San Francisco’s Fort Mason Center held the sixth meeting of the President’s Advisory Panel on Federal Tax Reform on Thursday, March 31, 2005. The specific focus of this meeting - the Panel’s sixth - was to examine the U.S. tax system as it relates to international affairs.

Prominent corporate decision makers such as Intel President Paul Otellini and Hewlett Packard tax advisor Larry Langdon explained the inefficiency of lengthy tax rules and the need for research and development credits for domestic benefit. Stanford’s Friedman Professor of Economics Michael Boskin analyzed the decline of total savings since World War II, stressing the need for neutrality toward saving, rather than taxing both income and returns on investment. World-renowned economist, Hoover Fellow, and Nobel Prize winner Milton Friedman explored those options now in the country’s reach. Though he foresees politics complicating any change, Friedman thinks that “economists today would come close to agreeing that the major tax ought to be a flat-rate tax on consumption,” which encourages saving.

By bringing a wide range of guests to advise on all angles of tax policy, this panel will eventually present the nation’s people and legislatures with feasible alternates to the current system. Panel members are affiliated with both major parties and draw experience from public service and private management. At least one option for change must include a revision of the current income tax, and all options must be revenue-neutral, allowing for equal total tax collection. Per Executive Order 133699 of January 7, 2005, President Bush appointed this nine member panel to accomplish: simplification and reduction of compliance costs and time; appropriate progressivity; growth and job creation for the future; and encouragement of home ownership and charity.

The first meeting on February 16 in Washington, D.C. highlighted the beginning perceived problems: the length of tax code, the amount of time needed to file, the hilarity of “short” forms, and the confusion with the Alternative Minimum Tax. Guest policy analysts gave opinionated explanations of the basic tax systems: income vs. consumption and the benefits of their preference. Secretary of the Treasury John Snow spoke on behalf of the White House, and it is to him that the Panel will report on July 31 of this year.

The March 3, 2005 meeting - also in the nation’s capitol - addressed “The Impact of Complexity on Taxpayers” and the Alternative Minimum Tax. Mark Everson, the Commissioner of the IRS, extended assistance and asked the panel to consider very critically all details associated with transition to another system. Federal Reserve Chairman Alan Greenspan reiterated his stance that lower taxes are always better, whether income or consumption based. He referenced a recent history lesson: “A defining feature of the [Reagan administration] 1986 reform was the broadening of the tax base and the lowering of tax rates, and it is widely believed that these changes enhanced economic efficiency.”

SAGO Networks in Tampa, FL held the March 8 meeting on business tax policy. Former Chairman of the House Ways and Means Committee Sam Gibbons spoke in support of a complete transition to a Value Added Tax. The Office of Tax Analysis at the Department of the Treasury submitted a report on “The Tax Burden on Investment and Entrepreneurship,” explaining the benefits of lowering taxes on business capital and investments to increase innovation, creativity, and productivity. The OTA provides models and analyses of proposed tax policy and works closely with the IRS.

Mayor of Chicago Richard Daley opened the March 16th University of Chicago meeting on special provisions in the tax code, asking that any changes ultimately benefit cities and families. Three discussion panels reviewed the complexities of imbedded incentives for work, retirement, education, and investment. Another Nobel Economist, Professor James Heckman, described the interaction of labor choices and tax rates.

In New Orleans on March 23, the spotlight was on fairness, families, and poverty. Mark Moreau of the Low-Income Taxpayers Clinic of Southeast Louisiana stressed that the reduction of poverty by the Earned Income Tax Credit could be more significant without the cost of preparation. Other topics include differentiation between marriage and joint filing and taxes’ interplay with medical care and health insurance.

At the San Francisco meeting, the panel restated their and President Bush’s open invitation to the public – individuals, businesses, and government agencies – to identify problems and concerns with the current tax system. These critical comments can be viewed at http://taxreformpanel.gov. On April 5, the focus of their request shifted to suggestions for actual change, and the website encourages submission before April 29. The next meeting of the Panel will be Tuesday, April 12 at 2 p.m. EST by teleconference.