Two years ago today, the President’s Advisory Panel on Tax Reform released its recommendation for overhauling the nation’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. system. The proposal lowered rates, simplified the tax system, and narrowed the preferences for housing in the tax system, which ultimately killed any prospects of the proposal becoming law.
Groups like the National Association of Realtors went out full force with full page (half-truth) advertisements about how the proposal would devastate the housing market. If that was the truth, I guess one could deduce that the real estate industry must be supported largely on indirect (tax) subsidies from government. (The biggest critic of the Tax Reform Panel’s recommendations for limiting the preferences for housing was the then-Realtors Chief Economist, who shortly after the Tax Reform Panel’s release also wrote this book: “Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade – And How to Profit From Them”)
Others (typically those who are just anti-Bush anything) spouted nonsensical rhetoric that the Panel’s recommendations favored the wealthy, when in fact, the panel’s report was distributionally neutral, meaning there was no change in the tax burden across income groups relative to the current law baseline. Even groups on the left like CBPP spoke favorably of the panel’s recommendations (beyond the criticism of Bush’s current law baseline restraint which the Panel had no control over).
Some on the right thought it didn’t go far enough because it wasn’t a flat taxAn income tax is referred to as a “flat tax” when all taxable income is subject to the same tax rate, regardless of income level or assets. and the report didn’t speak favorably of the FairTax. But overall, the Panel’s recommendations were a huge step in the right direction for tax reform. Here was our assessment of the proposal two years ago.
Unfortunately, no significant part of the Panel’s recommendations have been pursued and most presidential candidates have just given lip service to “tax reform” in general. Charlie Rangel’s tax reform bill eliminates AMT as the Panel’s report did, but he has a surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. pay for it instead of fundamental tax reform. Sen. Ron Wyden has pursued tax reform, but his move to put tax reform on the radar has unfortunately gone nowhere.
So we thought today we would celebrate the day that the Tax Reform Panel’s report was officially born, which was unfortunately, the same day it died.
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