Sunday, December 12, 2004

President Bush will name a bipartisan commission in a few weeks to consider the entire range of tax reform proposals, including a flat tax or national sales levy, though the panel’s summertime deadline could delay legislative action until 2006, a senior administration official said Friday.

Speculation has been building for weeks about the makeup and breadth of the commission’s mission, but the official told The Washington Times that the panel “won’t have people who are married to either the flat tax or a national sales tax camp. It will be people who have an open mind to the future of tax reform.”

The commission, which will have about a dozen members, will be modeled after the 2001 Social Security panel, which took nearly a year to come up with ways to implement Mr. Bush’s proposed investment accounts.

The tax reform panel will have a shorter time span for its deliberations — no later than sometime next summer, the official said. Members will be drawn from academic and business leaders, and perhaps former members of Congress.

Asked whether congressional action would have to be delayed until the following year if the commission does not finish its work until late summer, the official said “it could be in 2006.”

Officials would not speculate on the makeup of the panel, but some of the names mentioned in administration circles include retiring Sen. John B. Breaux, Louisiana Democrat, who helped Mr. Bush hammer out a compromise tax cut plan in 2001; former Rep. Bill Archer, Texas Republican, who was chairman of the tax-writing Ways and Means Committee; former Sen. Bill Bradley, New Jersey Democrat, who helped negotiate a compromise tax reform plan in 1986 with the Reagan administration; and retiring Sen. Don Nickles, Oklahoma Republican.

Business lobbyists and economists who have acted as the White House’s outside advisers on tax policy have speculated that Mr. Bush will not pursue a wholesale replacement of the tax code with a flat tax or a national sales tax. But the official said the president would not impose any restrictions on the commission’s deliberations.

“Everything is on the table. We are simply not going to prejudge the outcome of the panel’s deliberations or the president’s,” the official said.

The panel will be asked to present a package of proposals to Treasury Secretary John W. Snow “that honor the tax reform principles the president has set forth: a simpler, fairer and more growth-oriented tax system. Those will be the only marching orders,” he said.

Mr. Snow “will then use that to present his own set of reforms to the president and the president will decide what he wants to present to Congress,” the official said.

Mr. Bush’s plan to reform the tax system has triggered a wave of anxiety among many business leaders, who fear they will be the losers in a revenue-neutral overhaul that would be offset by ending long-favored corporate tax breaks.

“Whatever reforms that are out there, especially changes that are revenue-neutral, essentially redistribute the tax burden. Some companies are helped, some are hurt. If you change any part of the tax code, it has its winners and losers,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce.

“The dirty secret is that there is tremendous apprehension in the business community that they will end up paying for tax reform,” said the chief executive of another major business group who frequently advises the White House on tax issues.

Many tax-cut advocates with close ties to the administration say the final tax reform product will not reject the flat tax or a sales tax approach.

“My sense after talking to people at Treasury is that they are not going to do the big bang and replace the tax system or anything grandiose like that,” said tax-cut advocate Stephen Moore, president of the Club for Growth.

Mr. Moore thinks the White House will go for a significant but scaled-back plan that will make the president’s tax cuts permanent; repeal the estate tax; set up unlimited tax-free super-saver accounts; and eliminate deductions for state and local taxes.

“What I’m hearing is that the plan is to go with Social Security reform first and then tax reform in 2006,” he said.

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