Bush's Choice
Ludlow
By Money Politic$
President Bush appointed his tax reform commission last week, with former Senator Connie Mack as chairman. Mack, a former head of the Joint Economic Committee, is an expert in monetary and fiscal policy. It was a great appointment by Bush. As Mack develops and then steers a new tax plan, he may at some point find himself the next treasury secretary. Some supply-siders are already grousing: the membership of the new tax group is uninformed, the July 31 timetable is too short, public hearings around the country will be too time-consuming, the President’s instructions to maintain tax deductions for mortgage interest and to charitable contributions will limit the scope of the tax reform product. But realists have never expected a pure flat tax or a national sales tax to come out of this exercise. Instead, as Nobelist Ed Prescott has argued, a simplified Reaganesque 15% and 28% tax regime would fit key criteria: it would be pro-growth, rates would be flattened, rules would be simplified and reduced, and revenue neutrality could be achieved with even modestly dynamic revenue scoring along with the elimination of the myriad numerous unnecessary tax credits and deductions.
Senator Mack’s future product could make the 15% dividend and cap gains permanent, along with either a permanent end to the estate tax or a 15% marginal rate for that unwieldy monster. Unlike the Reagan reform in 1986, Senator Mack’s plan could increase saving and investment incentives through an expansion of Roth IRA-type tax-free savings accounts, as well as an across the board simplification of savings that would encompass old IRAs, the 401(k) family, and other tax-free savings for education, healthcare, and retirement. Another important goal would be full-cash expensing for the depreciation of business investment in plants and equipment.
The big flaw in Reagan ’86 was the hike in the capital gains tax that led to the stock market crash of 1987. Also, elimination of various commercial real estate deductions without proper grandfathering decimated hundreds of deals and led to the S&L credit crunch of 1989-90. Mack has an institutional memory of all this, having been around as a serving senator and house member during all of the Congressional tax debates and tax reform commissions of the past 25 years. He knows the plusses and the pitfalls. And in former Senator John Breaux as vice-chair, he has a conservative democrat who can help pilot the difficult politics of tax reform in a bipartisan direction. In our internet-driven communications system, what used to take a year or more could conceivably be accomplished in half the time or less. But the key factor remains: you need an individual with broad knowledge and good judgment to captain the tax reform ship. Bush got his man. Connie Mack is a great choice. He should not be underestimated. |
