Tax Reform Panel Issues Final Report
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The President's Advisory Panel on Tax Reform has issued its final report — all nine chapters and 307 pages of it (plus appendix). Highlights of the panel's recommendations had been released previously; I critiqued them most recently here; see also the chain at the bottom of this post.
The final report is far too long to be of any real use, and no official summaries have yet been made available. Here, however, are some excerpts from the Panel's original "Statement on Federal Tax Reform," dated April 13, 2005 (PDF - 6 pages), with my comments in italics:
--Since the last major reform effort in 1986, there have been more than 14,000 changes to the tax code. (And why should we think that, were a new round of tax reform enacted tomorrow, a new batch of 14,000 or so changes wouldn't be bolted on in future years?)
--[Tax] complexity is costing the U.S. economy about $140 billion per year. To put this amount in perspective, it is roughly the same as giving $1,000 to every family in America or the amount of money needed to fund all of the following: the Department of Homeland Security, the State Department, NASA, HUD, the EPA, the Department of Transportation, the United States Congress, our Federal courts, and all foreign aid. (But don't fall into the trap of thinking that a national sales tax would be any less complex.)
--One particular problem that cannot be ignored is the rapidly growing reach of the AMT. The AMT imposes a stealth tax system that is separate from, but parallel to, the regular income tax system. ... The AMT will catch almost 4 million taxpayers this year and 20 million taxpayers next year. (I think abolishing the AMT is the only proposal from the Panel that is truly "reform" and will quickly become the focus of any tax reform proposals in Congress. It will provide a convenient litmus test to separate the fiscal conservatives and moderates from the "tax for the sake of taxing" radicals, especially going into the 2006 congressional elections).
--[A] broad-based, low-rate tax system would provide the greatest economic efficiency, simplicity, and ease of administration. (Okay, fine, provided that this utopian "broad-based, low-rate tax system" doesn't decay into a broad-based, high-rate tax system." Don't expect the Panel's report to include ways to prevent that from happening.)
--We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government. (Amen.)
The final report is far too long to be of any real use, and no official summaries have yet been made available. Here, however, are some excerpts from the Panel's original "Statement on Federal Tax Reform," dated April 13, 2005 (PDF - 6 pages), with my comments in italics:
--Since the last major reform effort in 1986, there have been more than 14,000 changes to the tax code. (And why should we think that, were a new round of tax reform enacted tomorrow, a new batch of 14,000 or so changes wouldn't be bolted on in future years?)
--[Tax] complexity is costing the U.S. economy about $140 billion per year. To put this amount in perspective, it is roughly the same as giving $1,000 to every family in America or the amount of money needed to fund all of the following: the Department of Homeland Security, the State Department, NASA, HUD, the EPA, the Department of Transportation, the United States Congress, our Federal courts, and all foreign aid. (But don't fall into the trap of thinking that a national sales tax would be any less complex.)
--One particular problem that cannot be ignored is the rapidly growing reach of the AMT. The AMT imposes a stealth tax system that is separate from, but parallel to, the regular income tax system. ... The AMT will catch almost 4 million taxpayers this year and 20 million taxpayers next year. (I think abolishing the AMT is the only proposal from the Panel that is truly "reform" and will quickly become the focus of any tax reform proposals in Congress. It will provide a convenient litmus test to separate the fiscal conservatives and moderates from the "tax for the sake of taxing" radicals, especially going into the 2006 congressional elections).
--[A] broad-based, low-rate tax system would provide the greatest economic efficiency, simplicity, and ease of administration. (Okay, fine, provided that this utopian "broad-based, low-rate tax system" doesn't decay into a broad-based, high-rate tax system." Don't expect the Panel's report to include ways to prevent that from happening.)
--We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government. (Amen.)
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Posted by Kip on
1 November 2005
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