Capital Commerce: Talk of tax overhaul draws fire
People who pay attention to the tax code—and that's a lot of people—have been sent scurrying by President Bush's Advisory Panel on Federal Tax Reform, which is charged with making recommendations about how to reform the tax code by November 1. The panel this week gave early indications about its intentions.
The panel mentioned new limits on deductions for mortgage interest and employer-provided health insurance. Bush has given the panel guidelines, which include preservation of a progressive tax system that recognizes the importance of homeownership and charity. Any changes to the system should also be revenue-neutral.
The suggestions, especially tinkering with the popular mortgage-interest deduction, raised hackles in predictable places, like the housing industry.
While many tax-code watchers are waiting breathlessly for the panel's full report, one important antitax advocate says none of the recommendations matter.
"Are the recommendations the panel makes critical? No," says Grover Norquist, president of Americans For Tax Reform. "The purpose of the panel is that it gives a reason for the president, the Congress, and the nation to focus on tax reform. It puts a placeholder out there to have a national conversation about tax reform this fall," says the antitax crusader, who has friends in high places in Washington.
Norquist says the ultimate goal of the center-right coalition pushing to simplify the tax code is a single-rate tax on wages and salaries, and no tax on savings or investment. Whether that comes through a wage tax or a retail sales tax doesn't matter, he adds. The goal can be accomplished through six steps, which he says could be passed incrementally. They are: elimination of the estate tax; elimination of the capital gains tax; a change to expensing from depreciation on business investment; an all-encompassing IRA that taxpayers can contribute to tax free with no limit; elimination of the alternative minimum tax; and a single tax rate.
The first step will be a vote this fall on permanently eliminating the estate tax, says Norquist, though he bets it won't pass this year.