lower rates, but there can be little doubt regarding their positive effect. the 1986 reform also strove to achieve a measure of comity in the tax code, by treating taxpayers in similar circumstances in a roughly comparable manner and by maintaining progressivity in the tax system. in addition, the 1986 reform broadly applied the constraints of revenue and distributional neutrality, which appear to have facilitated bipartisan coalition building. setting rough distributional neutrality as a rule of the game limited the number of losers created and likely made sacrifices in the name of efficiency easier for different groups of taxpayers who knew that losses would be relatively limited. of course, public views about the fairness of proposed changes to the tax code will surely play a significant role in the current debate, and these views will be driven by perceptions of the fairness of the current tax system. the standards by which the public judges fairness are deeply rooted in judgments of whether, and which, incomes are the consequence of individual effort. the contours of economic policy since the nation's founding have closely followed changing standards of fairness over time. simplification of an overly complex structure was another important accomplishment of the 1986 reform. unfortunately, tax code drift since 1986 has evolved to a point where taxpayers are again confronted with great complexity. indeed, an individual taxpayer may have difficulty even knowing his or her marginal tax rate because of the overlapping web of deductions and exemptions and the provisions that attempt to limit those deductions and exemptions. and many taxpayers are now required to compute their liability under two systems - the regular income tax and the alternative minimum tax. such challenges also affect lower - income households, who face the complexities of the earned income tax credit. a simpler tax code would reduce the considerable resources devoted to complying with current tax laws, and the freed - up resources could be used for more productive purposes. thus, greater simplicity would, in and of itself, engender a better use of resources. a principle that i believe is important now - but appears not to have weighed so heavily on those involved in the earlier reforms - is predictability in the tax code. by this i mean creating a tax system in which households and businesses can look into the future and have some reasonable degree of certainty about the future tax implications of decisions made today. just as price stability facilitates economic decisionmaking by limiting the potential distortions from unanticipated changes in the price level, some semblance of predictability in the tax code also would facilitate

community, potentially harming all neighborhood residents and businesses. a related type of market failure studied by economists is known as an information externality. an information externality may arise when information about economic opportunities in an area has the potential to benefit many investors but is costly to gather. as a result, no single potential investor may find obtaining the data to be profitable. for example, on average, lower - income areas have fewer owner - occupied homes and record fewer home - purchase loans than higher - income areas do. 14 lower transaction activity makes accurately gauging property values and evaluating credit risks in those areas more difficult, which may inhibit the extension of credit. 15 alternatively, lower - income people may have shorter and more - irregular credit histories, making an evaluation of their individual creditworthiness more difficult and costly. because a potential investor who bears the costs of obtaining data about underserved neighborhoods may be able to obtain only a portion of the full economic benefits, these data may remain uncollected. 16 one purpose of cdfis is to help overcome these and other market failures that inhibit local economic development. for example, by facilitating larger - scale property development projects, coordinating public and private investment efforts, and working to improve amenities and services in a local area, cdfis may help to solve collective action problems and reduce neighborhood externalities. cdfis can counter information externalities by assuming the cost of learning about their local communities and developing specialized financial products and services that better fit local needs. in general, cdfis provide coordinated development activities and community - specific information that the market may not supply on its own. among other benefits, the familiarity with each community that cdfis develop can help to gauge and control risk. 17 for example, the use by cdfis of appraisers who specialize in evaluating properties in a particular community produces more - reliable estimates of the value of the loan collateral. likewise, cdfis structure loans and use public and private credit enhancements both to increase borrowers ’ ability to qualify for loans and to spread the associated credit risk among a mix of private creditors and other providers of funds. although these specialized techniques can reduce credit risk, they are labor - intensive and, consequently, expensive. most private lending institutions reduce costs by adopting processes that are highly standardized and automated. such systems are not necessarily compatible with lending to borrowers who require substantial screening, counseling, and monitoring or with acquiring specialized information about community development lending. part of the