November 1, 2005
For immediate release
Contact: William Ahern (202) 464-5101
Washington, D.C.—The newly released report of the President’s Panel on Federal Tax Reform represents a big step toward simplifying the current system, according to the Tax Foundation (see full response at
http://www.taxfoundation.org/publications/show/1155.html).
In general, the commission would steer the nation’s tax system away from taxing income with its insoluble complexities, toward a consumption-based system. However, neither of the plans amount to the complete overhaul advocates of fundamental tax reform had hoped for.
Moreover, because the panel was required to produce a “revenue neutral” plan and constrained itself to be distributionally neutral, both plans may not contain enough sweeteners to overcome the intense political opposition nor enough to build a groundswell of grassroots support across the country.
Nevertheless, several major proposals have great merit. On the corporate side, the proposal to jettison depreciation schedules in favor of immediate expensing would have a huge impact on business decisions.
“This is probably the most important change that the tax reform panel has offered.” said Tax Foundation president Scott Hodge. “Rules to help businesses that have many depreciable assets on their books get through the transition period would make this proposal even more promising.”
On the individual side of the code, the panel has proposed reducing the number of brackets from 6 to 3, with a top rate of 30 percent. Not since the 1988-1992 period has the number of rates and brackets been so low.
The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day®, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.
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