Tax Reform in the Air

Vice Chair John Breaux of the President's Tax Reform Commission, indicated that the Commission will report recommendations by the end of next month and that these recommendations could be included in next year's State of the Union. The President may have four options to choose between as part of the recommendation. A separate group, the Committee for Economic Development (CED), made their own tax reform proposal yesterday. The CED proposal would eliminate certain tax expenditures, integrate the corporate and individual income taxes and eliminate the alternative minimum tax. The CED, citing dramatic spending increases in recent years, would also institute a 10% VAT.

In a separate Tax Analysts article, House Minority Whip Steny Hoyer (Md) suggested that eliminating the AMT was not necessary as part of the reconciliation bill as he continued Democratic criticism of the legislation. Hoyer's comments were somewhat surprising; the dividend and capital gain part of the legislation has been controversial for a while, but there is significant bipartisan support for extending certain business tax incentives and considerable bipartisan support for eliminating the AMT, which is increasingly considered a middle-class as well as upper-income menace.