Bush Names 2 Ex-Senators to Consider Tax Changes
By EDMUND L. ANDREWS
Published: January 9, 2005
ASHINGTON, Jan. 7 - President Bush on Friday named two well-known former senators to head a bipartisan advisory panel on taxes, and gave the group six months to come up with recommendations on how to make the income tax simpler, fairer and more conducive to growth.
The panel's chairman will be Connie Mack III, a former Republican senator from Florida, and its vice chairman will be John B. Breaux, the former Democratic senator from Louisiana who decided not to run for re-election last year.
Mr. Bush pledged in his election campaign to seek a fundamental overhaul of the income tax, and many Republicans would like to replace today's complex code with a consumption tax or a flat tax that essentially taxes money people spend rather than the money they save or invest.
The panel Mr. Bush named Friday consists almost entirely of people who have never staked out public positions on the best approach to overhauling the tax code. Neither Mr. Mack nor Mr. Breaux championed a particular approach to taxes, though Mr. Mack was a strong supporter of tax cuts. Mr. Breaux, a conservative Democrat, frequently tried to work as a broker between the two parties on tax issues and is best known as a cagey dealmaker.
Republicans with ties to the administration were divided about whether Mr. Bush is serious about pushing ahead with changing the tax code, which would almost certainly ignite a prolonged lobbying battle in Congress involving armies of interest groups.
Mr. Bush greatly dampened expectations of radical tax overhaul when he said at the Republican convention that any tax overhaul would have to protect incentives for home-buying - the biggest deduction in the tax code is for mortgage interest - and for charitable contributions.
That effectively eliminated the possibility of replacing the income tax with a national sales tax - an idea favored by the House speaker, J. Dennis Hastert - or a flat income tax that would lower most tax rates while eliminating tax breaks.
"They have essentially taken fundamental tax reform off the table by promising to protect two of the largest deductions," said Bruce Bartlett, an economist at the National Center for Policy Analysis and a former Treasury official under President Ronald Reagan.
White House officials have made it clear that their top priority is to overhaul the Social Security program, moving people away from a system of government-guaranteed benefits to one based increasingly on personal savings accounts.
Republicans with ties to the White House predict that Mr. Bush will ultimately push for seemingly incremental changes that have the same economic impact as a consumption tax. That strategy would call for a big expansion of savings accounts that would shield from taxes all the investment income that people earn from their deposits. Companies would be allowed to immediately write off their investment in plants and new equipment, while losing their tax deductions for interest costs. Tax rates might be collapsed down to just two brackets, with big exclusions for people with low incomes.
In addition to Mr. Mack and Mr. Breaux, the panel's members will be Bill Frenzel, a retired Republican congressman from Minnesota and a political centrist; Elizabeth Garrett, a law professor at the University of Southern California who was a tax counsel to David L. Boren, the former Democratic senator from Oklahoma; Timothy Muris, former chairman of the Federal Trade Commission under Mr. Bush; Edward P. Lazear, a professor of labor economics at Stanford University; James M. Poterba, a professor of tax economics at the Massachusetts Institute of Technology; Charles O. Rossotti, a former commissioner of the Internal Revenue Service; and Liz Ann Sonders, chief investment strategist at Charles Schwab.
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