A Swing and A Miss on Tax Reform
In case you were wondering what that giant "whoosh" emanating from Washington was, it was the sound of the people on the President's Advisory Panel on Federal Tax Reform swinging and missing at the easy underhand toss that George W. Bush sent their way. The commission was announced during the president's 2005 State of the Union address; its instructions were to overhaul a federal tax structure described in the speech as "archaic" and "incoherent." But rather than taking the president's broad mandate for fundamental, comprehensive reform, the panel recommended preserving the basic elements of the "archaic, incoherent" monstrosity already on the books.
Among the panel's recommendations, released this week, are reduction of tax brackets from six to four, elimination of the marriage tax penalty, and a general restructuring of personal savings mechanisms such as IRAs and health savings accounts.
Don't get me wrong -- these recommendations constitute good policy. They're good ideas, and I would support them on the floor of the House. But they're too small, and at bottom they only simplify and slightly improve a broken system. This panel -- its deliberations and report -- provided an unprecedented opportunity to publicize and advocate the cause of fundamental tax reform of the sort that could expand our economy, meet our growing fiscal needs and provide a simplified, streamlined tax system for every American.
This was a chance to scrap the Internal Revenue Code -- the 5-million-word monstrosity that costs American businesses and families billions of dollars and billions of hours to comply with -- once and for all. The president gave the panel a golden opportunity to bring about vital, comprehensive reforms. Instead, it proposed an array of incremental policy tweaks of the kind that one might expect to be presented in the president's annual budget.
Meanwhile, even the most cursory look at the panel's recommendations reveals a minefield of serious political trouble. Recommendations such as the reduction of the mortgage interest deduction and elimination of the state and local tax deductions may have sound economic arguments on their side, but they're an awfully bitter pill for Americans to swallow if all they get in return is a few deck chairs moved around on the Titanic. Those of us who have long advocated fundamental tax reform, for decades in some cases, have reason to wonder -- especially given President Bush's well-deserved reputation for thinking big -- "Where's the vision? Where's the boldness?"
The president's leadership style has always been to set far-reaching parameters for debate, to pursue policy goals worthy of a great nation. This is an instance in which the president should follow his instincts again, thank the tax panel for its work, set aside its parochial thinking and start a vibrant national debate on tax reform by proposing bold, fundamental changes. Our current tax system has been written by and for special interests and is, by design, dizzyingly complicated. It kills jobs, and it simply does not efficiently accomplish the tasks for which it is designed.
The American people are ready for this debate. They are ready for a debate about a flat tax that would gut the Internal Revenue Service and allow almost every American to file his or her tax return on a simple form the size of a postcard.
They are ready, I believe, to learn more about replacing the income-based tax system altogether with a national sales tax, as in the FairTax proposal I have co-sponsored in the House. This plan would allow Americans to choose, based on their spending decisions, how much tax they would pay every year. It would make planning and budgeting easier for families and businesses and would spur economic growth across our nation.
Meanwhile, reforming the individual tax system would also provide a long-overdue opportunity to drain the corporate welfare, special-interest morass of our current corporate tax structure.
These are the kinds of proposals President Bush was looking for from his panel, and -- that giant "whooshing" sound notwithstanding -- they are the kinds of bold proposals that ought to define the economic legacy of his presidency.
The writer is a Republican representative from Texas.