Tags: Summers | Tax | System | Rebuilding

Lawrence Summers: Tax System Needs Rebuilding

Monday, 27 February 2012 08:01 AM

Former U.S. Treasury Secretary Lawrence Summers says rewriting the tax code is the single biggest job Washington faces.

"The delicate question is how Washington should prepare for serious tax reform during what is likely to be a unique window of opportunity in late 2012-2013," Summers writes in the Financial Times.

"The timing is essential both because of all the deficit reduction activity and because spending side reforms will have a much more difficult time becoming reality if the revenue side is not addressed as well."

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

Summers says that, while it is tempting to say presidential candidates should put forward their tax reform proposals in detail and allow voters to choose, this approach is unlikely to work.

"The more tax issues are discussed during the campaign, the more the candidates will be driven to make pledges about the things they will never do – pledges that might make tax reform that much more difficult," he says.

The U.S. will need to mobilize more revenue, says Summers. This year, the federal government will collect less than 16 percent of gross domestic product in taxes – far below the post-second world war average, yet federal spending will need to be larger relative to GDP in the future

“Increasing marginal corporate rates or increasing individual rates beyond their Clinton-era level raises serious questions about incentive effects or the encouragement of shelter activities,” says Summers. “It is in any event unlikely to be politically feasible.”

“A much better strategy for raising revenue would start from the premise adopted by the Simpson-Bowles bipartisan commission that tax expenditures are a form of government expenditure and presumptively should be cut back unless they can be justified in the current environment.”

The Hill reports that Former Sen. Alan Simpson and former White House chief of staff Erskine Bowles said the Obama budget wouldn't achieve the same level of deficit reduction that the Bowles-Simpson plan released in 2010 would have and “would only briefly stabilize the debt at a level that is already too high.”

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

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Monday, 27 February 2012 08:01 AM
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