Paul L. Caron
Dean





Wednesday, November 17, 2010

Bipartisan Group Issues Budget Plan Calling for 6.5% National Sales Tax

Restoring The Bipartisan Policy Center, formed in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell, today released a 140-page report by its Debt Reduction Task Force co-chaired by Pete Dominici and Alice Rivlin, Restoring America's Future (Executive Summary).

Here are the components of the plan to Create a Simple, Pro-Growth Tax System:

1.  Cut tax rates; broaden the tax base; boost incentives to work, save, and invest; and ensure, by 2018, that nearly 90 million households (about half of potential tax filers) no longer have to file tax returns.

  • Cut individual income tax rates and establish just two rates – 15% and 27% – replacing the current six rates that go up to 35%.
  • Cut the top corporate tax rate to 27% from its current 35%, making the United States a more attractive place to invest.
  • Eliminate most deductions and credits and simplify those that remain while making them better targeted and more effective.
  • Replace the deductions for mortgage interest and charitable contributions with 15% refundable credits that anyone who owns a home or gives to charity can claim.
  • Restructure provisions that benefit low-income taxpayers and families with children by making them simpler, more progressive, and enabling most recipients to receive them without filing tax returns.

2.  Establish a new 6.5% national Debt Reduction Sales Tax (DRST) that – along with the spending cuts outlined in this plan – will reduce the debt and secure America’s economic future.

Tax Plan

Press and blogosphere coverage:

https://taxprof.typepad.com/taxprof_blog/2010/11/bipartisan-group-issues.html

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Comments

Rather than making over half the workers exempt from income taxes and more than willing to vote for class-warfare-pandering politicians who will tax "the other people" even more and, also, for the good of our nation's long-term survival, the study group should require more families to pay a least some income taxes, thus sharing in the support of the government which benefits them and to give them an appreciation of how much in taxes are collected and wasted.

Posted by: Woody | Nov 18, 2010 6:16:03 AM

I like the plan, particularly the DRST part. Regression of that VAT will be a big deal, and unfortunately the Taskforce does not address this in great detail. They would provide tax credits to families with children and lower incomes, but earlier in the plan they claim to eradicate tax returns for the lower income brackets. So that does not work property. Also - what if you don't have kids, but - for example - you are retired? See my blog at www.us-vat.com/blog

Posted by: Mark Houtzager | Nov 18, 2010 4:18:51 AM

This may or not be good policy, but as politics it is poorly timed.

Posted by: mike livingston | Nov 17, 2010 6:44:32 PM

So I'm supposed to take advice from a guy who can't even manage to pay his taxes on time?

Maybe if he paid his fair share it wouldn't be so bad.

Posted by: Sandy P | Nov 17, 2010 5:54:38 PM

are we to really believe that raising the price of just about everything that we buy by 6.5% will encourage us to save more..? Aren't many of these people (eg, Dole and Baker) the same ones who gave us the budget deal in 1989 (raise taxes and cut spending; one out of two ain't bad, except for the economy)?

Posted by: Ira | Nov 17, 2010 4:29:14 PM

We have to make some use of all those new 1099s businesses are forced to file.

Posted by: bonzo | Nov 17, 2010 2:22:54 PM

A national sales tax without elimination of the income tax? Don't let that camel's nose into the tent. A sales tax "for debt reduction" would never go away and would always rise. And, not surprisingly, this bi-partisan group left off "cut the spending!"

Posted by: Woody | Nov 17, 2010 11:05:51 AM