November 3, 2005
Bush's Tax Non-Reform
By Robert
Novak
WASHINGTON -- George W. Bush's chances of engaging the country with
a dynamic second-term initiative were sabotaged this week. His own
tax reform advisory panel Tuesday reported two plans exceeding the
worst expectations. Not only would they be dead on arrival if actually
sent to Congress, but they probably stifle President Bush's hopes
for seriously reshaping how Americans are taxed.
The President's
Advisory Panel on Federal Tax Reform created 10 months ago released
its report Tuesday, and it turned out to have precious little
to do with what Republicans think of as reform. Instead of a low
flat tax, it proposes a high graduated tax. It retains pretty
much intact the dysfunctional Internal Revenue Code. It does not
entertain the slightest possibility of a national sales tax.
Having named
a commission to make recommendations instead of using his own
administration to devise a plan, Bush faces this dilemma. He can
either buy into a reform that is going nowhere or, alternatively,
disregard his panel's work and start from scratch. It is unlikely
the graduate of Harvard Business School who now occupies the Oval
Office would take the unconventional latter approach.
What the
panel came up with is hard to believe. The two options propose
four and three tax brackets, respectively, with top rates of 33
percent and 30 percent, down from the present 35 percent. Even
Lord John Maynard Keynes, no supply-sider, said 25 percent is
the highest acceptable rate. The measly rate reductions were added
belatedly by the panel, which intended to retain 35 percent until
it found its plan generated enough extra money to make cuts and
still keep the package revenue neutral, as the president requested.
The extra
revenue results from repealing deductibility of state and local
taxes, ending tax-free health insurance supplied by employers
and capping home mortgage deductions. While largely leaving alone
the Revenue Code's maze, the panel rips into three of the most
popular tax benefits.
This strange
product results from the panel, instead of recommending a new
tax framework, concentrating on one specific -- and expensive
-- goal: to eliminate the Alternative Minimum Tax (AMT), estimated
to raise taxes of 21 million people in 2006 and 52 million in
2015. When the 1986 tax reform failed to clean up the code and
many zero taxpayers remained, the AMT was instituted.
Thanks to
inflation, AMT covers so many upper-middle-income taxpayers that
its elimination has become one tax cut favored by Democrats. But
why would a Republican president's commission lock into a Democratic
priority? Because the Bush panel's dominant figure is former Sen.
John Breaux of Louisiana, a Democrat with a reputation for compromise
but a record of partisan loyalty.
Breaux's
Republican co-chairman is former Sen. Connie Mack of Florida,
who ran with supply-siders on Capitol Hill but now seems most
interested in cancer research. Hopes that the panel's membership
would recommend real tax reform plunged when Bush appointed a
third legislator: 77-year-old former Rep. William Frenzel of Minnesota,
who as the House Budget Committee's ranking Republican in the
'80s was the bane of supply-siders.
Most disheartening
for reformers about the presidential panel is what it omits. It
does not include the innovative, daring plan of Sen. Jim DeMint
of South Carolina for an 8.5 percent retail sales tax and an 8.5
percent business transfer tax on companies. Yet, Bush has declared
a "sales tax is an option we should consider seriously."
"Rather
than giving the president a sales tax option," said Lawrence
A. Hunter, chief economist of the Free Enterprise Fund, "the
panel took it upon itself to decide for the president, limiting
his options. That isn't what the panel was supposed to do."
DeMint's plan, of course, would eliminate the AMT, as would any
far-reaching tax reform.
When Republicans
in 1994 assumed control of Congress, the party's leaders assured
me that tax reform would be high on their agenda. In 11 years,
however, Republicans have not begun to resolve conflict between
a flat tax and a sales tax. Bush as president ignored the issue
until this year and then named a commission instead of drafting
a proposal. What emerged this week suggests that the president
and the Republicans have squandered a precious opportunity.
Copyright
2005 Creators Syndicate
