WASHINGTON - Here's some holiday cheer: 120 million American families no longer have to file income tax returns; the top individual rate is lowered by 20 percent; the top corporate rate is cut by more than half; the government gets the same amount of revenue; and the tax system is slightly more progressive.
OK, it's not a free lunch. It would be accompanied by a 12.9 percent value-added levy, which critics like to call a national sales tax.
This is the brainchild of Michael Graetz, a Columbia University law professor and former top tax official in the George H.W. Bush administration. He has refined his proposal, and the Tax Policy Center, courtesy of a grant from the Pew Charitable Trust, has analyzed it; the results should cause liberals and conservatives to take notice.
There is broad consensus that the U.S. tax system is inefficient, inequitable and hopelessly complex. The chairmen of the two tax-writing committees in Congress, Rep. Dave Camp, R-Mich., and Sen. Max Baucus, D-Mont., have worked diligently to craft a bipartisan overhaul.
It's going nowhere. The two chairmen won't be in their positions in the next Congress, and a 1986-style tax reform - broadening the base and lowering the rates - isn't politically achievable today.
Further, the conservative dream of starving government by slashing taxes and the liberal idea of paying for new initiatives by closing loopholes for the rich are nonstarters.
The Graetz initiative offers something for both sides. It starts, he suggests, with countering the observation once offered by former Treasury Secretary Larry Summers that liberals fear a value-added tax because it's regressive and conservatives fear it because it's a money machine. Graetz's measure overcomes both objections.
The professor argues that his VAT would make business more competitive and create jobs; it would be levied on imports, not exports. It would bring U.S. tax policy more in line with the 160 other countries, including every developed one, that have a VAT.