Can Tax Reform Be Kept Alive?

February 8, 2006

For all its shortcomings, the President’s Advisory Panel on Federal Tax Reform’s final report is an outstanding product. For the most part the analysis is economically sound, intellectually honest, and presented in a clear and persuasive way. It’s hard to imagine doing much better, given what many view as the unreasonable constraints placed on their work (e.g., the inability to scrap deductions for home mortgage interest and charitable gifts, forcing the plans to be revenue-neutral and distributionally neutral, etc.).

The quality of their final product makes it all the more tragic that many in Washington are declaring tax reform a “dead” issue, including most recently a top U.S. Senate tax writer. From the AP via the Houston Chronicle:

The Senate’s top Democratic tax writer said Tuesday that a presidentially appointed panel’s recommendations for overhauling tax laws don’t stand a chance in Congress.

“That thing’s dead. That’s dead, Mr. Secretary,” Sen. Max Baucus, D-Mont., told Treasury Secretary John Snow, who had been called before the Senate Finance Committee to discuss the president’s budget.

“We don’t accept that,” Snow replied.

“Congress thinks it’s dead,” Baucus said. “That’s going nowhere”…

Sen. Ron Wyden, D-Ore., who has his own plan for simplifying tax laws, said progress will not be made unless the White House starts setting some deadlines.

“My concern is that the sand is going to run out of your hourglass pretty quickly,” Wyden told Snow. “Without any deadlines, you can’t make it happen.”

Former Sen. John Breaux of Louisiana, who is vice chairman of the tax reform panel, said last week that he’s disappointed the White House hasn’t pressed lawmakers to get to work rewriting the tax laws.

The day after Bush outlined his priorities for the year in his State of the Union address, Breaux said the commission’s report seemed to have disappeared.

“Must be in a closet somewhere, on a shelf somewhere,” he said. (Full story here.)

For some good reasons for lawmakers and the public to support the tax reform panel’s recommendations, check our analysis of the panel’s final report. For all our recent scholarship on federal tax reform, see our “Tax Reform” section of the website.

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