WASHINGTON - As Americans faced today's deadline for filing their income tax returns, President Bush's advisory panel on tax reform is serving notice that it will propose sweeping changes in the tax code this summer.
Former Sen. John Breaux, a Louisiana Democrat and co-chairman of the panel, said yesterday that the group is "absolutely" intent on recommending a thorough restructuring of the income tax system rather than a modest simplification or tinkering around the edges.
He also said he favored limiting to one or two the number of tax-reform options the panel will submit to the Treasury Department by July 31, rather than four or five options that would include less extensive reforms.
Breaux said the recommended options could include an overhaul similar to the sweeping legislation passed in 1986 or perhaps even a "new tax system," likely to feature a consumption tax, such as a sales tax, or perhaps a flat tax, where all income is taxed at one rate.
The advisory panel issued a strong statement Wednesday calling the current tax code "unstable and unpredictable" and in a "dismal condition," harming businesses, individuals and the U.S. economy.
"Our tax laws have been compared to an overbuilt and dilapidated house with conflicting architectural styles and a crumbling foundation, a sick patient who is about to expire and a factory that has been littered with so much garbage that it can no longer operate productively," the panel said.
The former senator said in an interview that this tough language was chosen to send a message to Americans that "the tax system is a mess" requiring quick action on a plan that tackles the code's many weaknesses.
The nine-member advisory group, co-chaired by former Sen. Connie Mack, a Florida Republican, also said Congress should move speedily to fix the alternative minimum tax, a levy initially designed to prevent tax avoidance by wealthy people. Now some middle-class Americans are finding that as they make more money, they have to pay that tax on top of their income taxes. This year, the panel said that 4 million people are paying this levy and that next year 20 million Americans will pay it.
Doing away with the alternative minimum tax might prevent higher taxes on middle-income Americans, but Breaux said repealing it would reduce federal revenue by $1.3 trillion over 10 years, making the deficit worse. He said other measures would be required to offset such a huge loss in revenue.
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