In his acceptance speech at the Republican convention, President Bush said that one of his key second-term goals is to create a simpler, fairer, pro-growth tax system. In a White House fact sheet, he said that he would issue an executive order to create 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.
In my experience, commissions of this sort are mostly useless unless those appointing them already know what they want the commissions to report. 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 members of both parties are 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 must come to an agreement or something terrible will happen. In this respect, the Social Security Commission of 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 the president what he wants within the specified time period.
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 endorse something like a flat-rate, consumption-based tax system and the Democrats will decry it as a give-away to the rich that will oppress the poor. What’s 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. Almost 30 years ago, the Treasury laid the groundwork for this 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 that’s a long shot.
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 senator Dennis DeConcini, former California congressman (and Office of Management and Budget director and White House chief of staff) Leon Panetta, or former California governor (and current Oakland mayor) Jerry Brown. In the past, these people 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 for commission members 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 workable.
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 the president’s proposal a valuable exercise.