Line Item Veto and Tax Policy

June 14, 2006

The issue of line-item veto is on the table again, and the bill before Congress right now would include line-item authority for the president on both spending and tax matters.

From Tax Analysts:

As the House Budget Committee plans to mark up line-item veto legislation on June 14, the Senate will opt to move the line-item veto the following week as part of a budget process reform package, Senate Budget Committee Chair Judd Gregg, R-N.H., told reporters on June 13.

“Tomorrow we’ll be introducing a very extensive bill to help control spending and to help stop overspending,” Gregg said. Gregg and Senate Majority Leader William H. Frist, R-Tenn., are scheduled to unveil the proposal on June 14, although action on the bill likely would not come until the week of June 19, Gregg said. President Bush’s proposed expedited rescission authority would be included among the bill’s many money-saving elements, he added.

The line-item veto legislation would allow the president to send specific provisions from spending and tax bills to Congress for reconsideration. Congress then would have to vote on the proposed rescissions within 10 days without filibuster or amendment. (Full Story)

If Congress is going to give the president the line item veto authority, it should definitely include matters of tax law. One of the goals of those who champion the line item veto is to allow the president to rein in unnecessary spending. But “spending” also takes place on the tax side through the provision of special tax provisions for certain industries, companies, or geographies.

What is the difference between a direct subsidy on the spending side to a company that is poor spending policy and an equal tax deduction that is poor tax policy? Nothing, except that going through the tax code is often less transparent, and therefore easier for tax lobbyists to get inserted into law.

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