September 14, 2004
WHAT REAL REFORM DOESN'T UPSET THE APPLE CARTS?:
Report Cited Drawbacks to Tax Reform: Treasury Study Examined Simplifying U.S. System (Jonathan Weisman, September 14, 2004, Washington Post)
President Bush has vowed to make tax reform a centerpiece of a second term, but an internal Treasury Department study in late 2002 warned that any fundamental simplification of the nation's tax system would "produce windfall winners and losers," would likely lower taxes for the rich, and could have devastating political consequences for its champions. [...]
In the study, Treasury economists were unambiguous in calling for the reform of a tax system that they said has grown needlessly complex, economically inefficient, unpredictable and unfair.
But they identified serious drawbacks -- both economic and political -- with each of the five reform proposals they drafted, especially a "flat consumption" tax that shifts the tax burden from savings and investment to wages and spending.
"The transition accompanying any fundamental tax reform may be disruptive and produce windfall winners and losers," the report said, but "the economic benefits of any fundamental tax reform are uncertain."
Moreover, it added, "Any reform is likely to have vocal losers and largely silent winners. In other countries, adoption of a consumption tax has led to election losses for the incumbent party."
Finally, the study said, fundamental simplification of the tax code would "run counter" to Bush's other tax policy goals. The president doubled the child tax credit from $500 to $1,000 and has championed a significant expansion of tax credits for charitable donations, proposals he wants Congress to make permanent.
Which is why the big reforms--taxes, Social Security, etc.--await a second term and a filbuster-proof majority in the Senate. Posted by Orrin Judd at September 14, 2004 12:28 PM