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115 IRET Congressional Advisory 1 (2001)

handle is hein.taxfoundation/iretcgadv0112 and id is 1 raw text is: May 9, 2001 No. 115 SALVAGING A GOOD TAX BILL As this is written, it appears that at the insistence of the U.S. Senate, Congress will approve IRET this year a smaller cut in taxes and a bigger increase in government spending than President Bush had sought to achieve. Instead of the $1,620 billion of tax relief over the next decade that the President had proposed, the compromise reached with the Senate calls for $1,350 billion of tax cuts, with $1,250 billion of that to be used for a 10- year tax relief package and available for some type of economic stimulus. The tax bill should include across- the-boaid rate cuts... Marginal ratte cutts are superb public policy because they generate a large groith divdend by reducing tax biases against saing, investment, and wvork... Repeal of the death tax should also be par-t of the bill. $100 billion to be special short-term The scaling back of the tax package is disappointing because Americans are badly overtaxed. Too many tax provisions are strongly biased against saving, investment, work effort, and entrepreneurship, which hurts productivity and slows growth. Moreover, the staggering complexity of many tax provisions wastes enormous amounts of time and money, and thereby also lowers incomes, production, and living standards. To be sure, modest tax relief is better than no tax relief, but the U.S. tax system has such enormous problems that tax biases against saving, investment, and work. The rate cuts that will do the most to spur economic growth are those in the highest tax brackets, where anti-production tax biases are the strongest. 0 Repeal of the death tax should also be part of the bill. The death tax hurts the economy both because it sharply discourages saving and because it diverts huge amounts of time and money from productive activities to tax planning and paperwork. Eliminating the death tax quickly would be best, but gradual repeal would be better than leaving it in place. 0 Although not part of the Bush proposal, the Senate and the House-Senate conference should consider folding into their package the Portman- Cardin bill (H.R. 10), which passed the House by an overwhelming bipartisan margin of 407 to 24. Portman-Cardin would allow people to contribute more to their pension and retirement accounts and simplify complicated pension rules. H.R. 10's Institute for Research on the Economics of Taxation even the amount of relief proposed by President Bush (about 5% of tax collections over the next decade) would not be sufficient fully to correct them. With the Senate permitting still less to be done, it is more important than ever that the Senate and the subsequent House-Senate conference concentrate on the areas where the current tax system does the most harm and where reform would do the most good. - The tax bill should include across-the-board rate cuts, such as those proposed by President Bush. Marginal rate cuts are superb public policy because they generate a large growth dividend by reducing IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N.W., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 0 Internet www.iret.org

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