With Washington virtually paralyzed by partisan gridlock, one issue both parties seem to agree on is that the tax laws are a disaster.
The National Commission on Fiscal Responsibility and Reform found that 90 percent of tax laws affects only 10 percent of taxpayers -- one of many findings by the Commission. Their final report titled “The Moment of Truth” is also known as the “Simpson-Bowles” report, named for the two men who chaired the commission.
In an attempt to break Congressional deadlock, in January 2010 Congress enacted bipartisan legislation to form a committee to bring some sustainable sense of stability to our nation’s fiscal policy. It also required an up-or-down vote, with no amendments of their recommendations.
But true to form, Congress couldn’t agree. The vote failed to authorize the commission, so President Barack Obama issued an executive order and formed a similar commission, with a key difference -- there would be no binding vote on the recommendations. The commission consisted of 6 Senators, 6 Congressmen, and 7 members appointed by the President. Former Sen. Alan Simpson (R-Wyo.) and White House Chief of Staff Erskine Bowles (D-N.C.) were co-chairs.
The committee formed 3 subcommittees to study 1) tax policy, 2) mandatory spending, and 3) discretionary spending. Mandatory spending are things the government is required to pay under prior legislation, such as Social Security, Medicare, welfare payments and farm subsidies.
Discretionary spending is typically for specific projects and short-term programs, and often added to legislation in the form of earmarks.
The commission examined all aspects of government spending. It studied the effects of federal debt on the whole economy. It looked at current situations and projected what would happen if differing proposals were adopted.
The commission also studied ways of changing the tax code, and recommended ways to make Social Security and Medicare solvent.
On Nov. 10, 2010 they presented their findings. Briefly stated, they recommended:
• $200 billion cuts in discretionary spending;
• $100 billion of increased tax revenues;
• Stricter cost controls on Medicare and Medicaid:
• Reduced entitlements; and
• Increasing the retirement age and payroll tax for Social Security.
The report is written in bureaucraticese and makes a good read for someone with insomnia. It has a lot of ifs, but it also has useful ideas.
For instance, it recommends just 3 levels of tax rates -- 12%, 22%, 28% -- with a corporate rate of 28%.
That would broaden the tax base by closing or greatly reducing loopholes that only 10% of us use.
The report has generated a lot of controversy. When it was released, Simpson, a politician known for candor, said, "I'm sure we're going to ruffle a lot of feathers with this. But if we're going to change the direction we're headed, we all have to give a little."
Rather than the report becoming a starting point to find middle ground, partisan politics trumped the effort again, and Congress went on its way.
But doing nothing is not an option. We elect these people to make decisions and lead. To do nothing only furthers economic instability, discourages investment and hiring, and leads us nowhere.
Reid Rodgers lives in North Platte and studies economics and finance in his spare time. He recently competed on a nationally televised Jeapordy quiz show.