Tax Policy for Great Society Programs: Tax Expenditure and the Failure of Comprehensive Tax Reform in the United States in 1969

On December 30, 1969, Richard Nixon signed the Tax Reform Act of 1969-originally crafted by the Treasury Department during the presidency of Lyndon B. Johnson-into law. Some scholars who discussed the tax reform have evaluated that it succeeded in making the federal tax system somewhat fairer, simpler, and more equitable, while the others have pointed out that its legislative process exemplified the quandary of comprehensive tax reform; this paper analyzes and demonstrates the conflict regarding with the tax reform between tax reform proponents, such as the Treasury Department and Democrats in Congress, and the Johnson administration. The unenthusiastic Johnson administration, and particularly the CEA's argument of temporary tax surcharge based on "domesticated Keynesianism," delayed the proposal and legislation of the tax reform until the Nixon presidency, and doomed the ideal tax reform that the Treasury crafted on the basis of the concept of "tax expenditures." With greater support of the Johnson administration, the Tax Reform Act of 1969 could have not only made the federal tax system so much fairer and more equitable, but also restored the taxation -expenditure nexus the Kennedy-Johnson tax cut of 1964 had broken.