Obama's Tax Reform Panel Issues Report

by Mike Godfrey, Tax-News.com, Washington

Friday, September 03, 2010

The US President’s Economic Recovery Advisory Board (PERAB), chaired by former Federal Reserve Chairman Paul A. Volcker, has issued a report on options for changes in the current tax system to achieve three broad goals: simplifying the tax system; improving taxpayer compliance with existing tax laws; and reforming the corporate tax system.

The PERAB, an advisory panel, was established by President Obama in February 2009, with members drawn from outside the government. They meet periodically and solicit information and ideas from all sectors to provide analysis and information directly to the President on the design, implementation, and evaluation of policies.

The tax reform subcommittee is one of seven subcommittees of the PERAB, including subcommittees on jobs, growth, and investment, and on financial markets and regulation.

The PERAB tax reform report fulfills the specific mandate they were given - to discuss the pros and cons of a spectrum of reform ideas. They were also instructed not to consider policies that would raise taxes on families making less than USD250,000.

As specified in a posting by Austan Goolsbee, the PERAB’s staff director and chief economist, the report is meant to be informative rather than to draw conclusions. Its intention is to aid discussion about the wide variety of tax reform ideas in these areas.

For example, considering the complexity of US tax law, the subcommittee looked at tax simplification options for families, such as the consolidation of family credits and simplification of eligibility rules, and the clarification and improvement of savings incentives. It also looked at simplifying the taxation of capital gains.

Reviewing the background on tax compliance, the report contains a section on possible improvements to voluntary compliance and a reduction to the tax gap, including a harmonization of the employment tax rules for businesses and the self-employed.

It provides an overview of corporate taxation, with suggestions for reducing marginal corporate tax rates and increasing incentives for investment, and also addresses international corporate tax issues.

“The PERAB was not tasked with providing its own policy recommendations for the government,” Goolsbee added, “and, of course, given the independence of the PERAB as a group of outside advisers, it is not a reflection of administration ideas under consideration. The final report is an informative and important almanac of options for tax reform.”

“The report will also be submitted to the bipartisan National Commission on Fiscal Responsibility and Reform as they continue to consider ways to address our nation’s middle and long-term fiscal challenges and to achieve fiscal sustainability,” he concluded.

The tax reform subcommittee received more than 600 serious submissions of tax reform ideas from the public both in person and in writing or electronically during their deliberations.