Tax Reform on the Horizon!
Washington, Feb. 26 (Bloomberg) - By Ryan J. Donmoyer -- President George W. Bush will push for a fundamental overhaul of the tax code if Congress passes his $1.6 trillion tax cut, chief White House economic adviser Lawrence Lindsey said.
Lindsey, who as a Federal Reserve governor in 1995 warned that replacing the tax code initially would cause "significant" disruption in the economy, became the first Bush administration official to signal support for overhauling the tax system.
The government will continue to collect "substantial" revenue over the next decade, even after Bush's tax cuts are enacted, Lindsey told the Credit Union National Association.
"That's the revenue that's going to allow us to do fundamental tax reform later on," Lindsey said. He didn't endorse a specific plan./p>
Lawmakers of both political parties have offered myriad proposals for replacing the tax code. House Majority Leader Dick Armey of Texas and House Commerce Committee Chairman Billy Tauzin of Louisiana, both Republicans, have sponsored several "Scrap the Code" debates where Armey argues for a flat tax and Tauzin makes the case for a national retail sales tax.
Others, such as House Minority Leader Richard Gephardt, a Missouri Democrat, and Senate Budget Committee Chairman Pete Domenici, a New Mexico Republican, have offered their own proposals for an alternative tax regime.
Alternatives
Under a flat tax, all income over a set amount would be taxed at a single rate. Unlike the current system, there would be no adjustments such as the deductions for mortgage interest or business expenses.
A national sales tax would work like those collected by some state and local governments. Income would be free of federal tax and instead goods and services would be taxed at the point of purchase.
The debate about changing the federal tax code gained momentum after Republicans won control of Congress in 1994. It was dampened later in the decade because of a lack of support from then-President Bill Clinton.
Tauzin is eager to reopen the discussion, spokesman Ken Johnson said. "We look forward to any and every opportunity to debate the merits of the national retail sales tax," he said.
Democrats, such as Massachusetts Representative Richard Neal, have backed tax reform and want a "simpler, fairer tax code," said Dan Maffei, a spokesman for the Democrats on the tax-writing House Ways and Means Committee.
Skepticism
However, Democratic legislators are skeptical of assumptions Lindsey appears to be making about the budget surplus, he said.
"The Bush budget does not leave any resources for doing it unless it's a zero sum game, or worse," Maffei said.
At the height of the earlier debate, Lindsey spoke to the National Commission on Economic Growth and Tax Reform, a panel created to consider explore different tax systems headed by former congressman and one-time Republican vice presidential candidate Jack Kemp. Kemp is a long-time advocate of the flat tax.
Lindsey told the panel, which ultimately recommended that the U.S. adopt a flat tax, that most popular substitutes would be beneficial for the economy in the long-term, but they would trigger prolonged recessions in the near-term.
'Protracted Instability'
"The long run might involve a protracted period of instability," Lindsey said in his 1995 remarks. "I think that in the real world, the potential disruption is likely to be significant."
Lindsey also told the panel that it is "highly unlikely" that the Federal Reserve would cut interest rates to accommodate the increased cost of goods and services under an alternative system, something that supporters have said would probably happen.
Lindsey did not endorse a substitute tax system at the time. He did say that "any of the tax regimes you have under consideration will have a positive impact on economic performance."
At the credit union association today, Lindsey said Bush's first priority is passing his $1.6 trillion tax package, which would cut and consolidate tax rates, double the child credit, ease taxes on some two-earner married couples, and repeal the estate tax, which is assessed when someone who dies has assets worth more than $675,000. The plan would be phased in over 10 years.
"It's going to take some time to get fundamental tax reform through Washington," Lindsey said. "Americans need tax relief now and while we wait to build consensus for far-reaching reforms later, the money belongs in your pockets, not ours."
Staying With The Plan
Senator Jeff Bingaman, a New Mexico Democrat appointed this year to the tax-writing Senate Finance Committee, told the credit union association that the effort to cut taxes is "genuine." He said that contrary to Bush's insistence that Congress pass his tax cuts without any changes, "I'm confident Congress will add some things to that package."
Bingaman said he favors adding legislation to expand IRA and 401(k) contribution limits, which passed the House overwhelmingly last year but never sent to the White House. But he said several obstacles will make it difficult to get the package included in Bush's tax bill, including the justification of the tax cut on the grounds that it will stimulate the economy. "That makes it harder to target tax cuts to savings," Bingaman said.
Bingaman also said Congress would alter some of Bush's proposals. For example, he said, it's more likely that Congress will alter the estate and gift tax rather than repeal it. Lindsey reiterated that Bush wants full repeal because he said the tax is unfair and too complicated.
©2001 Bloomberg L.P. All rights reserved.
catslv.org Improvements
I have made some improvements to the CATS Las Vegas Chapter Web Site:
1. You may now search the entire CATS Las Vegas Chapter Web Site for any word or phrase by clicking on the "Search" link available on every page. This is great when you want to find a specific article or quote to send to someone, or when you simply want to clear up some word or phrase and you need more information.
2. I have included a newly designed membership application, which you can access from the home page and then simply print out. There are now three ways to become a member of CATS, all available from the home page. By secure online membership page, by phone, or by printing out the membership application and mailing it in.
I hope you take a few moments to check out the improvements and see for yourself how well they work.
Thanks for your support.
Bracken
Chairman, CATS Las Vegas Chapter
CATS National E-mail Update
From: CATS National Office
Date: Mon, 26 Feb 2001 09:45:22 EST
Subject: CATS E-Info
To: All CATS
Citizens For An Alternative Tax System
10600A Crestwood Drive
Manassas, VA 20109
800-767-7577
E-mail: info@cats.org
Dear CATS Members:
Washington, 26 Feb. The chief White House economic advisor, Lawrence Lindsey spoke this week to the Credit Union National Association here in DC. He indicated the intentions of President Bush to pursue fundamental tax reform right after passing his 1.6 trillion tax cut!
Here are excerpts from an article written by Ryan J. Donmoyer from Bloomberg.
"The government will continue to collect substantial revenue over the next decade, even after Bush's tax cuts are enacted, Lindsey told the Credit Union National Association. That's the revenue that's going to allow us to do fundamental tax reform later on."
"The debate about changing the federal tax code gained momentum after Republicans won control of Congress in 1994. It was dampened later in the decade because of a lack of support from then-President Bill Clinton.
"Congressman Billy Tauzin is eager to reopen the discussion," spokesman Ken Johnson said. "We look forward to any and every opportunity to debate the merits of the national retail sales tax," he said.
Democrats, such as Massachusetts Representative Richard Neal, have backed tax reform and want a "simpler, fairer tax code," said Dan Maffei, a spokesperson for the Democrats on the tax-writing House Ways and Means Committee.
"It's going to take some time to get fundamental tax reform through Washington," Lindsey said. "Americans need tax relief now and while we wait to build consensus for far-reaching reforms later, the money belongs in your pocket, not ours."
Build consensus?? That job is well on the way thanks to your persistence. Everything that you have done over the last so many years has not been lost! It is stored up in the reservoir of public consciousness and is now breaking loose!
There are many new groups aligning with the sales tax! Let's continue the branding process and make the national sales tax well thought of in every sector of society. You can help by recruiting one new CATS Member. We can double our presence with this one action. And the new recruit will thank you for the opportunity to be counted in support of this idea.
Glenn Wahlquist
Operations Director
CATS National Office
Get Ready for April 16
Start making plans now to join us on Monday, April 16 for our annual "Tax Filing Day" rally to be held across the street from the IRS Las Vegas Office on Oakey and Decatur between the hours of 11:00 a.m. and 1:00 p.m.
Later that day we will be handing out informational flyers to the last-minute tax filers in front of the Main Post Office on Sunset Rd. We ask that everyone do a 1 or 2 hour shift starting at about 4:30 p.m. and continuing until around 11:00 p.m. Please call and let us know what time-slot you would prefer.
The Tax Man's Dirty
Little Secret
"The dirty little secret, of course, is that (federal income tax) withholding -- implemented during World War II -- is the linchpin of the welfare state and big government. If Americans had to sit down every April 15 and write a check for their entire tax bill -- instead of having the IRS surreptitiously remove installments from their paychecks each week as if the money never existed -- the beltway bureaucrats and politicians couldn't flee town fast enough to avoid being skinned by angry mobs demanding relief."
- Las Vegas Review Journal editorial, 3/1/01
