- The Washington Times - Saturday, January 8, 2005

President Bush yesterday appointed a commission to think of ways to simplify the federal tax code, giving it until July 31 to report its ideas.

“A simple code will make it easier on the taxpayers,” Mr. Bush said after meeting in the Oval Office with the chairmen of his commission, former Republican Sen. Connie Mack of Florida and former Democratic Sen. John B. Breaux of Louisiana.

“These fine, distinguished citizens will be taking a good hard look at the tax code and coming up with recommendations as to how to make sure the tax code encourages economic vitality and growth,” he said.

The president did not offer any specific ideas of his own, but conservatives have been pushing the White House for radical action — either implementing a flat tax or a federal sales tax that would eliminate the income tax.

“It seems like to me the tax code today discourages economic vitality and growth when you spend billions of hours filling out the forms,” Mr. Bush said.

The bipartisan commission includes William Eldridge Frenzel, a former Republican congressman from Minnesota who served on the tax-writing Ways and Means Committee; Elizabeth Garrett, a law professor at the University of Southern California and former legislative director and tax and budget counsel to former Democratic Sen. David L. Boren of Oklahoma; Edward P. Lazear, a Stanford economics professor and senior fellow of the conservative Hoover Institution; and Timothy J. Muris, a former chairman of the Federal Trade Commission under Mr. Bush.

Most Democrats have opposed Mr. Bush’s tax cuts and are concerned that his reforms will reduce the progressive nature of the status quo, where the wealthy pay most of the federal income tax.

“We see a White House looking for so-called recommendations only from those everyone knows will agree with the administration,” said Rep. Charles B. Rangel, New York Democrat and ranking member of the House Ways and Means Committee. “That’s not leadership; it’s closed-mindedness.”

Treasury Secretary John W. Snow said “everything is on the table” in reforming the tax code to “serve the interests of growth and simplicity, reduce complexity and make the code something we can all take more pride in.”

“This thing is on fast track as far as the timing is concerned in comparison to other advisory commissions,” Mr. Breaux said.

Mr. Snow said he expects the commission’s work to lead to legislation that can be taken up in Congress before the end of the year.

“I think we’re going to get a terrific result from this panel,” Mr. Snow said.

The Business Roundtable, a lobbying group with influence among Republicans and in the White House, applauded the creation of the commission.

“We encourage the president’s advisory panel to recommend reforms that will make the U.S. tax system competitive with the tax systems of our major trading partners,” said J.T. Battenberg III, chairman, chief executive officer and president of Delphi Corp., and chairman of the Business Roundtable’s Fiscal Policy Task Force. “A level playing field for U.S. companies to compete with foreign competitors is essential to maximize the growth of our economy.”

According to a Business Roundtable study, the United States has the third-highest corporate tax rate of the world’s largest economies.

Democrats have argued, however, that a sharp reduction in corporate tax rates would force a tax increase on the middle class to make up for the lost revenue. The party has consistently attacked Mr. Bush’s tax policies as “sops” to big business and the rich.

But simplifying taxes and reducing compliance costs is important, Mr. Battenberg said, because the current complex tax code “imposes real costs on the economy.”

“These costs are either passed on to consumers or workers, or reduce the return to investment and burden U.S. firms like any other tax,” he said.

Mr. Bush has said that he would like to preserve mortgage deductions and charitable deductions in the tax code, popular provisions that would not be included in a pure flat tax or national sales tax.

On Thursday, Mr. Bush signed legislation that allows those who donate money this month to the victims of the Indian Ocean tsunami to deduct those contributions on their 2004 tax returns.

Mr. Snow said the president instructed the commission to “give due consideration to the importance of charitable deduction and the home mortgage deduction.”

Chris Edwards, director of tax policy for the libertarian Cato Institute, said he is encouraged by Mr. Mack’s role in the commission.

“He’s a good, hard-core Reagan-style supply side tax cutter,” said Mr. Edwards, who worked for Mr. Mack when he was in the Senate. “He always championed a pro-growth agenda.”

Republicans in Congress appointed their own tax-reform commission in 1996 while the party was flexing its new-found power. But a rift between those who preferred a flat tax to a sales tax led to a vague endorsement of a flat tax.

“It didn’t really go anywhere,” Mr. Edwards said.

Today’s political climate is different, Mr. Edwards said, and the Republicans seem willing to leave their old disputes behind to get something done this year.

“I think now the whole conservative/libertarian tax-reform crowd is beyond that,” Mr. Edwards said. “There is an understanding that you can go a long way to reforming the current tax system that is pro-savings, pro-growth and pro-investment.

“I think because Mack and Breaux were legislators, they will not be wild-eyed radicals on this commission,” he said. “They will try to do something that could get through Congress.”

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