Snow Kicks Off Tax Panel With Call For 'Major Reform'

Published: February 16, 2005

Treasury Secretary Snow today said President Bush wants "major tax reform," setting a high bar for action as Bush's tax reform panel gathered in Washington for its first public meeting. "The president is committed to major tax reform, to real tax reform, to something more than just moving the boxes around," Snow said as he convened today's meeting. "The president will give it the best effort he can." Snow left immediately after concluding his remarks, and the panel's chairman, former Sen. Connie Mack, R-Fla., outlined the commission's approach by saying it first intends to take a "comprehensive look" at the current tax system and its "problems." After defining the problems, the group intends to consider "options for reform," which Mack said could range from "modifications to improve current law" to "replacing the current structure and starting over." The panel will hold "a number of public meetings" in Washington and in other locations. In the wake of statements by several administration officials that the alternative minimum tax needs to be part of the effort to change the tax code, Mack gave the issue particular attention in his remarks

Comments by panel members and several witnesses invited to address the group highlighted the complexity of trying to simplify the tax code. Witnesses tied revising the tax code to the task of addressing the large shortfalls facing the nation's entitlement programs. Former IRS Commissioner Fred Goldberg Jr. noted the possibility of tax credit proposals that "prefund" the government's future entitlement commitments. Asserting that Medicare and Medicaid fixes will require more revenue, William Gale of the Brookings Institution suggested the panel consider a value added tax, which he said would be a "very powerful money machine for financing entitlements."

The panel also elucidated the potential uncertainty surrounding Bush's seemingly straightforward call for changes to be revenue neutral. Responding to a question by panel member Liz Ann Sonders of Charles Schwab, Goldberg weighed in against the "dynamic scoring" of proposals, which he said was too uncertain even though tax changes would have an economic effect. Another panel member, University of Southern California Law Professor Elizabeth Garrett, said the group should focus not just on the revenue implications over "the next five or 10 years" but on "the long run as well," raising the question of the period of time over which a proposal should be revenue neutral. Questions were also raised about how quickly Congress would undo changes and whether reform should move the system toward a consumption or an income tax.