The panel's report stops short of specific
recommendations but will likely play into an already bitter tax debate in
Washington ahead of the November elections.
Republicans have been blasting Democrats for their plan
to raise tax rates on high-earners, while Democrats say the country can't
afford historically low rates on wealthier Americans in an age of expanding
budget deficits.
Members of the President's Economic Recovery Advisory
Board (PERAB), led by Paul Volcker, the former Federal Reserve board chairman,
on Friday voted to send the 126-page report to Obama for his consideration.
The report did not specifically weigh in on the hotly
debated tax cuts enacted under former President George W. Bush on all income
groups that are set to expire at year end. Republicans want to extend all the
lower tax rates, while Democrats want to let lower rates for wealthier
Americans expire.
Rather, the report highlighted the complexity of the tax
code, echoing frequent laments from the US tax commissioner, who says the tax
code runs many times the length of "War and Peace."
"When you take a look at it now it looks very much
to be an untended garden," panel member Roger Ferguson, chief executive of
pension fund TIAA-CREF and a former vice chairman of the Federal Reserve Board,
said in presenting the report.
The bipartisan panel stressed it is not part of the Obama
administration, nor is it calling for specific actions.
Members of the tax task force include Laura Tyson, a
University of California economics professor and former economic adviser to
President Bill Clinton; Martin Feldstein, a Harvard economics professor and
former adviser to President Ronald Reagan; Ferguson; and William Donaldson,
former chairman of the Securities and Exchange Commission.
Many of the ideas offered have been floated in tax
reports past, said Clint Stretch, a principal at Deloitte who served as counsel
to the congressional joint tax committee.
"I could have made this list of issues when I first
became a tax lawyer back in the 1970s," he said.
One aspect of the report addressed better collection of
taxes.
At least $345 billion a year in taxes goes uncollected,
according to the government, with nearly three-quarters from individual filers
that include some businesses like law firms and partnerships. The report said
ways to better collect taxes from these groups include requiring such
businesses to have registered bank accounts to track income.
These will be a hard sell to lawmakers, Stretch said.
"It is fairly controversial in the sense that the
compliance problem is overwhelmingly individual and small business, and they
are a favorite class of taxpayers" among politicians, he said.
For individuals, the report also discusses a so-called
"Simple Return" - a pre-filled-out tax return that could be sent from
the government to individuals with relatively simple taxes.
US businesses have long complained that the top corporate
tax rate of 35 percent, among the highest on the books among the United States'
industrialized peers, puts them at a competitive disadvantage.
The Obama administration says the overall tax burden is
much lower because there are so many special breaks.
The benefits of cutting the corporate rate include
encouraging savings and new investment, the report said. It did not recommend a
specific figure.
But wealthy
individuals could shift income to corporations to avoid higher individual
rates, the report said.
The revenue lost from cutting the corporate rate would be
about $120 billion over a decade for each percentage point drop. Options to make
up the revenue include ending some tax breaks, such as ending deductions for
certain domestic production and cutting accelerated depreciation, one of the
biggest business tax perks, the report said.
