Sunsetting the Internal Revenue Code.

On March 23, 1998, Tax Executives Institute submitted the following letter to the Chairmen of the Senate Committee on Finance (William V. Roth) and House Committee on Ways and Means (Bill Archer). The Institute's letter was signed by TEI President Paul Cherecwich, Jr.

On behalf of Tax Executives Institute, I am writing to express the Institute's serious concern about proposals to sunset the Internal Revenue Code on a designated date without specifying a replacement tax system. In our view, these proposals reflect either a misapprehension of the importance of certainty and predictability to business enterprises and individuals or a disregard for the consequences of "terminating" the tax system. They illustrate the folly of making tax policy by sound bite and should be rejected.

Background

Tax Executives Institute is the principal association of corporate tax executives in North America. TEI is a nonpartisan, not-for-profit membership association that represents approximately 5,000 in-house tax professionals employed by 2,800 of the leading companies in the United States and Canada. TEI is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. TEI members deal with, and are frustrated by, the complexities of the tax laws on a daily basis, and know that abrupt or ill-conceived shifts in the law--changes without due consideration of transitional issues--exact a heavy toll.

Sunsetting the Code: A Beguiling but Unwise Move

H.R. 3097 and S. 1673, which have been styled "The Tax Code Termination Act," would sunset the Internal Revenue Code on December 31, 2001. Although the legislation includes a hortative declaration that any new federal tax system should be approved by Congress in its final form no later than July 4, 2001 (to permit a six-month transition to the new system), there is no assurance that the principles underlying a replacement system could be agreed upon, that the new system's contours could be defined, and that meaningful and comprehensive transition rules could be developed in time to meet that ambitious deadline. What is more, there is substantial doubt whether, even if the Fourth of July 2001 target were met, the six-month transition period contemplated by the legislation would be sufficient to avoid major disruptions in...