Is a tax reform commission a good idea?

Posted: Sep 13, 2004 12:00 AM

 In his convention speech on Sept. 2, President Bush said that one of his key second term goals is creating a simpler, fairer, pro-growth tax system. In a White House fact sheet, he said that he would issue an executive order creating a bipartisan panel that will report to the treasury secretary early next year on options for tax reform. As a long-time supporter of tax reform, I am reluctant to throw cold water on this effort, but I am pessimistic that anything meaningful will be accomplished by it.
First of all, the record of such commissions is not good. I've got a whole shelf full of reports from various presidential, congressional and high-level private commissions that were just a waste of time for everyone involved with them.

 In my experience, commissions of this sort are mostly useless unless those appointing them already know what they want them to report at the end of the day. If a president doesn't know what he wants in the way of tax reform, it is unlikely that a commission is going to tell him -- especially if it has members of both parties involved.

 Commissions may serve some value as marketing tools if a president is looking to build support for something he has already decided to do. But the value of this is so small, it is probably not worth the effort.

 In any case, commissions only work if the members have a gun to their heads, where they have to come to an agreement or something terrible will happen. In this respect, the Social Security Commission in 1983 chaired by Alan Greenspan is the only one I can think of that was ever really "successful."

 I think Bush would have been better advised just to ask the Treasury Department for a report, as Ronald Reagan did in 1984. Its staff is well aware of every serious tax reform option that has ever been put forward and is fully capable of giving him what he wants within the time period he has specified.

 By contrast, it will take at least a year for a bipartisan commission to get up to speed, hire staff, hold hearings, deliberate and write a report. Most likely, at the end of the day, the Republicans will all endorse something like a flat-rate consumption-based tax system and all the Democrats will decry it as a give-away to the rich that will oppress the poor. What is the point?

 If Bush wants a flat-rate consumption tax, which he has voiced support for many times in the past, he should just say so and ask the Treasury to draft one. It laid the groundwork almost 30 years ago in its famous Blueprints study, which is the foundation upon which virtually all serious tax reforms have been built ever since.

 If Bush knows what he wants, not only is it a cop-out to appoint a commission, it is dangerous. It is very hard to find members for an enterprise like this who are politically reliable and have both the credibility and the expertise to do the job. Of course, if he could find the appropriate people, it could conceivably give a boost to his efforts. But, like I said, that's really hard.

 It's not impossible to find Democrats and liberals who are generally supportive of what Bush presumably wants to accomplish. For example, he could appoint former Arizona Sen. Dennis DeConcini, former California Rep. (and Office of Management and Budget director and White House chief of staff) Leon Panetta, or former California Gov. (and current Oakland mayor) Jerry Brown. In the past, they have all endorsed proposals along the lines of a flat-rate consumption tax.

 Personally, I would recommend against appointing any politicians. In the current political climate, there will be too much pressure on them to repudiate what the other side supports, even if they might agree with it. Consequently, I would limit the membership of this commission to academics from universities and think tanks.

 Of course, there is no guarantee that such people will not become politicized. But I think there is a core of economists on both sides who are mutually respected and could conceivably come to agreement on something doable.

 At the risk of destroying their chances or mischaracterizing their political loyalties, I would suggest the following Democrats/liberals: Bill Gale, Brookings Institution; Eugene Steuerle, Urban Institute; Alan Auerbach, University of California, Berkeley; Joel Slemrod, University of Michigan; and Robert Hall, Stanford University.

 On the Republican/conservative side, I would look at David Bradford, Princeton University; Kevin Hassett, American Enterprise Institute; R. Glenn Hubbard, Columbia University; Michael Boskin, Stanford University; and Martin Feldstein of Harvard.

 I think that a commission made up of such people could conceivably agree on something worth doing and make it a valuable exercise.