Hurricane Katrina came along just in time to blow another of President Bush's major second-term tax initiatives off course.
Despite tough talking up until last week from Senate Majority Leader Bill Frist, a vote to repeal the estate tax seems far-fetched at best. And with massive rebuilding efforts just beginning along the Gulf Coast, it will be some time before making the tax cuts of 2001 a certainty beyond 2010 is deemed politically feasible.
Even before Katrina, passage of at least the full estate tax repeal was doubtful. Reports were that the Senate was well short of the 60 votes needed for the measure, with a block of senators unwilling to put their votes behind any significant tax cut. Even with compromise proposals supposedly continuing to make great strides, the scope and specifics of any discussion are reportedly still wide open. Deals on the table include exemptions of between $4 million and $6 million and a tax rate between 15 percent to 35 percent.
It seems like a lifetime ago that the administration was making noise about Social Security reform, the third rail of politics that President Bush proudly made the centerpiece of his agenda. The debate over whether to create private accounts or not to create private accounts, once the stuff of bolded headlines and magazine covers, has faded quietly from the scene.
It was in March, more than six months ago, that the American Institute of CPAs released their excellent in-depth analysis of the proposals floating through Congress, none of which have officially made it to the floor for debate. Before their summer recess, both the leaders of the House and the Senate were pointing fingers at one another over who would be the first to get a bill out of committee.
So whatever the reason -- be it having another Supreme Court vacancy to fill, the ongoing war in Iraq, or coping with Katrina's devastation -- any proposal with high or uncertain costs isn't going to fly to the top of Congress' to-do list in the face of current events.
President Bush does have another policy option, one whose chief asset is that it is aimed at being revenue-neutral. The bipartisan President's Advisory Panel on Federal Tax Reform was established in January and instructed to recommend reforms to the tax code by the end of this month in order to make the country's tax system "simpler, fairer and more growth-oriented." The panel, chaired by former Senator Connie Mack, was also instructed to keep any proposals revenue-neutral.
The panel's 12th and possibly final public meeting had been scheduled for this Thursday, until the panel's heads were forced to postpone both of its September meetings. Those meetings were expected to feature discussions of the actual report's contents, after a number of testimony-heavy gatherings. Vice chairman John Breaux, a former U.S. Senator for Louisiana, has been particularly involved in hurricane aid efforts; also, the panel relied on the U.S. Department of Treasury for running any proposal estimates, and the department is now working to provide relief guidance to taxpayers affected by the hurricane.
A spokeswoman for the panel said discussions are continuing to determine when the panel's final report will be delivered to the Treasury Secretary. Because the panel must reschedule at least two meetings, and accommodate the schedules of its nine members, the expectation is for at least a 30-day delay -- pushing delivery of the final report into late October.
The Bush administration, like much of the country, has its hands full. But when the time comes to return to legislation, the bottom line is that it might be wise for their next policy push to be one that politicians and taxpayers alike can get behind.
