Tax Reform Panel: VAT to the back-burner

Chair of the President's Tax Reform Panel Connie Mack said that the panel would not propose dramatic reform at this time; instead going with limiting home mortgage interest deductibility and tax-exempt status of health insurance plans for wealthy taxpayers. The limitation is likely to come as a ceiling, though replacement with a credit is also possible. The intent is to remove the AMT and replace revenue losses with the interest and health-insurance limitations. However, a separate article by Business Week (http://www.businessweek.com/bwdaily) indicated the political risks associated with using only the limitation on tax incentive approach to eliminate the AMT.

Mack indicated that the value-added tax could come back in future reform efforts. One possibility would be to use the revenue growth to support the personal retirement accounts envisioned by Bush as a supplement or even alternative to Social Security; another is to fund the new prescription drug benefit.