Tax Update Blog: Tax Reform Archives

Yet another tax reform panel

March 26, 2009

President Obama has launched another tax reform panel. It seems like only yesterday that President Bush's Presidential Advisory Panel on Federal Tax Reform launched its final report into instant oblivion. Any hopes that the new panel will have more success were dashed by the the conditions imposed on the panel:

“The only constraints on its activities are that there will be no tax increases during 2009 or 2010, and the proposals should not raise taxes on American families making less than $250,000,” said Peter R. Orszag , director of the Office of Management and Budget (OMB).

Unless they can interpret this very creatively, they are pretty much out of luck to start. There is a severe need to reform the vast array of crummy tax breaks, from hybrid car credits to the umpteed educational credits and deductions. You can't clean this stuff up without hurting somebody under $250,000 without making an already top-heavy tax system more unbalanced and dependent on the income of the top 5 percent of earners.

TaxVox points out how other Obama policies are making tax reform more difficult:

The first is that he keeps extending targeted business incentives, such as the research credit. Eliminating these tax breaks makes good sense. But Obama is not only not eliminating old loopholes, he’s even created a few new ones.

The second is that he’s on the road to creating a troublesome spread between corporate and individual rates. In his budget, Obama would raise the top individual rate to nearly 40 percent. The president has never said how low he’d cut the corporate rate, but in 2007 House Ways & Means Committee Chairman Charles Rangel (D-N.Y.) proposed taking it down to about 30 percent.

The panel will have some smart people on it, but unless they strike out in a different direction than they've been directed to take, it's hard to imagine much coming of it. They sure won't come up with this:

The TaxProf has a roundup of stories on the panel. Kay Bell has more.

Tags: Kay Bell.Obama tax reform panel.TaxProf.

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DON'T HATE ME FOR RENT-SEEKING

February 24, 2006

The Tax Policy Blog says I have only myself to blame for the awfulness of the tax law. A post from yesterday says accountants are "bashing" the results of an IRS studay of the costs of doing tax returns.

It is no surprise that the various industries that only exists because of the complexity of the tax code would come out bashing this study. And it's no surprise that these same groups have also helped lead the fight against fundamental tax reform.

With true tax reform, the need for computer programs and tax accountants to calculate everyone's taxes would be reduced dramatically.

That's the nice thing about my job - I can make a living off of the complexity I despise. Maybe it's akin to the feeling a divorced spouse gets from a monthly check from a loathed "ex." I really am for great simplification of the tax code, if not every bad idea for tax reform, and I think a walk through the archives here shows that. Yet I go to sleep with the serene knowledge I will have work to do the next day becuase there is little chance of our legislators fixing anytime soon, and if they do, the transition rules should provide for a comfortable retirement anyway.

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SHAVIRO CHIMES IN ON TAX REFORM PLAN

November 08, 2005

Tax Blogger and BNA portfolio author Daniel Shaviro has an article in today's Tax Notes on the Tax Reform Panel's report. The Tax Analysts article is accessible here to subscribers only, but Mr. Shaviro has a summary here.

He finds the report wanting in important respects, particularly in its revenue assumptions. Despite these problems, he finds the report useful:

Nonetheless, the Report merits careful attention. Even if it cannot play a role like that of the Treasury I study of 1984, which promptly kick-started a political process that culminated in enactment of the Tax Reform Act of 1986, there is another route to influence worth considering. In 1977, a Treasury tax reform study, Blueprints for Basic Tax Reform, was released despite its plainly being dead on arrival with the change between Administrations. While Blueprints had no immediate political influence, it helped to shape thinking about fundamental tax reform, not just in 1986, but continuing to this day. The Panel will have accomplished much if the Report can exert similar influence over the years, whether through broad concepts that help guide future reform efforts, or by providing a hit list of potentially desirable changes.

Tax Analysts subscribers can link to the article here. I wouldn't be surprised if the TaxProf were to pull it out from behind the subscriber firewall in the coming days. (Update 11-9-05: here it is).

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TAX REFORM PARANOIA

November 04, 2005

The President's Advisory Panel on Tax Reform has nine members. One member is a former Democratic senator. One member is a law professor who used to work for a Democratic senator. One member was appointed IRS commissioner by President Clinton. These folks worked with two academics, an investment banker and two former Republican legislators over ten months. They held 12 public meetings and issued a final report of hundreds of pages.

And all that work was just an exercise to "screw Democrats."

That, at least, is the odd conclusion of a strange article in the online magazine Slate. The article says that the plan turns the screw on Democrats with its proposed limits on home mortgage interest deduction. The plans would reduce the amount of home acquisition debt for which interest is deductible from the current $1 million to the maximum insurable FHA loan amount - currently about $244,000 to $313,000, depending on region. The plan would further "screw" Democrats by repealing the deduction for state and local taxes.

If this were true, it would be an interesting commentary on the state of the Democratic party. The idea that limiting tax breaks for homes costing over $300,000 would "screw" Democrats would have puzzled Franklin Roosevelt, or even Lyndon Johnson. But as the most expensive homes are on the "blue" coasts, then it must be a plot to oppress the blue state "middle class."

More puzzling still, these changes were recommended by the tax reform panel to finance repeal of the alternative minimum tax - a tax the author of the Slate piece has called "Bush's secret tax on Democrats." It was devilishly clever of the committee to "screw" Democrats by helping them.

The Winterspeak blog doesn't buy the Slate argument:

If there is a single group in the US undeserving of sympathy, it has got to be rich homeowners in the East and West coast. These folks have enjoyed 50%-100%+ increases in the value of their homes over the past 5 years and now enjoy properties worth of half a million dollars, in Boston at least, and more in San Francisco and New York. This wealth was no more earned than a scion's bequest, so why it cannot be taxed the bejeesus out of, I don't know.

For a well-informed discussion of the "blue state" effects of the tax reform recommendations, go to Janet Novack's analysis in Forbes.

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TAX REFORM PANEL: TODAY'S THE DAY

November 01, 2005

The President's Advisory Panel on Federal Tax Reform delivers its final report at 9:00 a.m. central time today.

Is it a bad sign that the panel is delivering the report on All Saints Day, a traditional day for honoring the dead?

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HAPPY BIRTHDAY!!

October 21, 2005

If you haven't made your weekend plans, be sure to raise a toast to our current tax code, the Internal Revenue Code of 1986. It celebrates its 19th birthday tomorrow. Remember?

October 22, 1986: President Reagan signs the Tax Reform Act of 1986.

From the looks of the Tax Reform Panel's proposals, I think the '86 code will make it to legal drinking age.

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TAX REFORM - PLAN A

October 20, 2005

It looks as though the Presiden'ts tax reform panel will report two different tax-reform plans - a "simplified income tax system" and a "hybrid consumption based tax." We'll look here at "plan A," the simplified income tax.

The main features of this plan include:

- Four rates: 15%, 25%, 30% and 33%.

- No alternative minimum tax.

- Health insurance tax-free benefits cappied at $11,500 for families
and $5,000 for single filers.

- a 15% credit for home mortgage interest would replace the current deduction. The credit would be limited, with caps on the size of the loan varying among regious; the limits would range from $172,000 to $312,000.

- The state and local tax deduction would disappear.

- The exclusion for gain on home sales would be raised to $600,000, from $500,000 for couples.

- IRAs, HSAs, 401(k)s, 403(b)s, 529 college savings plans and MSAs would all be replaced by three tax-preferred plan types: "Save at Work" accounts, "Save for Retirement" accounts, and "Save for Family" accounts.

- Capital gains would be 75% excluded from income

- Dividends would not be taxed

- The top corporate rate would be reduced to 32%, from the current 35%.

- It eliminates the tax-free status of most fringe benefits (eg., child care, life insurance).

The positive aspects of the plan:

- Elimination of AMT

- It addresses the home mortgage deduction.

- It eliminates double taxation of corporate income.

- It pares back the maze of tax-favored savings vehicles.

- It addresses the rat's nest of tax-free fringes.

These positives fail to overcome the plan's shortcomings:

- The base is not broadened enough to significantly reduce rates.

- By favoring capital gains, it retains the complex distinction between ordinary income and capital gains, requiring a higher overall rate.

- The cap on home-mortgage interest is complex and confusing.

- By retaining multiple rates between corporations and individuals, it encourages taxpayers to manipulate income between themselves and controlled corporations.

- As far as I can tell, it doesn't address many of the time-wasting tax preferences and loophole closers that make computation of business income so difficult. This would include the execrable Section 199 "production deduction," depreciation issues, Section 263A, various inventory methods, the fire-into-the-crowd deferred compensation rules of Sec. 409A -- and we won't even talk about Subchapter K, the partnership tax laws.

Without a significant rate reduction to reward taxpayers for the loss of their targeted tax breaks, it's hard to see how this plan can advance. For all of their hard work, it seems like the best the commission can hope is that their ideas nudge the tax reform debate along for future Congresses.

In other commentary, Prof. Maule gives the panel an "F": "...and I wish there were an F- grade."

Other Links:

New York Times summary of proposals
Tax Update prior coverage

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TAX REFORM? IT LOOKS LIKE I'LL STILL HAVE A JOB

October 19, 2005

A tax practitioner who opposes the devil of tax complexity is a bit like the preacher who struggles agains the forces of evil: we fight on the side of the angels, but Satan is good for business.

The President's tax reform panel is settling on its final recommendations, and it looks like business will still be ok.

My initial thoughts: the panel has many good and sensible recommendations that, taken together, would go far to improve the tax system. But not far enough.

My biggest disappointment is that the proposals wouldn't significantly lower rates. Lawmakers aren't going to fight to cap the mortgage interest deduction if the payoff is merely elimination of the alternative minimum tax and a 2% reduction in top rates. My hopes for rate reduction may be unrealistic. Still, the last big tax reform lowered the top rate from 50% to 28%. Reducing the top rate from 35% to 33% isn't the same thing, and I don't think that tax reform will work without a significant rate reduction. High rates create an irrestible motiviation to carve out loopholes, leading to higher rates, and more loopholes, etc., and you end up where we are today.

I would like to say more, but I will be at meetings today and unable to post much until late this afternoon. In the meantime you can check out the links below for details on the plan. Tax prof Daniel Shaviro has some thoughts already. No doubt the TaxProf Blog and Dr. Maule will chime in.

The New York Times has a good summary of the proposals. There is also coverage at Tax Analysts free site.

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AICPA PUBLISHES NEW TAX REFORM GUIDE

October 18, 2005

The American Institute of Certified Public Accounts has issued a new guide to the tax reform debate. The report evaluates the major policy options and proposes ten "guiding principles" in evaluating reform proposals.

Links:

The full report (pdf format)

Executive Summary

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TAX REFORM SHORT-STAFFED?

October 17, 2005

We recently noted that the top Treasury tax policy position has been vacant since 2003. Professor Maule points out that five key Treasury tax policy positions are vacant.

If the President is serious about tax reform, he'd better fill these posts in a hurry. The Tax Reform Panel is set to issue its recommendations November 1. If "personnel is policy," then the current tax reform effort is going nowhere.

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TAX REFORM PANEL STIRS UP HORNETS NEST

October 13, 2005

If you ever have wondered why it's so hard to get good tax policy enacted, the frenzy caused by this week's meeting of the President's Advisory Panel on Tax Reform will give you some insight.

The panel discussed two ideas that policy wonks have long considered as worthwhile targets for reform: the home mortgage deduction and the tax preference for employer-provided health coverage. Many economists believe both sets of tax breaks distort their markets and subsidize uneconomical behavior (i.e., excessive investment of family wealth in real estate and "gold-plated" health plans).

The result: outrage on the left and right. From the right:

So in order to make the elimination of the Alternative Minimum Tax "revenue-neutral," the Bush-appointed tax commission proposes the elimination of the housing-mortgage deduction over $340,000. The result of such a phase-out: A colossal real-estate crash in New York, Florida, Illinois, California and, yes, even Texas, with a cascading effect throughout the country. This may be the dumbest major independent-commission proposal in all of human history.

From the left:

So while Bush is looking for ways to **** over the middle class while protecting the tax cuts to the rich.

(sic; asterisks added)

So tax-deductible mortgages on $1 million houses are now a rallying point for the left. Who knew? Left-leaning tax prof Daniel Shaviro apparently didn't get the memo:

Okay, the Republicans have so exploited the tactic of mindlessly repeating talking points ad nauseum that it's understandably tempting for Democrats to play the same game, and trot out good old Paris Hilton every five minutes. But is supporting the AMT, and opposing limits on wasteful upper-end health insurance tax benefits, as well as on tax breaks that promote borrowing and big homes, really a good place to deploy this strategy?

I saw a little bit of the tax reform panel's session rerun on C-span last night (yeah, my life is pretty darn exciting). They seemed to approach the mortgage deduction very gingerly, and they were well aware of the need to transition carefully to a reduced deduction to avoid a real-estate crash. Yet they still stirred up a hornets nest.

The promised land of tax reform is low rates. If rates are low enough, you don't need so many deductions, and taxes matter less. If the biggest tax breaks are off limits, you'll never see the promised land:

(Source: Tax Policy Blog)

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TAX REFORM COMMITTEE: TRIM MORTGAGE, HEALTH DEDUCTIONS; NO NATIONAL SALES TAX

October 12, 2005

From today's edition of Tax Analysts Taxwire:

The President's Advisory Panel on Federal Tax Reform on October 11 ruled out proposing a dramatic replacement system and instead will use the framework of the current income tax base to make major changes, including curbing benefits for housing and healthcare. Scaling back the benefits would simplify the tax code and would help finance repeal of the alternative minimum tax, which would cost $1.2 trillion over 10 years, the panel said.

The "FAIR Tax," a version of a national sales tax, has achieved some support and has spawned a best-selling book. I never thought a sales tax with a rate exceeding 35% made much sense, and the panel apparently agreed.

It will be fascinating to watch the debate over limiting mortgage interest and health cost deductions. While there are many good arguments for limiting these deductions, and many more for killing the AMT, the lobbying against such proposals will be ferocious. I also expect the deduction for state and local taxes to come into play, given that it is the biggest single AMT trigger in high-tax states like Iowa.

UPDATE: Color Prof. Maule unimpressed:

With this sort of work product, the panel should refund to the taxpayers the public funds it has wasted. Charged with reform, this panel seems dedicated to window dressing that masks maintenance of the status quo for their friends and financial backers. America is being short-changed.

Links:

Tax Policy Blog

Washington Post (Hat tip: Reader HH).

New York Times

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ESTATE TAX REPEAL VOTE DELAYED UNTIL SEPTEMBER

July 28, 2005

The showdown over the repeal of the estate tax has been delayed until September, reports Tax Analysts. Senate Majority Leader Frist will file a cloture motion on the bill, which would enable it to come to a vote.

This will allow Minority Leader Max Baucus and Republican negotiator John Kyl additional time to work out a compromise:

While Kyl has been pushing for a vote on full repeal to speed Democratic deal making, Baucus has repeatedly asked for more patience in achieving a Democratic consensus. Kyl has proposed an estate tax rate tied to the 15 percent capital gains rate and an $8 billion individual exemption. Baucus has yet to present a formal offer.

Related:

National Public Radio story from this morning on estate tax repeal efforts

NPR debate over the estate tax between Gene Sperling and Grover Norquist

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DeLAY SAYS THERE'S NO PUTTING OFF TAX REFORM

June 22, 2005

One day after a Senate taxwriter said tax reform would be put off to 2007, House Majority Leader Tom DeLay said otherwise:

"We cannot put it off," he said. "I�m glad to see the tax reform commission is being serious about what they may recommend."

That makes sense; it's unlikely that tax reform will happen at all in the Bush administration if it's delayed to 2007. Still, this part of the report makes us question how reliable his tax observations are:

DeLay is a longtime supporter of a consumption tax and said he is pleased with how the national sales tax bill from Rep. John Linder R-Ga., has gained momentum.

"I think a lot of people are starting to push aside the flat tax idea because they know it won�t work longer than two years."

That's about two years longer than sales tax rates over 35% would work.

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TWO YEARS TO TAX REFORM?

June 21, 2005

Senator Jon Kyl, a member of the Senate Finance Committee, says that tax reform might be on the back burner for awhile. Tax Analysts reports:

An aide to Senate Finance Committee member Jon Kyl, R-Ariz., on June 20 confirmed comments the senator made in an interview with Bloomberg News in which Kyl said congressional action on fundamental tax reform is likely to be postponed until 2007.

According to Bloomberg, Kyl said that waiting to act on tax reform would give lawmakers enough time to discuss the findings of the President�s Advisory Panel on Federal Tax Reform and debate the issue during 2006, an election year. After debate, Congress could then move forward on changes to the tax system in 2007, Kyl said.

Last weekend the White House postponed the due date for the Tax Reform panel's report.

If tax reform waits two years, it might as well wait 20. Tax reform necessarily involves slaughtering a lot of sacred cows, and Congress is loath to do so in the runup to an election.

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TAX REFORM REPORT DELAYED TO SEPTEMBER 30

June 16, 2005

The President today signed an executive order delaying the deadline for the tax reform panel's report to September 30. The deadline had been July 31.

Why the delay? It might indicate that there is actual debate over the plan; in that case they might need more time. Yet the press release quotes the co-charis of the committee as saying "We were on track to issue our report by July 31," so they might be delaying for another reason.

Our guess: they figured nobody will be in Washington on July 31 anyway, so they may as well take their time and make their report when people are back from the beach and paying attention.

UPDATE: It looks like the summer vacation theory is right:

Treasury spokesman Taylor Griffin confirmed the delay was not due to fears that the panel would fail to get its work done on time. Rather, he said, the extension was granted to make sure tax reform is not lost in the shuffle amid other priorities such as energy legislation, Social Security reform, highway funding, judicial nominations, and appropriations.

The text of the release is in the extended entry below.

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I DON'T THINK HE LIKES THE 'FAIR' TAX

June 02, 2005

The "Fair Tax," a proposal for a national retail sales tax, has gotten some attention in the tax reform debate. Joseph Thorndike, a columnist for Tax Analysts, isn't quite sold on it:

First, though, we have to sort through an embarrassment of riches: How can we identify the worst quality of a tax that has so many? As numerous critics have pointed out, the Fair Tax would raise too little revenue and prompt too much evasion. Its popularity depends on unreasonable assumptions and misleading descriptions. It would never work as advertised -- a fact that many of its supporters either choose to ignore or secretly celebrate.

But other than that, maybe he likes it.

WHAT IS THE REAL RATE?

Mr. Thorndike points out that the 23% rate touted by Fair Tax supporters is misleading, because it is a "tax inclusive" rate. The 6% tax rate we Polk Countians are accustomed to is "tax exclusive" - it isn't included in the sales tax rate.

Example:

Wally buys a new computer for $1,000, and he pays $60 in sales tax. His "tax exclusive" rate is 6%. His "tax inclusive rate" is 5.66% (60/1060 = 5.66%).

If you compute the "Fair Tax" the way we are used to talking about sales tax rates - tax exclusive - it will apply at a 30% rate. That's a real difference.

Perhaps we are biased, being income tax consultants, but the Fair Tax seems to have some huge practical problems. Two come immediately to mind.

WHEN RATES GET TOO HIGH, PEOPLE CHEAT

Sales taxes are only likely to work if rates are low enough to not interfere with commerce. When combined with state and local taxes, the Fair Tax would burden every trip to Git 'n Go with a 36% or higher surcharge. This is high enough to push many transactions into the E-bay economy.

HIGH SALES TAX RATES THREATEN BUSINESSES THAT COLLECT SALES TAXES

Taxpayers going through their first sales tax audit are astounded at how big the assessments can be. They also know that they aren't as simple as many folks believe. While income taxes are only a problem to the extent your business is profitable, sales taxes apply even when you are losing money, and they apply based on gross receipts - a much larger base than taxable income.

Because sales taxes are computed on a big base, a small error in determining what transactions are subject to tax can lead to a stiff assessment over three years, even at a "low" 6% rate. At a 36% rate, even little errors would be ruinous.

FAIR TAX PROSPECTS?

Mr. Thorndike doesn't think the Fair Tax will survive the tax reform process:

And the winner of this year's prize for Worst Idea in a Serious Public Policy Debate: the Fair Tax. In all likelihood, this plan for a national retail sales tax has already exhausted its 15 minutes of fame. Sometime later this summer, President Bush's commission on federal tax reform will probably put it out of its misery.

Link: Thorndike Article (Tax Analysts subscribers only)

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TOP TREASURY TAX POLICY POST FINALLY FILLED

May 27, 2005

The long-vacant top tax policy post at the Treasury finally has an appointee. President Bush announced that he will nominate Phillip D. Morrison as Assistant Secretary for Tax Policy. The post has either been vacant or filled on an "acting" basis since early last year.

With the President's Advisory Commission on Tax Reform set to release its report in the coming weeks, Mr. Morrison will have his hands full. He leaves a post with Delloite and Touche. He was the Treasury's International Tax Counsel from 1989 to 1992.

Mr. Morrison has an article on the prospects for reforming the taxation of international activity available here. An excerpt:

n certain respects, it is still true that the United States has the harshest, and therefore the most anti-competitive, anti-deferral regime of all the OECD countries. Check-the-box has also made Subpart F taxation elective with respect to dividend, interest, rent and royalty payments among CFCs, except in those jurisdictions where per se corporations must be used, thereby creating an unfair situation for those latter companies. With improved transfer pricing clarity and enforcement in the last 15 years, the foreign base company sales and services rules have only capital export neutrality as support and CEN has been somewhat discredited in recent years. Likewise, the lack of sensible loss allowance rules in Subpart F and the lack of a meaningful de minimis rule create a certain level of unfairness and complexity that should be carefully considered. Given these continuing issues, it would be surprising if Subpart F reform were not the subject of at least some renewed debate during 2005-2006 if there is any corporate tax reform debate at all, though many tax directors may be inclined to let sleeping dogs lie.

Link: Tax Analysts Coverage (free)

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SMALL BALL TAX REFORM?

May 20, 2005

If the President's Advisory Panel on Tax Reform listens to this weeks advice from four former top Treasury policy wonks, they won't be swinging for the fences. They would instead be recommending incremental changes to the existing tax system.

Our guess? A tax base that will resemble the current AMT system - no state and local tax deduction, especially - larger exemptions, and expanded retirement savings options. We may turn out to be wrong, but at least we're consistent.

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TELL US HOW YOU REALLY FEEL, BRUCE

May 19, 2005

Bruce Bartlett does not appear enthused about the prospect of replacing the income tax with a national retail sales tax:

"It's ludicrous," Bartlett said. "It's idiotic. It's moronic. It'll never happen."

Other than that, he appears to have raised no objections at a symposium on tax reform yesterday.

Tax Analysts commentator David Brunori said states should plan to have their concerns ignored in the tax reform debate:

"I cannot imagine the states gaining more influence," Brunori said. "The people who are having the debate do not care about the state fiscal systems."

But do they care about coffee cup integrity?

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ADVISORY PANEL NEXT TO TACKLE COLOR OF SKY CONTROVERSY

April 25, 2005

Professor Maule calls "No Duh" on the President's Advisory Panel on Federal Tax Reform:

Connie Mack, the former Florida Senator who chairs the tax reform commission, said, "It wasn't until we really had the opportunity to listen to so many different people talk about so many different aspects of the code that it really sunk in about how much and how often the code is being used these days to either create incentives or disincentives for either investment or behavior."

Excuse me, Mr. Mack, but weren't you part of many Congresses that amended the Code, adding layer after layer of special interest provisions masquerading as palliatives for the nation as a whole? Didn't you pay attention to the parade of tax legislation prancing past your desk month after month, session after session, Congress after Congress?

We have had similar thoughts.

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FIRST, NAIL DOWN THE OBVIOUS

April 06, 2005

The President's Advisory Panel on Federal Tax Reform has completed its hearings and now is requesting comments on specific changes for the tax system. The panel's executive director, Jerry Kupfer, yesterday told the Tax Executives Institute what witnesses have been telling the panel:

* the corporate income tax distorts many business decisions;

* complexity causes such paralysis for individual taxpayers that it may prevent them from taking advantage of some tax breaks;

* the system for taxing the foreign income of U.S. taxpayers is not effective or administrable; and

* the fundamental purpose of the tax system has gotten lost because the code is asked to do too much by encouraging some activities, discouraging other activities, and generally carrying out social and industrial policy.

The Tax Analysts writeup doesn't mention whether the witnesses addressed the Pope's Catholicism or where bears answer nature's call.

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SNOW: IT'S GOING TO BE BIG

April 05, 2005

Treasury Secretary Snow went against conventional wisdom and said that the current tax reform movement will push for "far-reaching" change. He didn't offer specifics.

Tax Analysts reports that Mr. Snow told the Tax Executives Institute:

Knowing this president -- who doesn�t like doing little things, he likes doing big things -- if we come up to him with a little tax package, he�s probably going to send us back to the drawing board.

He predicts a legislative package in the fall.

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TAX REFORM: IMPOSSIBLE AND INEVITABLE?

April 04, 2005

Tax Analysts assembled a number of the veterans of the 1986 tax reform battles last week. They apparently weren't optimistic about things efforts, according to today's Tax Analysts online (subscribers only):

Appearing at a roundtable sponsored by Tax Analysts, the panelists seemed to agree that political sparring would likely sidetrack reform efforts. The environment was much more open to compromise 20 years ago than it is today, according to the panelists.

"What I doubt is there is the simplicity, the focus, and the ability to be bipartisan that will be essential for any meaningful reform," said Tom Downey, a House Ways and Means Committee Democrat in 1986.

Yet the panelists also said powerful forces would make the need for tax reform urgent:

Weinberger speculated that a confluence of events in the coming years would drive the country towards tax reform:

* the impending retirement of the baby boom generation beginning in 2008;
* the skyrocketing number of taxpayers subject to the alternative minimum tax; and
* the scheduled 2008 expiration of the 2001 and 2003 tax cuts.

They say that personnel losses in treasury and the loss of a non-partisan tax policy priesthood that existed 20 years ago made it much harder to draft reform options. That may be so; still I don't recall George Mitchell and Ronald Reagan, who managed to get the 1986 act togater, as being noticably non-partisan.

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TAX REFORM PANEL IN SAN FRANCISCO

March 31, 2005

Milton Friedman is the big name on today's witness list for The President's Advisory Panel on Federal Tax Reform. The TaxProf has all of the details and links.

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IS THE BIG MO' IS BEHIND A 'MORE CONSUMPTION-BASED' TAX?

March 22, 2005

An administration economic advisor, says that momentum is building towards a "more consumption based tax system." The speech by Kristin Forbes, reported in today's Tax Analysts, hints at a system based on the current system, but with more generous breaks for savings:

For several years in a row, the administration has proposed creating a short-term savings vehicle and consolidating and strengthening current retirement savings accounts. Forbes said the administration is hoping the tax reform panel breathes new life into those proposals.

Our guess still is that the commission will recommend something like the current alternative minimum tax, with the "Lifetime Savings Account" and "Retirement Savings Accounts" tacked on.

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TAX REFORM PANEL HEADS TO SUNNY FLORIDA

March 08, 2005

The witnesses at today's meeting of The President's Advisory Panel on Federal Tax Reform features a hot-shot attorney, two professors, and some businessmen. Yet C-Span again chooses to pass on live broadcasts of this tax firepower, choosing instead live House and Senate broadcasts and some silly speech by the President.

*sulk*

The TaxProf has all of the details.

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WHO SHOULD YOU BELIEVE?

March 04, 2005

If you looked at the headlines, you might think two Alan Greenspans testified before the President's Advisory Panel on Tax Reform yesterday.

From today's print edition of the Des Moines Register (apparently not online):

From today's Tax Analysts online edition:

Witnesses testifying before President Bush�s tax reform panel March 3 reinforced the message the group has heard before: Don�t bother trying to replace the current system with a whole new one.

Federal Reserve Board Chair Alan Greenspan and former Treasury Secretary James Baker, who both agreed the system was broken and in need of overhaul, advised the group to approach tax reform with an eye toward the current system.

(emphasis added)

Our view: a little of both. Mr. Greenspan may want to nudge the existing system to one that begins to look like a consumption tax. Such a tax might look a lot like the existing alternative minimum tax, but with extra breaks for savings. But you may have already heard that.

BUT YOU DON'T HAVE TO BELIEVE ANYBODY!

Through the miracle of the internet, you can decide for yourself what Mr. Greenspan had to say, courtesy of the TaxProf Blog and his collection of Tax Reform Panel links.

The whole thing has Professor Maule perplexed.

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TAX REFORM PANEL MEETS AGAIN TODAY; NO C-SPAN AGAIN

March 03, 2005

The President's Advisory Panel on Tax Reform convenes again this morning in Washington. The witness list is headed by Federal Reserve Chairman Alan Greenspan, Former Treasury Secretary James Baker III, and IRS Commissioner Mark Everson.

Once again C-Span shows no respect for Tax Policy geeks; their schedule for today makes room for a House Committee meeting on "Care for Wounded Military Personnel" on C-Span 3 - a worthy topic, but one that (one hopes) affects fewer people than tax reform.

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REFORM PANEL NOW TAKES ELECTRONIC COMMENTS (IF YOU USE MS WORD)

February 24, 2005

The President's Advisory Panel on Tax Reform has moved its comment-gathering process into the late 20th Century. The panel now will accept "Transmission by Email as a MS Word attachment to comments@taxreformpanel.gov."

They also say they will accept "Typewritten statements." We hope they don't really enforce the typewriter part.

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