While the most important task of the Bush administration for the remainder of the president’s first term is fighting the war on terrorism, and specifically eliminating Saddam Hussein, it seems likely that the linchpin of Mr. Bush’s domestic agenda for the next two years will be tax reform. America’s economy could certainly use the boost. It seems at present that there are two routes the president and the Republican Party might take in simplifying the tax code and providing rate relief to taxpayers. One would be to make the president’s 2001 tax cut permanent. While this would certainly be a positive step, it falls short of the structural reforms needed. The other route is to scrap the current tax code and institute a new regime. While the second of these two options would be the more politically difficult, it strikes us not as a Clinton-style overreach but rather as a sound use of Mr. Bush’s political strength.

Making permanent Mr. Bush’s 2001 tax cuts — or at least extending them — seems doable politically, even with the filibuster-vulnerable 51-seat Republican majority in the Senate. As our Timothy Starks reported in yesterday’s New York Sun, under existing budget rules, the Republicans, with a simple majority, could pass a budget resolution extending five or 20 years, incorporating Mr. Bush’s tax cuts. However, such a strategy would require the tax cuts to be extended year-to-year.

Better, the president and the Republicans could go on the offensive, with a plan hatched by Treasury Secretary O’Neill, who is undertaking a study of ways to revamp the tax system from top to bottom. One proposal on the table is the flat, or singlerate, income tax. Also on the table is a national sales tax or a value-added tax. Since the last overhaul of the tax system in 1986 by President Reagan, the tax code has only grown more complex. Especially troublesome is the growth of the number of people who must calculate the burdensome and complex Alternative Minimum Tax — it is projected that by 2010 about 30 million Americans will have to worry about this tax, originally aimed to prevent the wealthy from exploiting loopholes.

The proposal that sounds the best to us out of any of these is a flat tax. In 2000, the top 1% of earners paid 37.4% of all federal personal income taxes. The top 50% of income tax filers pay about 96% of income taxes — that 50% starts at about $27,000. There is no reason for those at the top, and even those in the middle class, to be soaked to such an extent. Along with a flat tax, the estate tax could be permanently eliminated. Last time around the permanent death tax elimination had a solid 56 supporters — it needed 60 to overcome a filibuster. With the new Senate, National Review’s Ramesh Ponnuru calculates there are 58 hard votes. The elimination of the capital gains tax is another item we would like to see on the president’s agenda, as it would unleash a tremendous amount of growth at a negligible cost. So would elimination of the corporate income tax, which taxes money that is taxed already when it is paid out as dividends or wages.

The underlying principle is to change the code so that work and wealth creation and growth and risk-taking are encouraged, rather than penalized.