Wednesday, December 1 2004
TAX SIMPLIFICATION: Two of the major tax reform ideas floating around Republican circles are a National Sales Tax or some kind of Flat Tax. Last night on Special Report, Brit Hume interviewed Ken Kies on the pros and cons of a National Sales Tax. Without getting into specifics, my quick take is a National Sales Tax proposal, seriously pushed by President Bush and Congress, would be a political disaster for Republicans.

First, let's keep in mind that if the President does propose serious tax reform, every business and interest group that will lose their special tax breaks are going to fight the proposed changes tooth and nail. This is along with the entire accounting and legal industries, which have zero interest in seeing the nation's tax laws simplified. And then on top of all this opposition, I wouldn't hold my breath that the mainstream media will provide fair and honest coverage of the tax reform debate.

Given these entrenched interests (not to mention the Democrats in Congress) the President needs to make sure that any proposed reform has as much broad-based support as possible. A National Sales Tax is such a radical change with so many different avenues from where it can be legitimately attacked, that whatever its benefits, it should be a complete nonstarter from a political standpoint.

On the other hand, a flat tax with ONE and only ONE deduction for your home would vastly improve the current federal income tax and with serious support from the President could get through Congress. I don't know what allowing for a deduction for your home mortgage does to the numbers and what rate would be needed to make the plan revenue neutral. But not allowing the home ownership deduction would make the reform extremely vulnerable politically, and could be a fatal stumbling block towards getting any plan passed.

Serious tax reform and simplification would be a major accomplishment for the President, and more importantly, would be an enormous boost for the American economy. A National Sales Tax isn't going to happen for a lot of reasons, the first being it is probably bad tax policy. But a Flat Tax or a considerably simplified income tax are very real possibilities, and well worth expenditures of President Bush's political capital. J. McIntyre 9:47 am Link | Email | Send to a Friend