Piecemeal Tax Reform on Menu

Tax reform under a second Bush Administration will most likely take the form of piecemeal tax cuts, according to panel participants at a conference of the Council for Electronic Revenue Communication Advancement, a government-private industry trade association.

"We're in tax reform where we were four years ago on Social Security reform," said Americans for Tax Reform president Grover Norquist, a member of the National Commission on Restructuring the Internal Revenue Service and a former economist with the U.S. Chamber of Commerce.

"President Bush has won the right to have a civilized discussion on the topic," Norquist said. "Eventually you're talking about getting to a single rate of tax that taxes income one time. Some people think that could be a retail sales tax or a flat rate income tax, but that's a long way off. It's a huge project that is not going to happen in the same time frame that we're reforming Social Security."

"Look at the last four years to see what will happen in the next four years. We'll see four tax cuts in the next four years which will move towards a single-rate tax that taxes income one time," Norquist said.

Peter Orszag, an economist with the Brookings Institute and a former special assistant for economic policy in the Clinton Administration, agreed that, "We're headed toward zero taxation of capital income, and it is much more likely that we'll attempt to get there in a piecemeal approach."

"However," Orszag said, "I disagree that the piecemeal approach actually gets you to the ostensible benefits of a consumption tax. In some things in life you can go step by step and get to the end result. In other things, like trying to jump across a chasm in two steps, it just doesn't work. Tax reform is one of those things where if you try to do it step by step you end up with the worst of all worlds."

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