Charged by President Obama with identifying ways to overhaul the entire U.S. tax code by “closing loopholes, streamlining the law, and generating revenue,” the Volcker Task Force on Tax Reform faces a monumental task. Nonprofit publisher Tax Analysts weighed in last week with a cartload of advice for Mr. Volcker in the form of short papers by academic and legal tax experts.

The writers were asked to imagine that they were meeting with the task force members and had just five minutes — or about one thousand words — to present their recommendations for fixing the system. The result is a collection of admirably succinct papers containing some fascinating, and quite radical, proposals.

Here’s a sample, a couple of corporate tax papers:

Reform the Taxation of Business Income (Eric M. Zolt, professor at the UCLA School of Law and former deputy counsel in Treasury’s Office of Tax Legislative Counsel). Zolt offers three proposals:

• A single tax regime for business income. Sole proprietorships, partnerships, S corps, C corps — it’s time to ditch them all and replace them with a single set of tax rules, argues Zolt: “Why should taxpayers have to choose a suboptimal organizational form to achieve a favorable tax result? … If we want a tax system that is neutral as to business form, then one size fits all.”

• Flat taxation of capital income. Zolt advocates abandoning ineffective attempts at progressive taxation of income from capital (though retaining progressive tax rates for income from labor). A flat rate for capital would be simpler, less distortive, and easier to enforce, he asserts.

• Reformed treatment of debt and equity. The notorious preference of the corporate tax code for debt over equity has got to go, either by ending the deductions for interest or extending deductability to dividends. Either way, there would have to be a transition period and coordination with other developed countries, argues Zolt.

Moving to a Territorial System and Reforming the Corporate Tax (Daniel N. Shaviro, Wayne Perry Professor of Taxation at the New York University School of Law). Residence-based taxation of corporate income is unsustainable in the long run, Shaviro believes, because investors can easily avoid it by investing through non-U.S. entities. A shift to a territorial system (i.e., one that taxes domestic income but not foreign income) may be inevitable, but it should be accompanied by a one-time tax on the profits of U.S. companies’ foreign subsidiaries to offset their windfall gain from the transition. Shaviro also suggests enforcing stricter source rules to prevent shifting of income to outside the United States.

Like Zolt, Shaviro wants to address the debt-over-equity issue, but he thinks lowering overall U.S. corporate tax rates might do the job by shifting the tax bias in favor of equity. Any resulting rush by higher-income individuals to use corporate entities as tax shelters could be countered by measures such as reasonable compensation rules for owner-employees.

The complete series of Tax Analyst briefs is available here. ###