(Alexandria, VA) – The draft proposal from thePresident’s debt commission is a good starting point for reducing federalspending, but the panel’s work on a plan for tax reform that’s revenue-neutralis far from finished. That’s the assessment of the 362,000-member NationalTaxpayers Union (NTU), which today provided a brief preliminary overview of thereport. Among NTU’s comments:
- The report admirablyoutlines spending reduction opportunities in defense as well as domesticspending. Many of its recommendations comport with a joint study NTU and the U.S. Public Interest Research Groupsent the Commission two weeks ago. Among the common items were savings in agricultural subsidiesand military contracting. Still, more aggressive efforts to identify programsavings could yields hundreds of billions in additional deficit reduction.
- However, thespending-cap recommendations fall short, by using high Fiscal Year 2010 budgetlevels as a baseline and then allowing outlays to grow again too soon.
- The Commissioncourageously proposes steps to reduce the size of the federal workforce andincrease cost-burden-sharing for employee benefits such as pensions.
- Although the plan takessolid steps to control Social Security growth, such as adjusting benefitformulas, these gains are eroded by introducing a new benefit scheme andraising payroll taxes.
- Theblueprint mistakenly calls for nearly $1 trillion in net tax increases, insteadof aiming for a “revenue-neutral” approach to reforming the tax system. “One way to win over the American people on anytax reform plan is to convince them that even though there will be individualwinners and losers, overall the government won’t immediately profit from theexercise,” said NTU Executive Vice President Pete Sepp. In any case, thegovernment could see higher revenues simply by designing a system that minimizescomplexity and maximizes efficiency.
- Thesummary of the draft envisions capping revenue “at or below 21%” of GrossDomestic Product (GDP), but elsewhere tends to assume a 21% figure. This iswell above the historical federal average of 18% of GDP, and would constitutean impediment to economic growth.
- TheCommission commendably foresees abolition of the Alternative Minimum Tax andmoving to a “territorial” corporate tax system, but without deep ratereductions its call to repeal certain energy tax incentives would amount to thearbitrary policymaking that plagues current laws.
“Rather than being a day late and adollar short, the commission’s draft looks to be a month early and a fewtrillion dollars short of the spending restraint Washington must find,” Seppconcluded. “Still, there are many salvageable elements in the current draftwhich can become the foundation for a solid report that tackles the deficitwithout 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, smallergovernment, and economic freedom. Note:A more detailed analysis of the Commission’s draft will be forthcoming. Thejoint spending-cut report NTU prepared for the Commission, along with otherwork on deficit reduction, is available at www.ntu.org.