Presidential Panel Begins Discussing US Tax Reform Process

by Mike Godfrey, Tax-News.com, Washington

18 February 2005

Meeting for the first time on Wednesday, the tax reform panel appointed by President Bush began exploring the complexities of the current US tax code, as the march begins towards a simplification or overhaul of the income tax system.

Demonstrating the size of the task ahead, US Treasury Secretary John Snow, the first witness to speak at the hearing, observed that at more than a million words long, the Internal Revenue Code and regulations has more than doubled in terms of page-length over the past twenty years, whilst the current version of the ‘short’ income tax form still takes more than 11 hours to prepare - about the same as the ‘long form’ did ten years ago.

“The code is so filled with loopholes, exceptions and lengthy explanations that individuals and businesses spend more than six billion hours every year on paperwork and other tax headaches,” Snow stated.

“Imagine what this great country could do if we could get a few billion hours back. And that's why we're here today. To talk about how we can take those billions of hours away from the tax code nightmare and give them back to the terrific productivity and creativity of the American people,” he added.

According to panel chairman Senator Connie Mack, broad options for reform will be considered, ranging from the modification of current law, a comprehensive overhaul of the existing system, or a more radical uprooting of the current structure, and its replacement with a completely redesigned system.

In order to help the panel arrive at their decisions, Mack invited both businesses and individuals to contribute to the process by detailing their own tax “headaches” and describing how business and personal decisions are distorted by tax rules.

Mack also indicated that the panel will explore ways of overhauling the Alternative Minimum Tax system, warning that the 3.8 million taxpayers confronted by the system this year will grow to 51 million by 2015 if no action is taken.

“Americans are demanding a better tax system. It should be simple, transparent and easy to understand. It should be stable and predictable – in order to permit informed planning and decision making. It should encourage economic growth. And it should minimize the costs of compliance and intrusion into the lives of taxpayers,” Mack argued.

While the tax reform agenda remains something of a blank canvas at present, the panel’s vice chairman, former Louisiana Senator John Breaux, has hinted that the members may be leaning towards some form of system that will combine elements of an income tax and consumption tax.

"I think combinations of ideas need to be looked at very carefully," he told reporters after the meeting.

"Going all-in-one in one direction or going to all-in-one in another direction...is not, in my perspective, the best way to approach it,” he added.

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