According to the PERAB press release, the report is meant to be informative rather than prescriptive. Its intention is to aid discussion about the wide variety of tax reform ideas in these areas.  The report will also be submitted to the bipartisan National Commission on Fiscal Responsibility and Reform as they continue to consider ways to address our nation’s middle and long-term fiscal challenges and to achieve fiscal sustainability.  The Tax Reform Subcommittee of the PERAB received more than 600 serious submissions of tax reform ideas from the public both in person and in writing or electronically during their deliberations. They considered as many of these suggestions as possible.

The report states that the Board was not asked to recommend a major overarching tax reform, such as the 1986 tax reform, the tax plans proposed by the 2005 Tax Reform Panel, or proposals for introducing a value-added tax in addition to or in lieu of the current income tax system.  They received many suggestions for broad tax reform, and some members of the PERAB believe that such reform will be an essential component of a strategy to reduce the long-term deficit of the federal government. But consistent with their limited mandate, they did not evaluate competing proposals for overarching tax reform in this report.

Read the PERAB Report

New taxes to fund the federal government’s plan for higher health insurance spending continue to be debated in Washington. According to a new Bloomberg report, the top surtax rate will be 5.4 percent in the House plan. That will be the top rate in a three-tiered surtax aimed at high-income tax returns:

The latest proposal—one of several floated on Capitol Hill in the past few days and the third analyzed by the Tax Foundation since Friday—would impose a surtax of 1 percent on married couples with adjusted gross incomes (AGI) between $350,000 and $500,000 (singles between $280,000 and $400,000); 1.5 percent on couples with incomes between $500,000 and $1 million (singles earning between $400,000and $800,000); and 5.4 percent on couples earning more than $1 million (singles beyond $800,000).

States have been raising taxes on this same group, leading to concern over how high the combined tax rates would be in each state, especially in the growing number of states with double-digit tax rates.

Poster Jim Bennett offers these thoughts on McCain’s support of the Flat Tax:

I was disappointed in McCain’s speech May 15, 2008 in Columbus, Ohio, in which he endorsed the wrong tax reform plan. McCain, speaking about the Flat Tax, HR1040, claimed correctly that millions of taxpayers would file under a flat tax and save billions in the cost of preparing their returns. The Flat Tax does represent a vast improvement over today’s Byzantine code and has been implemented successfully in 16 foreign jurisdictions, in which former Soviet republics and satellites are strongly represented (Two more are about to adopt it, and three are actively considering it).

The weakness in the Flat Tax, however, is that it continues to be an income tax retaining the IRS. Congress, in increments, is certain to return it to today’s code that serves us poorly.

The Flat Tax has less popular support than the Fair Tax. It has one sponsor in the House, Michael Burges, R-TX26, and 8 co-sponsors (some of whom also are Fair Tax co-sponsors), all Republicans. The Fair Tax, by contrast, has one sponsor in the House and 69 co-sponsors, and can count at least one Democrat. There are other Democratic supporters in the House who have been discouraged by Speaker Nancy Pelosi from signing on as co-sponsors.

The Fair Tax, furthermore, can count several hundred thousand among its supporters throughout the country. The Flat Tax, championed by Steve Forbes, has a more limited following.

The National Association of Realtors opposes the Flat Tax because of the loss of the local property tax and mortgage interest deductions. The NAR does not oppose the Fair Tax – nor should it.

The choice by McCain of the Flat Tax is an unfortunate distraction and will be redressed over time.

On the same note, Julia Malone notes Linder’s concern with a Libertarian candidate endorsing the FairTax and the Republican candidate not endorsing it:

Republican Rep. John Linder is fretting aloud that Libertarian presidential candidate and fellow Georgian Bob Barr could draw enough votes from “fair tax” enthusiasts to tilt the outcome in a close state contest next November.

Linder, himself an ardent advocate of abolishing the IRS and replacing it with a form of national sales tax, said Tuesday that Barr’s support of this “fair tax” concept could win enough votes to affect the results in Michigan, Florida and even in Georgia.

The expected Democratic nominee Sen. Barack Obama “is going to turn out a helluva vote” in the normally safe Republican state of Georgia, Linder said.

He said he is contacting advisers of the presumptive GOP nominee, Sen. John McCain, to urge them, “Do not take this lightly.”

Linder’s prescription for solving the problem is, not surprisingly, for McCain to embrace the fair tax idea too.

#5 FAIR: Move Toward FAIR TAXation

- My short-term economic policies will move us toward our long-term economic goal: Simply put, America’s federal tax system is broken. What we have now is a system that is failing American families and businesses. Our tax system burdens low and middle-income families, robbing them of the chance for upward mobility.

- Our tax system encourages outsourcing of American production overseas and the dismantling of our industrial base. It wastes hundreds of billions in useless tax preparation, paperwork and confrontation. It pits industry against industry, class against class.

- My FairTax proposal allows American workers to keep their entire paycheck, allows American businesses to compete on a level-playing field with their foreign competitors, and brings jobs and investment that are currently parked off-shore back to the United States.

- However, I recognize that passage of the FairTax will not happen overnight. In the meantime, I will eliminate the Death Tax, and seek to reduce counterproductively high personal and corporate marginal tax rates.

Having a supporter be President of the United States would add tremendous momentum to getting the FairTax message out and ultimately build the support necessary to see change in our tax system.

Tax reform push may be delayed
Sources say recommended initiatives may be too controversial to push in an election year.
December 4, 2005: 6:29 PM EST

WASHINGTON (Reuters) – The White House may delay unveiling a broad proposal to overhaul the tax code until 2007 or later, despite earlier discussions of making it a major theme for next year, people close to the White House said.

A panel named by President Bush has recommended sweeping changes to the tax code, including reducing deductions for home mortgages and state and local taxes.

Bush is having the Treasury Department review the recommendations and submit a plan to him.

The White House had initially considered having Treasury prepare a plan by the end of the year that could form the basis for a proposal in Bush’s State of the Union address.

But several Republicans with close administration ties said it now seems likely Bush may only speak generally about tax reform in the address and not unveil specifics.

“I don’t think there is enough time to churn out a policy,” said one Republican, who spoke on condition of anonymity.

Time Magazine, in its latest edition, quoted a White House official as expressing doubt that a major proposal to change the tax code could attract Democratic support in a mid-term election year.

“No one wants to put something out there that’s not going to go anywhere,” the magazine cited a White House official as saying.

The Republican source who spoke to Reuters noted that several elements of the tax panel’s recommendations, most notably the proposed cut in the home mortgage deduction, are controversial and making major revisions to the commission’s report might take a great deal of time.

The position at Treasury that would normally serve as a clearinghouse for such efforts — the assistant Treasury secretary for tax policy — has been vacant for several months. “There is not the manpower to do it,” the source said.

Fewer tax brackets

In addition to curbing deductions like those for home mortgages, the commission also proposed limits on the tax-preferred status of employer-provided health insurance.

The commission also recommended reducing the number of tax brackets and eliminating the alternative minimum tax, a parallel tax system that increasingly hits middle-class taxpayers.

A second Republican who spoke to Reuters on condition of anonymity said the White House was not “at loggerheads” with the commission over its findings but there is a belief that an election year was not the best time to sell the public on such a detailed initiative.

“The complexity would turn people off,” the source said.

Many Republicans are wary of embracing a controversial and complex initiative after Bush’s drive to overhaul Social Security proved unpopular.

In an opinion piece published in the Washington Post just days after the tax report was released, Rep. Tom DeLay of Texas pointed to a “minefield of serious political trouble” in some aspects of the report, such as the home-mortgage proposal.

Treasury Secretary John Snow had said in late October that he hoped to present his findings on tax changes to Bush by the end of the year but the administration more recently has been noncommittal on the timing of the tax initiative.

“The timing is unclear,” White House economic adviser Al Hubbard told reporters Friday. “In terms of priorities for next year, that’s up — I’m going to leave it up to him to share his priorities with the American people.”

While commending the tax panel’s work as “excellent,” Hubbard added, “That’s not to say we’re signing off on what their proposals are.”

Secretary Show must make recommendations to President Bush regarding tax reform. As we know, the President’s Tax Advisory Panel ignored multi-million dollar research and misstated the effects of the Fair Tax in order to protect the status quo. Their review of the Fair Tax used false assumptions and inaccurate research. Accordingly, their findings have been almost universally condemned as a failure of vision and a continuation of the Washington insider’s game.

The Tax Panel’s recommendations benefit lobbyists, law firms, and tax advisors—not the American people.

We must all write Secretary Snow and let him know that we are disappointed with the recommendations of the Tax Advisory Panel. A sample letter in .rtf and .pdf formats with more details and contact information can be downloaded here. The sample can be used as a template to save time, but you are encouraged to rephrase the letter in your own words.

This would also be a good time to send a copy of The Fair Tax Book to Secretary Snow. Be sure to record the submission with FairTaxScorecard.com.

Regardless of your fair or flat tax persuasion, this is the time to let Secretary Snow know that we don’t agree with the Panel’s flawed recommendations.

WASHINGTON, Oct. 20 /U.S. Newswire/ — According to the Institute for Policy Innovation (IPI), a free-market think tank and publisher of “The Roadmap to Tax Reform,” a massive project utilizing tax experts from around the country, the President’s Tax Reform Commission’s recent proposals are shaping up as a missed opportunity.

“The first mistake the Commission has made is that it has failed to insist on dynamic scoring of its proposals for reform,” said IPI President Tom Giovanetti. “In other words, while there is almost universal agreement that the right kind of tax reform will result in increased economic growth, the Commission hasn’t even bothered to figure in this increased economic growth into its proposals.”

“And the second mistake the Commission has made is its failure to recognize that our current tax code taxes the wrong thing. The current code attempts to tax income, rather than consumption, whereas the conclusion of IP’s “Road Map to Tax Reform” was that consumption is the appropriate base for taxation. Much of the headache and complication in our current tax code is the result of exemptions, exclusions, deductions and credits designed to mitigate the harm done by taxing income rather than consumption.”

There are any number of ways to address the fundamental problem of the tax code, including a savings-exempt consumed income tax, and the Commission appears to be toying with the latter idea, albeit with steeply progressive multiple rate structure that will undermine most of its benefits.

IPI Research Associate George Pieler added, “Pending the panel’s full recommendation, their failure to significantly reduce tax rates across the board is the ‘smoking gun’ that their work has failed to meet the test of real, fundamental tax reform.

“Without putting rate reduction at the top of the priority list (as Alan Greenspan recommended to the Panel way back in March), the President’s Tax Reform Advisory Panel simply couldn’t come up with a plan that would matter to the average taxpayer, or that could muster any political momentum. Now attention will shift to the political process where, ironically, there may be better prospects for a good result.”

While the best hope was that the Commission would take advantage of all the excellent research that has been done over the past 20 years on tax reform and come up with a recommendation for sweeping, fundamental reform, perhaps the occasion of the Commission’s failure will at least begin a public debate on the need for fundamental tax reform.

The IPI experts are available for comment. Contact Sonia Blumstein at 703-912-5742. IPI is an independent, public policy think tank with offices in Washington, DC and Dallas, Texas.

The more I read about the president’s so-called tax reform panel the worse it gets. Essentially, the panel has done exactly what critics said the panel would do … propose tax increases for the evil achievers. You already know that the panel wants to cut into the home mortgage interest deduction while leaving the income tax in place. But … did you know that the panel has recommended eliminating ALL interest deductions on all home equity loans and loans for second homes?

This is a repeat of what we saw in 1986. Almost 20 years ago the congress eliminate a huge cache of tax deductions and established two flat rates, 15 and 25%. The tax code has now been modified and amended about 10,000 times since then, leaving us with the monster we now have. This “reform” plan is essentially the same. Eliminate more deductions, raise taxes on businesses and the repugnant rich, create some “refundable” tax credits, and set some flat rates.

It leaves the income tax in place and the K Street lobbyists inside the beltway licking their chops. As soon as the panel’s suggestions become law they would go right to work trying to carve out specific tax breaks for their high-paying clients. Right behind the lobbyists you’ll find the Democrats renewing their efforts to shift the entire tax burden onto America’s high-achievers with bill after bill and amendment after amendment, all in the name of reform.

Reform? This is not reform. This is, pardon the cliché, just rearranging the deck chairs on the Titanic. The IRS? Still there. Social Security and Medicare taxes? Still there. Business taxes will still be there and they will still be passed on to the consumer through the pricing structure.

Even more interesting:

The good news is that there is renewed interest in The FairTax Book and H.R. 25 with the impending release of the tax reform panel’s report. I’m told there will be a review of the book in the The New York Post this coming Sunday, and on November 6th there will be a review of The FairTax Book in the New York Times.

I have no real idea what to expect from the Post, but I think it’s probably safe to say that The New York Times will not exactly be a fan of the plan. When, after all, was the last time you saw the New York Times back any initiative that actually transferred power from the government to the people?

Here’s one thing I do expect from the Times review. They will change the terms of H.R.25, the FairTax Act, and then critique the plan as they wrote it, not as it is actually written. This has been the favorite techniques of those who want to keep our present tax system, and my guess is that the Times will follow suit.

To amplify my prediction — the Times will create exemptions to the consumption tax — and then write that the actual sales tax rate would have to be much higher. They will ignore, for the most part, the monthly “prebate” under the FairTax Act. Maybe it’s just me, but wouldn’t it be more fair to review and critique the FairTax Act as it is written, instead of rewriting the bill and then critiquing your rewrite?

I’ve been telling you on the air, and Congressman Linder and I told you in the book that the lobbyists were going to react with full force once they saw the FairTax as a threat to their livings. Now there’s a prediction that has more than come true. Listen today for more details on lobbyist tactics to kill meaningful tax reform.

HOUSTON, Oct. 18 /U.S. Newswire/ — Americans for Fair Taxation today blasted the Presidential Panel tasked with proposing fundamental changes to the tax system as engaging in, “Fraudulent political theater designed to protect the corrupt tax code and those who profit from its manipulation,” said Leo Linbeck, chairman of the national grassroots organization. “When a Presidential Panel engages in such activities it does a great disservice to the American people.”

“Far from making suggestions for fundamental reform, this Panel has actually suggested making the code more complex, more intrusive and more harmful to the economy and the well being of American citizens,” said Linbeck.

“The Panel has thrown up a smokescreen with a fake consumption tax program, continued tinkering with the code at the cost of health care benefits for American workers and recommended a scheme to punish homeowners in high cost areas of the nation in an attempt to solve the problems created by another lobbyist driven reform which gave us the Alternative Minimum Tax. In addition, the Panel wants to enlist credit card companies to monitor spending of Americans and report their findings to the IRS,” said Linbeck.

“The fact that the main proposals to emerge are limits on health insurance and mortgage interest deductions is nothing more than the usual Washington mindset of how to more efficiently shear the taxpaying sheep,” said Linbeck. “We can only hope that media representatives will take a closer look at the profit and political motives that lead some on this Panel to protect the lobbyist-driven federal tax code.”

“We must have hit a nerve with our growing grassroots demand for a national retail sales tax because the panel ignored our multi-million dollar research effort defining the proposed plan and instead invented their own phony and flawed national sales tax program and then found it wanting. The Panel went to great lengths to conceal the substance of the FairTax proposal,” said Linbeck. “The FairTax deserves a fair hearing. Instead, the Panel was driven by the very Washington insiders and tax lobbyists who now profit so handsomely through manipulation of the tax code to distort our thoroughly researched proposal. ”

“While every American knows perfectly well that well-heeled lobbyists are manipulating the federal tax code for profit, this Panel somehow ignored that reality and substituted politics-as- usual for strong action. In the process they employed limited findings and dishonest analyses and let down the American people, as well as President Bush,” said Linbeck.

“It is painfully obvious that Washington, D.C. insiders so closely linked with the status quo cannot be trusted to overturn the corrupt system of federal taxation. This effort will have to be driven by the American people,” said Linbeck.

I watched the C-span coverage of the the President’s Tax Reform Panel Hearing and more specifically Edward Lazear’s presentation of a National Sales Tax Option.

I have reviewed again what I had recorded and am struck by the stumbling and mixing up of numbers and concepts in his presentation.

It was such a cursory overview and no one seemed to have gone into great depth on the numbers. Though Mr. Lazear tried to point out pros and cons he got his numbers mixed up and certainly did not seem to have a true mastery of the concepts and was more keen on finding the negatives for the panel to hang their hat on. ( though inaccurate use of data)

Other panel memebers questions were also lacking in depth or understanding of such a major tax replacement plan.

For their own convienance they used a negative argument about a National Sales Tax plan to justify their position but left out the many facts and features of the Fair Tax which have already addressed those concerns.

Mr. Lazear did not lay out the full features of the Fair Tax Plan that addressed almost all of his negative points.

None of the Panelists seemed to be even knowledgeable enough to discuss the plan. Their questions and points to Mr. Lazear showed a shockingly poor understanding of even the 45 FAQs on the Fair Tax web site letr alone theother research that supports the concept.

No one challenged his assertion that this tax change would hit the Middle class more than the working poor or the Rich. The Fair Tax numbers disagree with that. No one challenged his tax evasion numbers, which I beleive are way off. Porterba question what the evasion numbers were from and Lazear said they were anecdotal from two swiss tax experts but had no supporting data.

If they showed up to my class and had demonstrated such a poor understanding of this issue, I to would have given them a Grade of F.

LaZear left out many positive points and supporting data of the Fair Tax including:

1. Replacement of the Payroll Tax. Providing a better funding source for Social Security and Medicare.

2. Easier Home ownership under the Fair Tax. ( certainly better than capping the mortgage deduction)

3. Fair Tax allows the US to compete with low wage countries because of Zero Corporate and business taxes under the Fair Tax. The Fair Tax creates Lower priced manufactured goods for export. In turn providing tremendous economic growth, increased manufacturing jobs, greater exports.

Locally, our Dephi plant may shut down because we can not compete with low wage Mexican production. The Fair Tax will help Delphi stay open and help save our local economy.

4. The economy will save billions in tax compliance costs.

We could go on but the shock is this is not what was discussed by the Panel and their questions and dismissal of the paln shows they have not studied its merits in a detailed and thoughtful way.

Let’s dissolve this panel and start over.

If anyone else watched the C-Span coverage and has comments, please post them here.