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December 09, 2005

Big-Deficit Tax Reform Does Not Seem to Be a Winner

Tax reform falls off the agenda:

Bush to Delay Major Push for Tax Overhaul, People Familiar Say: Dec. 5 (Bloomberg) -- President George W. Bush will delay a major push for revamping the tax code because administration officials concluded the changes are too tough to sell to the public and lawmakers, two people familiar with the matter said.... Bush hasn't mentioned tax code changes since his Advisory Panel on Federal Tax Reform issued a 272-page report Nov. 1 recommending two ways to overhaul the tax code. The proposals would reduce or eliminate many popular deductions such as those for mortgage interest and state and local taxes while reducing taxes on investment and abolishing the alternative minimum tax.

The silence stands in contrast to the fanfare with which the president announced the panel's creation in January. Then, Bush introduced panel Chairman Connie Mack, a former Republican Senator, and Vice Chairman John Breaux, a former Democratic Senator, in a ceremony at the White House.... Surveys and focus groups conducted for the Bush administration on overhauling the tax code found some enthusiasm until details such as altering the mortgage deduction were mentioned and began to draw objections, according to the person who has worked with the administration...

This was a group hand-picked to be friendly to the Bush agenda--whatever it turns out to be. The people who understand fiscal policy seem to want to spend their time putting pressure on the government to fix the deficit. The people who don't understand fiscal policy are scared of the reduction in the mortgage interest deduction.

Posted by DeLong at December 9, 2005 10:22 AM