- The Washington Times - Thursday, October 20, 2005

President Bush’s tax reform commission is drawing mixed reviews from tax-cutters who say its proposed changes would only patch up a broken system that needs to be rebuilt and others who think there’s a lot to like in the plan.

Some of the emerging recommendations from Mr. Bush’s bipartisan Advisory Panel on Federal Tax Reform also are being criticized by lawmakers from states such as California and New York, who say proposed cuts in tax deductions for employer-provided health benefits and elimination of state and local taxes would sharply raise taxes on the middle class in high-tax states.

“I think the tax reform panel led with George Bush’s chin. Rather than giving him a full range of options that would allow him to begin a national dialogue with taxpayers, they’ve narrowed his options and cornered him into a specific proposal,” said Larry Hunter, chief economist at the Free Enterprise Fund.

“This tax system is broken. You can only start from scratch. If Bush sends this proposal to Congress, it will be dead on arrival,” he said.

Mr. Hunter, a flat tax supporter, said the biggest shortcoming in the bipartisan panel’s reform plan is that “it doesn’t reduce marginal tax rates. Any major tax reform is very painful. I can’t imagine Republicans are going to put themselves through this and leave the top rate at 35 percent.”

But economist Kevin Hassett at the American Enterprise Institute, who also supports the flat tax idea, said the plan has a number of features that would strengthen economic growth — one of Mr. Bush’s directives to the commission — including larger savings and capital investment incentives.

“If my two choices were this or what we’ve got, it would be a no-brainer,” Mr. Hassett said.

Tax analyst Bill Beach of the Heritage Foundation called the plan “a mixed bag.”

“There are some elements here that are good, like eliminating the deduction for state and local taxes that right now operates as a great big subsidy for state governments to raise taxes,” he said.

On the other side, however, “We will have a still-complicated tax system that retains some of the elements that are bad in the existing system,” Mr. Beach said. If we are going to eliminate these subsidies, then what you want to do for the average taxpayer is lower the tax rates and move to a fairer and flatter tax system.”

Still, critics such as Mr. Hunter, who hoped the panel would scrap the tax system and replace it with a single flat income tax or sales tax, or at least reduced tax rates, said the plan included “some reasonable improvements.”

“If you look at the various pieces, they make sense and are an improvement on the system, but do they add up to a new system that’s substantially better? I would say that under this plan, the system is only marginally better,” he said.

But Mr. Beach urged tax-cutters to hold their fire until the commission releases its full report by the Nov. 1 deadline.

“In defense of the panel, they haven’t supplied us with all of the details. It’s premature to say it’s good or bad until all the details are before us,” he said.

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