The proposal below is written for the “Super Committee” that was formed by Congress in August to recommend measures that will reduce the federal deficit by $1.5 trillion or more over ten years. It has been sent to each committee member and will be copied to other key people.
The proposal was published as a Letter to the Editor in the Bernardsville News on October 20, 2011.
Dear (member of Super Committee):
There are many reasons to simplify the federal tax code and this is a frequent topic in the budget debate. The principle argument being advanced is that elimination of various deductions and tax breaks, bundled under the general heading of “tax expenditures”, will raise revenue, and that this will provide opportunities to reduce both tax rates and deficits.
Because the tax code is enormously complicated, and because the effects of these expenditures are woven tightly into the fabric of our economic lives, it will be difficult to design and implement substantial changes quickly that do not cause disruptions and are also fair. Therefore:
I recommend that we take small annual steps along a path that will eliminate almost all tax expenditures in 10-15 years.
The Bowles-Simpson commission estimated that total tax expenditures are now about $1.1 trillion each year. I propose that we set up a bipartisan Tax Simplification Commission. This commission will submit a report to Congress each June in which it delineates a package of tax expenditures for elimination. The total will be in the range of $50 to $100 billion, and the changes will become effective the next calendar year. Congress will incorporate this package in a bill and vote it up or down with no amendments.
Congress will follow its regular procedures and adopt separate legislation to allocate some of the incremental revenue to reduce tax rates. Unallocated revenue will go to deficit reduction.
Suppose the first year in which tax revision takes effect is 2013, that new approved reduction in tax expenditures over the next ten years averages $80 billion per year, and that half of this goes to deficit reduction. The amount going to deficit reduction in 2022 will be $400 billion, and the cumulative amount to deficit reduction over the ten years will be $2,200 billion.
All amounts here are in terms of 2011 dollars. In ten years 73% of the tax expenditures identified today will be eliminated.
The organization of the bipartisan Tax Simplification Commission is key. I elaborate further on this and other elements of the proposal in the enclosed paper.
For digital versions of these documents go to website “Jersey Grandpa” and to the post “Tax Simplification: A proposal for the Super Committee”.
Thank you for considering this proposal and best wishes in your important work on the Super Committee.
Bill Allen, 10-06-11