President Bush's Advisory Panel on Federal Tax Reform is
scheduled to present its recommendations to Treasury Secretary John
Snow Tuesday. Business tax experts will quickly scour the report to
see if the tax suggestions gore their ox - that is, hurt or help
their financial interests.
Liberal tax experts will look to judge whether the proposals
alter the tax burden distribution among the wealthy, middle-class,
Income disparities in the United States grew substantially from
2002 to 2003, new Internal Revenue Service statistics indicate.
After adjusting for inflation, the after-tax income of the richest 1
percent of households rose by 8.5 percent, or nearly $49,000 apiece -
helped by the Bush tax cuts. The bottom 75 percent of filers saw
real after-tax incomes fall. The middle fifth of taxpayers, for
instance, lost $300.
The nine-person panel outlined its tax suggestions last Tuesday.
It emphasized the distributional neutrality of its ideas.
"I don't believe them," says Robert McIntyre, director of
Citizens for Tax Justice, after noting some proposed changes.
No one expects Congress or the president to accept the panel's
recommendations carte blanche. More likely, the president will wrap
some of its proposals, such as streamlining tax breaks for savings,
into his 2006 State of the Union address.
Then the tax committees of the Republican-led Congress will have
a go at reform. What will emerge, if anything, is anybody's guess.
But chances of major reform are "pretty slim," says Tom
Ochsenschlager, tax vice president at the American Institute of
Certified Public Accountants in Washington.
No one doubts a need for reform. As the panel put it earlier this
year: "For millions of Americans, the annual rite of filing taxes
has become a headache of burdensome record- keeping; lengthy
instructions; and complicated schedules, worksheets, and forms -
often requiring multiple computations that are neither logical nor
Since the last major tax reform in 1986, Congress has added more
than 14,000 changes to the tax code to please its constituents.
If implemented by Washington, the panel's proposals would achieve
to a degree one goal: tax simplification. For instance, the panel
suggests eliminating tax deductions for state and local taxes (which
will save individual taxpayers $50 billion this year) and other
measures that would shrink the Form 1040 tax return from 75 lines to
The final result could be an Alternative Minimum Tax "in
disguise," warns Milton Ezrati, an economist at Lord, Abbett & Co. …