Cato Daily Dispatch for November 1, 2005
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Tax-Revision PlanBudget Reconciliation Woes
Colorado to Determine TABOR's Fate
Tax-Revision Plan
"Chosen to find a simpler way to tax the nation, a presidential panel is set to recommend two designs that would rewrite virtually every tax law for individuals and businesses," the Associated Press reports. "Under the plan, most deductions, credits and other tax breaks would be eliminated along with much of the paperwork and equations that baffle taxpayers under a drastically simplified income tax. But many, including the nine members of the presidential commission, have said key recommendations will be unpopular."
In "Tax Panel Omission," Chris Edwards, director of tax policy studies at the Cato Institute, writes: "The president's tax reform panel, headed by former Sens. Connie Mack and John Breaux, is set to propose two interesting plans. Plan A is a simplified income tax. Plan B is a more radical consumption-based tax. Both plans have features that would reduce tax code complexity and promote growth. However, the plans are missing a crucial element of supply side tax reform: substantial rate cuts.
"Looking ahead, the White House should improve the panel's plans before sending them to Congress. For both plans, the corporate rate should be cut to 25 percent and individual rates cut to 15 and 25 percent. That structure would provide world-class simplicity and efficiency, and would take a big step toward a Forbes-style flat tax."
Budget Reconciliation Woes
"A failed vote on the budget-reconciliation package could threaten the already shaky House leadership structure if Majority Leader Roy Blunt (R-Mo.) and his whip team cannot find 218 members willing to support it," The Hill reports. "Blunt has said he will not bring the budget bill to the floor if it does not have the necessary votes, but some lawmakers said last week that the fate of their leaders is intertwined with the legislation itself."
In "Congress Should Make Some Sacrifices, Too," director of budget studies at the Cato Institutes, Stephen Slivinski, writes: "Finding offsetting budget cuts to pay for disaster relief is obviously not impossible, nor is it unheard of. Relief bills for the 1994 California earthquake and the Oklahoma City bombing were all paid for by offsetting spending cuts.
"There's no reason why money spent on natural disaster relief should not compete with spending in other areas of government. If spending this money is truly necessary than other less essential programs in the budget then those less essential programs should be pared back to make room for it."
Colorado to Determine TABOR's Fate
"After an expensive, bitter campaign, voters must now decide whether to ease the limits on state spending and surrender billions of dollars in taxpayer refunds in the process," the Associated Press reports. "The measure, crafted by Democrats and Republicans including Gov. Bill Owens, would allow the state to keep an estimated $3.7 billion over five years that would otherwise be refunded to taxpayers under the Taxpayer's Bill of Rights (TABOR), the 1992 constitutional amendment considered the nation's strictest cap on government spending. Voters must decide its fate Tuesday."
In "Dispelling the Myths: The Truth about TABOR and Referendum C," Michael New, a Cato adjunct scholar, and Stephen Slivinski, the director of Cato's budget studies, rebut the logic of Referendum C, claiming that with it the government would permanently grow without restraint for the next five years: "Opponents of TABOR have endorsed Referendum C as a much-needed fix to TABOR. However, far from simply tinkering with TABOR, Referendum C puts government growth in overdrive. The referendum would in effect give Colorado state government a blank check for the next five years. It would also permanently change the way the TABOR cap is calculated and lock in for perpetuity more government spending."
Kristen A. Kestner, editor, kkestner@cato.org