How out of touch is President Bush's tax reform committee? In its recent final report, it recommended that the mortgage deduction for income taxes be reduced. This bit of wisdom comes at a time when housing is already unaffordable for a growing number of Americans. And with wages flat, the committee thinks the lowest earners should pay an even higher tax rate. Meanwhile, the wealthiest individuals would enjoy lower rates on income from work and investments.
In other words, the recommendations failed the fairness test. Miserably.
The committee was right on one point - the tax code is too complex. But its fixes are too simplistic. It says the alternative minimum tax should be repealed; not a bad idea, because it unwittingly snags an increasing number of families each year. But that would deny the government billions of dollars in tax revenue. To make up the differences, other taxpayers (including some who are least able to afford it) would pay more.
Not only would the deduction for mortgages be reduced, but also for charitable giving, hardly a productive change when the private sector is taking greater responsibility for the needy. The biggest losers would be those living in high-tax states, because they would be denied their entire deduction for state and local taxes.
The big winners would the wealthiest Americans. The 35 percent tax rate, now paid by the top 1 percent of taxpayers, would be reduced to 33 percent. And taxes on stock dividends and capital gains would be nearly halved, from a maximum rate of 15 percent to 8.25 percent.
In other words, these are the same regressive tax policies that got the country its current deficit-ridden mess.
President Bush, whose credibility on tax matters is already damaged, hardly needs this political fight. That could be why the report was met with silence from the White House. It's hard to imagine any movement in Congress, either. No business interest has come forward to support the recommendations, while others (including homebuilders and mortgage bankers) have been critical.
This report can expect a quick trip to a dusty shelf, which could be the best ending.
