

Diamond’s research has appeared in “The National Tax Journal,” “International Tax and Public Finance,” and “The Encyclopedia of Taxation and Tax Policy.” He served on the Joint Committee on Taxation, United States Congress, from 2000 to 2004 and played an integral role in developing and implementing the framework used in the committee’s first official estimates of the macroeconomic effects of changes in U.S. tax policy. He received a Ph.D. in economics from Rice in 2000.

Zodrow’s articles on taxation have appeared in numerous publications, including “The Journal of Public Economics,” “The National Tax Journal,” “International Tax and Public Finance,” “Tax Law Review,” “The Journal of Economic Perspectives” and “The Journal of Economic Literature.” He is currently an editor of the “Policy Watch” section of “International Tax and Public Finance.” Zodrow has a Ph.D. and an M.A. in economics from Princeton University.

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For more information, contact Diamond at jdiamond@rice.edu, Zodrow at zodrow@rice.edu, or B.J. Almond in the Office of News and Media Relations at balmond@rice.edu.