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Tax Panel Identifies Problems But Doesn't Solve Them Tax Panel Identifies Problems But Doesn't Solve Them

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Legacy Content / ECONOMY

Tax Panel Identifies Problems But Doesn't Solve Them

August 27, 2010

The tax code is needlessly complex for individuals and businesses, according to a report issued today by a presidential commission that nevertheless made no recommendations on what to do about it.

The President's Economic Recovery Advisory Board produced a 100-page report that was called an "almanac" of different ideas by staff director Austan Goolsbee, who provided some background on why the board never tried to settle any of the controversial disputes about how to make taxes simpler and more efficient. "There are a lot of competing interests and a lot of competing objectives," he said. "We have, I hope, given the administration and outside public a sheet from which they can consider the various problems that exist."

The board, led by former Federal Reserve Chairman Paul Volcker, was formed soon after President Obama's inauguration, purportedly to provide him with wise counsel from some people with long experience on the economy. But Volcker complained later in 2009 that other Obama advisers blocked the board from having much influence. When Obama asked the board to look at tax reform, he limited its reach to some uncontroversial areas and further prevented it from doing anything that would interfere with plans to renew the 2001 and 2003 Bush tax cuts, which the White House says would cover 95 percent of taxpayers.

 

The report covers three areas: tax simplification, compliance and corporate taxes. It discusses the underlying issues and then provides a laundry list of possible actions, without endorsing any. There are relatively few partisan disputes about reforming the tax code in these areas, but the board didn't try to reach a consensus, even when there was one.

For example, member Laura Tyson noted the unanimity on the board for abolishing the alternative minimum tax, envisioned as a way to ensure the rich pay taxes but instead a confusing and chaotic problem for many middle-class families who unexpectedly see their tax rates change. The problem, she said, is that limiting it even for those making less than $250,000 a year would rob the Treasury of a trillion dollars in revenue expected over the next decade under current law.

Tyson lamented the fact that the board was forced to use 10-year-old estimates of the amount of tax revenue lost to noncompliance, because of a lack of resources for the IRS to study the problem.

Another member, Roger Ferguson, noted that the tax code contains 20 different provisions that are aimed at encouraging individuals to save money, resulting in confusion, mistakes and administrative problems. A 2005 commission created by President Bush offered a detailed plan for consolidating these into one program, but the new report makes no recommendations.

The board contains some prominent supporters of President Obama: Chicago business executive Penny Pritzker, venture capitalist John Doerr and Oracle Corp. president Charles Phillips. But it also includes others identified with Republican interests, such as former Reagan economic adviser Martin Feldstein.

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