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JEFFERSON: Can I say why I think that is? There is a widespread perception that the current system has failed, and the biggest piece of evidence is the alternative minimum tax. The AMT already forces a lot of people to calculate their taxes twice and to pay the higher amount. By 2010 about 36 million people will fall under the AMT. I think as that starts to affect more people, they will become more conscious of the fact that something is wrong.
MITCHELL: When you have more and more households paying the AMT, it will make people hate the tax system, which politically will build support for tax reform. I will tell you a secret. I am always telling our ideological allies on the Hill, "Don't fix this. Let it fester."
TIME: We have a looming budget deficit and a war that will cost a lot of money. Is the timing of Bush's tax-cut proposals right?
MITCHELL: The big pieces of the Bush plan are things that are consistent with tax reform. The sooner lower tax rates take effect, the better the results for the economy.
SAWICKY: The problem is Bush's proposals are not worth doing later or now. There is a huge amount of resources that I can think of much better ways to use, not only for spending but also for other kinds of tax cuts and also to run some budget surpluses.
RENWICK: I think the national economy needs some stimulus, but the Bush tax plan is not getting much bang for the buck. It is not giving the kinds of tax cuts that would move the economy out of this recession and create some jobs.
BRADFORD: The thing that worries me is not the deficit per se. We have been doing badly in my mind for 25 years in transferring money to the elderly at the expense of future generations. That is my main cut on the present Administration's proposal.
JEFFERSON: I think that the President's policies are very risky to the economy. I don't see how it is really stimulating the economy. It raises questions with regard to fairness. And it raises the specter of high inflation in the future if things don't pan out exactly the way the Administration thought.
MITCHELL: The Bush Administration, I think, has a quiet tax-reform agenda. If you look at what they are doing this year, eliminating the double tax on dividends, this is an important component of tax reform. Traditionally we thought of tax reform as, Let's go from here to there, cold turkey. You can do it in incremental steps. But the Administration is doing the candy part of tax reform, not doing the vegetable part. You are getting rid of the various forms of double taxation, which everyone affected will be happy about, but you are not putting fringe benefits in the tax base, an enormous issue not only for tax-reform policy but also for health-care policy.
RENWICK: What is really driving the agenda for these tax moves is not so much simplifying the tax system as shrinking the tax revenues and shrinking government.
TIME: Do you think it is possible to have a consumption-tax system that doesn't reduce overall tax revenue?
JEFFERSON: Oh, yes. I think there should be, at least in principle, a rate structure on a consumption tax with a flat rate on businesses and increasing marginal tax rates on individuals that should yield revenue consistent with what we are collecting now.