Listening to Myself

Friday, November 19, 2004

This does not sound promising

It sounds like the Bush team is trying to rein in people's expectations for real tax reform and simplification. According to the Washington Post:

Instead the administration plans to push major amendments that would shield interest, dividends and capitals gains from taxation, expand tax breaks for business investment and take other steps intended to simplify the system and encourage economic growth, according to several people who are advising the White House or are familiar with the deliberations.

The changes are meant to be revenue-neutral. To pay for them, the administration is considering eliminating the deduction of state and local taxes on federal income tax returns and scrapping the business tax deduction for employer-provided health insurance, the advisers said.

It sounds like they have some potentially useful reforms in mind, but I am very concerned about how they are planning on paying for it. What also strikes me as strange is that as "Pamela F. Olson, a former Bush Treasury official in close contact with administration tax planners, said the president will pursue a tax system where all income -- whether from wages, dividends, capital gains or interest -- is taxed only once. " So if they repeal the deduction for state and local taxes, aren't they now taxing income twice there? And why the heck would anyone think that repealing the deduction for employer-provided health insurance is a good idea? That just seems akin to attaching a giant "kick me" sign to the whole idea of tax reform. Are they trying to make the jobs of Paul Krugman, et. al. easier?

Or perhaps this is all an insanely clever ploy where they put something out that sounds really politically untenable, then switch it for something more radical, but without the same tax hikes on moderate income folks. All I know is that this is the beginning of a very long process (probably longer than this last election cycle, even!) and we probably won't see the conclusion until 2006 at the earliest.


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