# Presentation: 174173

## Introductory Remarks for Tenth Public Meeting
Senator Connie Mack
July 20, 2005

- Senator Connie Mack
- July 20, 2005

## Executive Order

- President Bush established the Panel by Executive Order on January 7, 2005
- Directed the Panel to provide revenue neutral tax reform options that are simple, fair, and promote economic growth
- At least one option must use the current income tax system as a base
- Report our recommendations to the Secretary of the Treasury by September 30, 2005

## Nine Panel members

- Connie Mack, Chairman
- John Breaux, Vice-chairman
- William Frenzel
- Elizabeth Garrett
- Edward Lazear
- Timothy Muris
- James Poterba
- Charles Rossotti
- Liz Ann Sonders

## Stage 1: Thorough evaluation of our current tax system

- Seven meetings (three in the Washington area; four in other locations around the country)
- 52 witnesses: policymakers, experts, practitioners, taxpayers, business owners

## Stage 1: Thorough evaluation of our current tax system

- Topics covered at hearings
- Complexity and compliance
- Business and entrepreneurship
- Impact of taxes on taxpayer decisions
- Fairness and families
- Economic growth and international competitiveness
- Business investment
- State and local interaction with the federal tax system

## Comments from public hearings

- Every witness conveyed the dismal condition of our tax system
- Overbuilt and dilapidated house with conflicting architectural styles
- Sick patient who is about to expire
- Factory floor littered with too much garbage
- Milton Friedman: “blackboard with no further place to write”

## Written comments from our website

- Thousands of written comments
- Most comments reflected the sentiment of one family who wrote,
- 	*" tax reform is necessary and long overdue"*

## Our current system is overwhelmingly complex

- Overwhelmingly complex and constantly changing
- 60% use a paid preparer
- $140 billion per year: equivalent to $1,000 per family
- Targeted provisions with different definitions and phase-outs
- Fifteen common tax benefits available to families with fourteen different phase out levels, and nine different definitions of income
- 14,400 changes since 1986

## Our current system is unfair

- Our code makes it difficult to figure out whether you are complying – and rewards those who have the means or the inclination to find angles to reduce their taxes
- Special provisions must be subsidized by higher rates on everyone else

## Our current system restrains economic growth

- The tax code causes taxpayers to devote more resources to tax advantaged investments and activities at the expense of more productive alternatives
- Impacts a wide range of business decisions - such as how much to invest, how to finance investment, and whether to incorporate and take a company public
- 1.2 million paid preparers in the U.S.; more resources could be devoted to developing new products and services, expanding operations, and hiring new workers

## Themes

- We have lost sight of the fundamental
- 	purpose of our tax system - to raise revenue to fund the government
- A rational tax system would favor a broad tax base - providing special treatment only where it can be persuasively demonstrated that the effect of that treatment justifies the higher taxes paid by all other taxpayers
- There are trade-offs inherent in any tax system - but meaningful reform could deliver a system that is simpler, fairer, and more growth oriented than our current code

## Stage 2: Consider and Evaluate Specific Reform Options

- Two meetings covering three days
- 35 witnesses
- Every major reform option of the last twenty years
- Critiques of proposals by leading tax experts

## Working groups

- Rationale
- Huge record to digest
- Numerous issues to consider
- Panel members have full time jobs and are located across the country
- Purpose
- Identify and gather information about relevant proposals and issues, so that the entire Panel can meet to discuss and evaluate the issues.
- We have broken into 4 working groups

## Working Group 1

- Focus:  Major Simplification and Reform of the Existing Federal Tax Code
- Participants:  Bill Frenzel, Beth Garrett, Tim Muris, Charles Rossotti

## Working Group 2

- Focus:  Fundamental Reform within the Existing Federal Tax Code
- Participants:  John Breaux, Ed Lazear, Jim Poterba, Liz Ann Sonders

## Working Group 3

- Focus:  Complete Replacement of the Existing Federal Income Tax Code
- Participants: Connie Mack, Ed Lazear, Tim Muris, Liz Ann Sonders

## Working Group 4

- Focus:  Partial Replacement of the Existing Federal Income Tax Code
- Participants: Connie Mack, Bill Frenzel, Beth Garrett, Jim Poterba

## A better tax system for America

- Filing taxes will be straightforward and easy to understand.
- Our tax system will be fair and transparent.
- Taxpayers will be able to understand their tax obligations and have confidence that they and their neighbors are all paying their fair share.
- Hidden tax hikes and gimmicks will be eliminated.
- Our tax system will be clean.
- No more complicated and inefficient tax breaks and loopholes that benefit special interests and unnecessarily interfere with taxpayers’ decisions.
- Our tax system will encourage savings in a simple and efficient manner.
- Saving for the future will be straightforward and convenient.
- Barriers to the competitiveness of American businesses will be torn down.
- Investment will be encouraged to spur innovation, productivity, and job growth.
- Our antiquated international tax system will be updated to keep pace with global competition and to make U.S. businesses more competitive worldwide.