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Press Release


Taxpayer Group: Good Starts on Spending, Weak Finish on Taxes in Debt Commission’s Draft Report

November 11, 2010
By Pete Sepp

     (Alexandria, VA) – The draft proposal from the President’s debt commission is a good starting point for reducing federal spending, but the panel’s work on a plan for tax reform that’s revenue-neutral is far from finished. That’s the assessment of the 362,000-member National Taxpayers Union (NTU), which today provided a brief preliminary overview of the report. Among NTU’s comments:

  • However, the spending-cap recommendations fall short, by using high Fiscal Year 2010 budget levels as a baseline and then allowing outlays to grow again too soon.
  • The Commission courageously proposes steps to reduce the size of the federal workforce and increase cost-burden-sharing for employee benefits such as pensions.
  • Although the plan takes solid steps to control Social Security growth, such as adjusting benefit formulas, these gains are eroded by introducing a new benefit scheme and raising payroll taxes.
  • The blueprint mistakenly calls for nearly $1 trillion in net tax increases, instead of aiming for a “revenue-neutral” approach to reforming the tax system. “One way to win over the American people on any tax reform plan is to convince them that even though there will be individual winners and losers, overall the government won’t immediately profit from the exercise,” said NTU Executive Vice President Pete Sepp. In any case, the government could see higher revenues simply by designing a system that minimizes complexity and maximizes efficiency.
  • The summary of the draft envisions capping revenue “at or below 21%” of Gross Domestic Product (GDP), but elsewhere tends to assume a 21% figure. This is well above the historical federal average of 18% of GDP, and would constitute an impediment to economic growth.
  • The Commission commendably foresees abolition of the Alternative Minimum Tax and moving to a “territorial” corporate tax system, but without deep rate reductions its call to repeal certain energy tax incentives would amount to the arbitrary policymaking that plagues current laws.

     “Rather than being a day late and a dollar short, the commission’s draft looks to be a month early and a few trillion dollars short of the spending restraint Washington must find,” Sepp concluded. “Still, there are many salvageable elements in the current draft which can become the foundation for a solid report that tackles the deficit without trampling on taxpayers. Let the conversation begin.”

The 362,000-member NTU is a nonpartisan, nonprofit citizen group founded in 1969 to work for lower taxes, smaller government, and economic freedom. Note: A more detailed analysis of the Commission’s draft will be forthcoming. The joint spending-cut report NTU prepared for the Commission, along with other work on deficit reduction, is available at www.ntu.org.