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The Chance for a Fair Tax System
October 13, 2005
Yesterday, President Bush’s Tax Advisory Panel previewed several proposals, including placing lower caps on two popular income tax deductions. Some of the panel’s ideas, however, will likely face serious political opposition but are not completely without merit – high cap levels benefit high-income taxpayers disproportionately. It is unlikely that the president would implement a policy that carries so much political risk. Yesterday, the White House said the tax code should be "simpler, fairer, and more conducive to economic growth," but it refused to state a clear opinion on the commission’s recommendations. It remains to be seen whether the administration will duck the hard choices that will be necessary to reform the tax code in a responsible way, or if it will, instead, cherry-pick the panel’s proposals for those ideas that fit within its right-wing ideology.
- Will the panel offer President Bush a chance to make the tax system fair? The president has the opportunity to side with the panel and oppose replacing the current code with a national retail sales tax. Limiting deductions for high-income individuals and expanding access to tax incentives to low- and middle-income Americans would help rectify a tax code that is currently designed to help upper-income Americans. Former Sen. Connie Mack (R-FL), head of the Advisory Panel, said, "Clearly, under present law, the higher-income folks benefit the most from those two aspects of the tax code." It remains to be seen if President Bush will have the courage to take away some of these popular tax breaks from "high-income folks."
- What parts of the panel’s proposals will survive the Bush agenda? The advisory panel has put forth several progressive ideas, such as rejecting the national sales tax. Nevertheless, the likelihood of these suggestions making it through an agenda that has created a tax system benefiting the wealthiest of Americans is unclear. The administration will most likely use other recommendations that fit its right-wing agenda – such as yet more reduction in capital gains and dividends taxes, or other tax cuts for the wealthy – and leave the rest behind.
- There is a progressive solution. The Center for American Progress released a plan earlier this year to "restore fairness, simplicity, and opportunity to the tax system while generating the resources necessary to meet our nation's commitments." To restore fairness in the tax code, the Center proposed taxing wage and investment income at the same rate for millionaires, reducing the share employees pay into the regressive payroll tax, and increasing the take-home pay for working families. To simplify the tax code, the Center's plan would reduce the number of tax brackets to three, close corporate and individual tax loopholes, and eliminate the Alternative Minimum Tax (AMT). By restoring fiscal discipline and offering increased incentives to save, the plan would implement a progressive growth strategy while making the tax system less complex.
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