At the inaugural meeting of President Bush's Advisory Panel on Federal Tax Reform, Treasury Secretary John Snow told the panel that, "The tax code is dreadfully murky in its complexity, but its size is clear and easy to see." "More than a million words long, the Internal Revenue Code and regulations has more than doubled in terms of page-length over the past 20 years, and today's 'short' income tax form takes more than 11 hours to prepare -- about the same as the 'long form' did a decade ago," Snow said. Former Senator Connie Mack, who serves as chairman of the panel, said that the group would "take a fresh look at the existing tax code and will formulate options for making the tax system simple, fair and productive." Former Internal Revenue Service Commissioner Fred T. Goldberg Jr., a partner at Skadden, Arps, Slate, Meagher & Flom LLP, presented a history of the income tax, concluding that we currently have "a grotesquely complicated system that distorts the allocation of resources and violates common-sense notions of fairness." Louis Kaplow, a professor of law and economics at Harvard Law School, explained the central concepts of an income tax and a consumption tax. William G. Gale, with the Brookings Institution and co-director of the Urban-Brookings Tax Policy Center, noted that it is a myth that the consumption tax is more effective at taxing the underground economy than the income tax is. He concluded that the income tax is a fair and proven mechanism for raising revenue, consistent with long-term economic growth. "While it could be improved, it should not be scrapped," he said. Stephen J. Entin, president and executive director at the Institute for Research on the 'Economics of Taxation, said that the fairest tax is proportional to income. Since deductions for costs are necessary to measure income properly, and saving is a cost of earning income, he argued, "The best measure of income is consumption. We should tax what we spend." Entin urged a fair, flat and unbiased neutral tax that would treat all savings like pensions and IRAs, end the double taxation of corporate income, and permanently eliminate the "death tax." The panel, charged with submitting a final report to the Treasury by July 31, 2005, will hold its next meeting March 3.
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