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No New Tax Ideas THIS Year

December 1st, 2009 . by economistmom

The President’s Economic Recovery Advisory Board was supposed to release its “Tax Task Force” report this Friday.  Instead, the Board’s Chairman, Paul Volcker, released this statement last Friday (emphasis added):

The tax subcommittee of the PERAB was scheduled to release its report on December 4th. But we have received more than 500 submissions of serious tax reform ideas from the public both in person and on our website and we had to cut them off to meet the original deadline.

I want us to review as many suggestions as possible and to have sufficient time to fully consider the hundreds of suggestions that have come in already. I have asked the Administration to extend our deadline and to reopen the website for submissions so that we can hear the widest possible range of ideas.

We still have the same specific mandate: to discuss the pros and cons of a spectrum of reform ideas relating to tax simplification, enforcement of existing tax laws and reform the corporate tax system without considering policies that would raise taxes on families making less than $250,000.

The PERAB is not tasked with providing its own policy recommendations for the Administration and the final report will be an almanac of options from a broad range of viewpoints.

We will be reopening the web submission form and extending the deadline for any suggestions in keeping with our mandate (suggestions may also be submitted via email) and will be scheduling more public meetings over the coming weeks. We expect to report back to the Administration after the holidays.

I think the problem was not that they had too many ideas to “process” by the deadline, but perhaps too few ideas to comprise a serious “almanac” of good tax reform ideas given the constraint of NOT raising taxes on households with incomes under $250,000–more than 95 percent of households (the Administration’s very generous definition of “middle class”).  Note that such a constraint takes virtually all base-broadening ideas (what most tax economists consider of highest priority in truly “reforming” the tax system) off the table.

So instead of hearing of new ways to improve the tax system, this week Congress is likely to take up the estate tax and whether to temporarily or permanently extend estate tax relief, because under current law (as passed in 2001) the estate tax disappears completely in one month (January 1st, 2010), only to reappear with a vengeance in its pre-2001 form on January 1st of the following year.  If 2009 law is permanently extended, there’s no plan to offset its cost, because this form of estate tax relief has been exempted from the House-passed statutory PAYGO rule as well as from the Obama Administration’s application of PAYGO principles to their own budgetary proposals.  This also deviates from the usual notion of fundamental tax reform by violating “revenue neutrality.”

So it seems we’re too busy dealing with the mess of old tax policy to be able to focus very well on new and better tax policy just yet.

One Response to “No New Tax Ideas THIS Year”

  1. comment number 1 by: AMTbuff

    Am I wrong to suspect that Obama appointed Volker to lead this doomed commission as a snipe hunt: a way to keep him out of play during the financial crisis?