- The Washington Times - Wednesday, December 15, 2004

The big unanswered question about President Bush’s economic agenda next year is what kind of tax reform will he propose and when does he plan to propose it?

Mr. Bush campaigned on overhauling the tax code to make it simpler, fairer and more pro-growth, but whether he wants to replace it with something else is unknown at this point. Here is what we do know, according to a senior administration official who briefed me recently on what to expect.

In the next few weeks, the White House intends to name a presidential commission made up of a dozen or more people drawn from business, academics and possibly former members of Congress. Their mission will be to examine the tax code and propose changes that will meet Mr. Bush’s mission statement.

“It will definitely be bipartisan. It won’t have people who are married to either the flat-tax or sales-tax camps. It will be people who have an open mind to the future of tax reform,” this official told me.

The plan is to ask the commission to come up with a set of proposals relatively quickly. Unlike the 2001 Social Security commission that spent a year on its report, the White House hopes to keep this commission on a short time leash, expecting its recommendations by late summer.

Tax reformers with ties to the White House tell me they do not expect the panel or the administration to seek a flat tax or a sales tax, neither of which have strong political support right now. But the panel will be urged to look at every idea. “Everything will be on the table,” the official said.

No one is saying who will be on the panel, but here are some of the names being mentioned by people who advise the White House about tax policy:

cRetiring Sen. John Breaux, Louisiana Democrat, who helped Mr. Bush negotiate a compromise tax cut package in 2001 and successfully steered it through the Senate. Mr. Breaux, a highly-respected, centrist Democrat, has been a big promoter of lowering the tax rates and expanding tax-free savings plans, one of Mr. Bush’s top priorities.

cFormer Sen. Bill Bradley, New Jersey Democrat, a chief sponsor of President Reagan’s 1986 tax reform plan, which broadened the taxable base and lowered income tax rates — bringing the top rate down to 28 percent.

• Larry Lindsey, who was Mr. Bush’s first White House economic adviser and the chief architect of the president’s tax cut package.

cFormer Rep. Bill Archer, Texas Republican, who chaired the tax-writing House Ways and Means Committee and knows the tax code backwards and forwards.

Other possibilities include economist Michael Boskin of the Hoover Institution who also advised Mr. Bush on tax cuts in the 2000 campaign; economist Kevin Hasset of the American Enterprise Institute, and retiring Oklahoma Republican Sen. Don Nickles.

The plan calls for the panel to submit its recommendations to Treasury Secretary John Snow and he, in turn, “will use that to present his own set of reforms to the president, who will decide what he wants to present to Congress,” the official said.

Yet two questions emerge from all this. What is the expected timetable for Mr. Bush’s tax-reform initiative? And would he accept a commission plan that would replace the tax system with a new and simpler system?

The president’s Social Security investment accounts are clearly his first priority next year, which likely means no action on tax reform until 2006.

Not only will the commission need more time to seek out a broad range of public discussion and consensus, the White House will want more time to build public support for its proposals.

Interviews with business and economic analysts here also suggest that there is no real appetite in the White House or in the business community for roots and all reform.

There has been a mounting wave of anxiety among business lobbyists here about Mr. Bush’s plans for revenue-neutral reform. The tax code is filled with corporate loopholes, and business leaders fear they will have to bear the brunt of the costs of any changes elsewhere in the system.

“The dirty secret is that there is tremendous apprehension in the business community that they will end up having to pay for tax reform,” a business lobbyist told me.

This is why a major wholesale reform is unlikely, say tax cut advocates.

“My sense is they’re not going to do the big bang and replace the system or do anything grandiose like that,” said tax-cut crusader Stephen Moore of the Club for Growth.

Instead, Mr. Bush is more likely to propose making his tax cuts permanent, simplifying compliance, cutting capital-gains and dividend rates, end the estate tax, tax-free super savings accounts, immediate asset depreciation for businesses, and ending deductions for state and local taxes.

This may not be the wall-to-wall structural changes many are hoping for, but it would lift the economy into a higher, longer-lasting orbit and prepare the way for bigger reforms to come.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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