In our “Countdown to tax day” we have so far covered the pros and cons of a VAT, the limitations of only taxing income over $250,000, extending expiring tax cuts only temporarily, implementing new types of taxes, the true costs of tax expenditures, and the current state of revenues. For our grand tax day finale, we turn to the need for fundamental tax reform.

With huge structural deficits looming in the future, many observers feel that the current tax code will not be able to raise enough revenue to balance the budget, even with significant spending cuts. There have been talks of adding new taxes to make sure that revenues will match up with spending. Earlier in the week, we discussed the prospects of a financial transactions tax and an energy tax. Another highly-discussed idea is a value-added tax (VAT).

President Obama has pledged not to raise taxes on individuals who earn under $200,000 a year or on couples earning under $250,000. It seems highly unlikely that the President will support enough in spending cuts to make this promise realistic (see here and here).

In counting down to tax day, we’ve already shown that we don’t raise as much in revenue as we spend, and how this is partially the result of costly tax expenditures. Paring back some of those tax benefits can help us to raise more revenue, if we so choose; raising rates is another.

In the complexity that is our tax system, there’s a special group of tax law provisions that significantly change how the regular tax rates affect individual and corporate taxpayers.  Known as tax expenditures, they are changes to the regular rate structure that often have social or economic goals. 

With tax day fast approaching, it's worth discussing the current state of revenues in the United States. Last year, revenue collection hit a 60-year record low of 14.8 percent of GDP -- which was enough to pay for only 60% of what we spent.

Those who are yet to file their tax returns know full well that April 15 (Tax Day) is fast approaching. In the mad rush to complete the paperwork, little thought is likely given by many to broader tax issues that will affect their tax bill and how it is collected for years to come. Well, the early filers at the Bottom Line have some time on our hands to consider these weighty issues and we will be exploring them in daily posts leading up to the big day.