The recent public saliency of fundamental tax reform – specifically a shift to a single-rate consumption-based form of federal taxation – reflects the confluence of three important contemporary trends. The first is the ideological ascendancy of conservatism, with its long-standing suspicion of activist government. The second is the political rise of the national Republican Party, fully competitive with the Democrats on both the congressional and presidential levels. The third is a growing body of theoretical and empirical research critical of the income tax and supportive of consumption-based taxation.

At first glance, this confluence would appear to put fundamental tax reform within reach. But while the climate for reform may have improved markedly, serious and perhaps insurmountable obstacles remain. At the ideological level, fundamental tax reform risks fracturing the coalition between economic and social conservatives that has created the right's current dominance. As reform moves from vague campaign promise to comprehensive legislative proposal, moreover, it may place the Republican Party in conflict with some of its most important constituencies. Finally, the economic literature on fundamental tax reform – though extensive, sophisticated and suggestive – remains inconclusive on a number of key issues.

Fundamental tax reform entails significant political and ideological risks for those promoting it. Given the expectations raised by the measures currently under discussion, the potential costs of failure are high. Prospects for reform are, on balance, poor.