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Far-right tax fantasy

There's disappointing news for the political fringe that yearns to repeal the income tax. The advisory commission that former Florida Sen. Connie Mack chairs took that issue off the table this week. Prospects for replacing it with a European-style value-added tax or a national sales tax appear headed for the wastebasket, too. So far, so good.

But the commission is still toying with another far-right fantasy: taxing all income at the same rate. That would be conceptually fair only with the politically implausible assumptions of a generous standard income threshold and repeal of itemized deductions that cosset wealthier taxpayers.

Each deduction comes with an army of lobbyists, none more so than the ones the committee is specifically targeting: employer-paid health expenses, at $102-billion a year, and home mortgage interest, a $61-billion tax expenditure. The commission is considering potential limits, perhaps by halving the present $1-million ceiling on qualifying mortgages or by limiting the value of the deduction to 15 or 25 percent, and by setting a ceiling on exempt health benefits.

Though these would ignite a firestorm in Congress, they are not necessarily bad ideas. But they belong in the context of a broader - and under present leadership, unlikely - national debate on health care and housing. Every exemption is the equivalent of a check drawn on the taxpayers' account at the treasury. Where is the fairness in writing that check to benefit some people at the expense of others who are not fortunate enough to have their own homes or health insurance?

That said, the Mack commission is provoking some timely and useful debate. But it would be even more useful had President Bush not decreed a revenue-neutral result in the face of ravenous deficits as far as the eye can see. The commission took its own wrong turn in deciding to recommend repeal rather than reform of the alternative minimum tax, which is beginning to sweep up middle-income taxpayers because of the failure to index it. The 10-year difference between repeal and permanent indexing, the fair solution, would cost an estimated $206-billion, another unwise and unaffordable windfall for the very rich.

[Last modified October 15, 2005, 01:19:02]