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NTU Urges Congressional Action on Tax Reform, Social Security Reform, and Changes to the Pension System

July 11, 2005

The Honorable Bill Thomas
Chairman, Ways & Means Committee
United States House of Representatives
1102 Longworth House Office Building
Washington, DC 20515

Dear Representative Thomas:

On behalf of the 350,000 members of the National Taxpayers Union (NTU), I write to offer our thoughts on several major initiatives that will soon be coming before your Committee. As you know, NTU has long supported fiscal responsibility and smaller, more efficient government. That is why NTU and our members have been actively engaged in the ongoing debates over Social Security reform, tax reform, and pension reform.

We have endorsed President Bush's "Progressive Indexing" proposal, but we also view plans to set aside the Social Security surplus revenues in individual accounts as a major step towards broader reform. On the issue of tax reform, NTU has advocated adoption of the national retail sales tax plan known as the "FairTax." However, we would be quite pleased with any tax reform package that dramatically simplifies the Tax Code through adoption of a flat tax or an approach that at least offers taxpayers the option of filing under the flat tax.

Furthermore, NTU strongly supports efforts by both President Bush and Chairman Boehner to make needed fundamental changes to defined benefit pension policies. It is very important that Congress pass a reform package that closely adheres to H.R. 2830, the Pension Protection Act of 2005. It is imperative for Congress to reform a system that forces taxpayers to subsidize underfunded corporate pensions and harms workers who expect their employers' pension obligations to be fulfilled and plan their retirements accordingly.

While we support each of these initiatives, we are concerned that the strategy of wrapping Social Security reform, tax reform, and pension reform into one large piece of legislation would make it extremely difficult to pass legislation during this Congress. Worse, your previously stated position that a value added tax (VAT) might be a way to shore up Social Security is troubling. Adoption of a VAT would be a serious mistake for the United States. A VAT would lead to the type of over-inflated government we have seen in Europe, where VATs are common. Such a tax destroys jobs and economic growth, yet a VAT would not lead to long term tax simplification because it lacks the transparency of other tax reform proposals (including a flat tax or the FairTax). In addition, a VAT would be easily filled over time with special exemptions and hidden tax breaks by well-connected industry lobbyists.

Taxpayers nationwide are clamoring for needed reforms on each of these major issues and NTU looks forward to working with you on this agenda. We consider each issue -- Social Security reform, tax reform, and pension reform -- to be central to our mission of fighting for smaller and more responsible government, and we are very hopeful that the 109th Congress will adopt needed changes to each of them.


John Berthoud