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Tax Reform Veterans See Hurdles Ahead

Beyond decades-old proposals for a flat-tax or a national sales tax, little new work exists on tax reform. Bush's Treasury Department did complete a strongly argued internal paper on the need for tax reform in November 2002. But rather than propose an actual plan, the paper cautioned that many existing proposals were politically unworkable. A single flat income tax rate, for example, "would necessarily reduce the tax burden on high-income individuals" or "lead to an increase in the tax burden on lower income taxpayers," the study concluded.

The paper also warned of potentially negative political consequences for the party pushing reform, concluding: "The transition accompanying any fundamental tax reform may be disruptive and produce windfall winners and losers. . . . The economic benefits of any fundamental tax reform are uncertain."

Bob Packwood was one of the leaders of the last major tax overhaul. (File Photo)

Friday's Question:
It was not until the early 20th century that the Senate enacted rules allowing members to end filibusters and unlimited debate. How many votes were required to invoke cloture when the Senate first adopted the rule in 1917?

_____  Tax Center _____

Tax Changes Guarantee Surprises
Experts say those most likely to face an unpleasant shock are people in the income range of roughly $75,000 to $400,000.

Filed Your 1099 Form?
If you are a mutual fund investor, you may want to wait until the end of the month before filing your tax return.

Falling Into AMT Trouble
The AMT is expected to loom far larger this year, especially in the Washington region than in lower-tax, lower-cost areas of the country.

_____  Live Discussion _____

Transcript: Michelle Singletary and Sam Serio of the IRS

Special Report:
Find articles about the latest changes; advise about filing your taxes; and online forms and resources.

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With that backdrop, Bush said he will name a bipartisan panel late this year or early in 2005 to draft reform plans by June. Snow would present Bush his proposal by the fall, for a legislative push in 2006.

Rostenkowski said that schedule is too slow.

"We're a year away from having a bill introduced," he said. "I don't think the president can waste that much time. You're only good two years into your second term. After that, you're on your way out."

Another difference between the present and 1986 is Democratic control of the House then, versus Republican control today of the Senate and House along with the presidency. Bush has mandated that any tax reform fully offset tax cuts with loophole closures or other ways to raise revenue, meaning there will have to be winners and losers in the bill, said William G. Gale, a tax economist at the Brookings Institution. With a divided House and White House in 1986, there was an understanding that both sides would have to compromise.

With Republicans in full control, tax reform may prove to be like President Bill Clinton's health care effort in 1993, when Democrats controlled Congress and the White House, Gale said. The Republicans saw no need to compromise, and the effort collapsed during Democratic squabbling.

During his first term, Bush shied away from working collaboratively with Congress on complex domestic policies, preferring to either ram proposals through with minimal compromise, as he did with major tax cuts in 2001 and 2003, or let Congress lead him, as he did with last year's Medicare bill.

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