Thursday, March 26, 2009

White House Leans Toward Tighter Enforcement of Taxes

From The Wall Street Journal:

President Barack Obama's initiative to raise new tax revenue to pay for major policy changes likely will focus in the short run on tightening enforcement against businesses and wealthy individuals. In the long run, some experts believe it could lead to sweeping changes in the tax code itself.

White House officials disclosed the tax initiative on Tuesday, saying they intend to explore ways to better enforce the current code as well as improve it by eliminating corporate subsidies and untangling its many complexities. Mr. Obama has assigned the task to his President's Economic Recovery Advisory Board, an outside panel of economists and businessmen headed by former Federal Reserve Chairman Paul Volcker.

Administration officials said the group faces two limitations: no tax increases before 2011 and no tax increases on families earning less than $250,000 a year. The task force is to report its recommendations by Dec. 4.

The initiative reflects the Obama administration's re-evaluation of how the U.S. government pays for itself, as lawmakers drop some major proposals from Mr. Obama's budget plans for future years.

A growing number of experts and many lawmakers believe the current U.S. income-tax system isn't raising enough money because it is obsolete. They say the U.S. should consider switching to more efficient means of raising revenue -- for example, taxes on consumption.

"We're shooting ourselves in the foot economically by relying as heavily as we do on income taxes when the rest of the world relies on consumption taxes," said Michael Graetz, a Yale University professor and former Treasury official in President George H.W. Bush's administration. "I think you can tinker with the existing system, but anybody who believes they are going to get enough revenue simply by improving collection of taxes owed is fooling themselves."

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