Evaluating the Consumption Tax Proposals: Changes in the Taxation of Interspousal Transactions, Use of Trusts, and Revising the Meaning of "Tax Planning"

This Article focuses on two proposals to revise the federal income tax system: the Armey flat tax and the USA tax. It compares these tax reform measures with the current Internal Revenue Code for income tax in three areas: (1) corporate stock redemptions and divorce; (2) the use of alimony trusts; and (3) nonqualified deferred compensation (so-called "rabbi") trusts. In assessing the proposed changes, the Article also addresses the amount of simplification that will be achieved, the possible undertaxation of recipients of profits, tax avoidance, and the extent to which one must cast aside conventional tax planning and tax policy concepts in the new tax regime.