A Look at Dubya’s Tax Reform Panel’s Proposals

Daniel Shaviro at Start Making Sense comments on the proposals from the President’s Advisory Panel on Federal Tax Reform. He says, for instance, that these proposals are not a variety of “X tax” (contrary to what I’d suggested ).

One thing that jumped out at me: “Charitable deductions [would be] allowed to all (rather than just itemizers), but only to the extent [that they are] in excess of 1% of income.” This could be helpful. As it stands today, it is very difficult to use charitable deductions to eliminate your federal income tax.

But don’t get your hopes up. Shaviro doesn’t think the Panel’s plan is going anywhere:

I suspect that this plan is dead on arrival. The Commission was unable to come up with a politically feasible plan. I don’t blame them for this, as I don’t think I could have done any better given the constraints under which they had to work. The killer, politically (although it would have had little hope anyway) was having to impose visible base-broadening in exchange for tax reductions that were much less visible than rate reductions because they involved the AMT.

The result could be another bad setback for the tax reform cause, killing the issue until the next time around.

For the Bush Administration, this is certainly not the magic bullet to restore those sinking poll ratings. I would not be surprised if they were to bury this plan under the heaviest rock they can find.

Shaviro also voices a suspicion that I’ve had about “tax free” savings vehicles like those included in the Panel’s proposals, or like the Roth IRA:

I wouldn’t bet a nickel on the government’s claim (if this plan were to be enacted) that the withdrawals will actually be tax-free. Fast forward ahead to , if you will, when someone who is financially well-off is withdrawing funds from her huge tax-free savings account. Add in the detail that the government might be in desperate fiscal trouble, scrambling to renege on as little as possible of its near-term Social Security and Medicare commitments. What are the odds that the withdrawal will really be tax-free, no matter what Congress said in or so?

From the “The Revolution Will Not Be Authorized” department:

Remember that “World Can’t Wait” protest march I wrote about on ? You know, the “truly massive day of resistance all over this country” in which “[p]eople everywhere will walk out of school, they will take off work, they will come to the downtowns and town squares and set out from there, going through the streets and calling on many more to join us.”

“This will not be easy,” the organizers warned us: “If we speak the truth, they will try to silence us. If we act, they will try to stop us.”

If we apply for a permit, the police might say “no.”