Bush's eerie silence on tax reform

Bush's eerie silence on tax reform
THOMAS OLIPHANT
By Thomas Oliphant, Globe Columnist
November 4, 2005
WASHINGTON

KNOWING THAT taxes are among President Bush's favorite topics, I couldn't wait to hear his reaction to the report of the commission he set up this year to recommend sweeping changes in the country's messy system that satisfies no one beyond the lobbyists who do so much to make it so messy.

But I had to wait. And wait some more. Eventually, even a patient soul like myself couldn't avoid realizing that Bush was not going to say anything. Not a word. Not a syllable. Zip. Silence.

The president's affably ineffectual treasury secretary, John Snow, got my attention next. I figured he had to say something, but as it turned out Snow was careful to say nothing while saying something. Snow called the commission's report "a starting place for the recommendations we will make to the president."

I may be dumb, but I at least know the brush-off when I see it. The former railroad boss couldn't even bring himself to say "good" starting place.

By now it was clear that the Bushies were running for cover. The final confirmation came from the White House spokesman Scott McClellan. The poor guy's had a rough couple of months trying to make chicken salad out of whatever, but he adroitly escalated the administration's response from brush-off to kiss-off. Said McClellan, with no reference to the commission's recommendations whatsoever: "We look forward to moving forward on initiatives that the president will outline later with members of Congress."

The sight of a president walking away ?- make that running away ?- from what he once declared a top priority is never pretty. But lest anyone forget, let's go back to Bush's acceptance speech at the Republican National Convention barely a year ago in New York City. At the time, he had been having some difficulty saying just what it was that he wanted to do with a second term, and he and his advisers had pretty much decided that sweeping change in the tax code should be one of them.

So, to great cheers, Bush said the following: "In a new term I will lead a bipartisan effort to reform and simplify the federal tax code."

The key word was "lead." But not only has Bush not led at all, he has been unable to even follow. A commission can be a big help for presidents who don't know much and aren't curious, but rare is the chief who names one to develop a proposal and then hides from it. Only Bush has done it before ?- with Social Security in 2001.

This is very different from Bush's other notable flop this year, in his second attempt at dealing with Social Security. In that case he at least had a general idea of what he favored ?- partial privatization. He never made an actual proposal, however, because the math was too much for him, and after months of bromides before screened audiences it became clear that the more he talked about it the less people liked it ?- a bad sign in politics.

With tax cuts ?- besides the irresponsible orgies of 2001, 2002, and 2003 which ruined the government's finances ?- the president had absolutely no idea what he wanted to do, which is often why commissions are appointed. Bush picked well ?- the co-chairs were well-regarded former senators. There was a centrist, Democratic deal maker John Breaux of Louisiana, and a conservative, Connie Mack of Florida. Their only important instruction was that this had to be true reform ?- meaning that revenue lost from further cuts had to be balanced by provisions that increase it.

In a major gift to Bush, the panel assumed for its task that all the income tax cuts affecting individuals and businesses enacted during '01 and '02 would be made permanent. But in a major slap at right-wingers, it also gave short shrift to pies in the sky like flat taxes and national sales levies as income tax substitutes.

In its major conclusion, the commission decided that repealing the Alternative Minimum Tax ?- a marvelous example of how unforeseen consequences are the bane of all would-be tax reformers ?- is a more important task than any other over the next decade. The original idea of the AMT was to keep rich people from avoiding all tax liability. In other words, no matter how low deductions, exemptions, and credits cut your tax bill there is still a basic payment you have to make.

The problem is that as the years have passed the AMT's reach has extended far into the upper-middle class and below. In 10 years, the Breaux-Mack Commission figures more than 50 million people will be paying it. This whopper has been looming for five years, but Bush neglected it except at the extreme margins. Repeal, which the commission favors, would lose more than $1.2 trillion over 10 years.

Compensating for that was the commission's real challenge. Rather than touch income tax rates, it went for major deductions ?- including capping the mortgage interest deduction for very high-income individuals, assaulting the deductibility of employer contributions to health insurance plans, and ending the deduction for state and local taxes paid.

That all but guarantees congressional rejection, especially by pols from large states, and it helps explain the fact that Bush hid from his own commission. But the fact remains that one more element that once loomed large for a second term is moribund. You almost wonder why he ran.