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Moro on the National Commission on Fiscal Responsibility and Reform

By Robert Giese
bob.giese@chsfl.org

The National Commission on Fiscal Responsibility and Reform [NCFRR] continues to develop a comprehensive proposal to address the federal deficit. It has invited comments from members of Congress, leaders of all types of American organizations and private individuals.

We invite ME-P contributions, as well.

A Four- Point Proposal

James Q. Riordan, Sr. sent a letter this week to co-chair Alan K. Simpson, the former Senator from Wyoming. Mr. Riordan made four basic points about the fiscal problems and suggested a Value Added Tax (VAT) as a solution.

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First, he indicated that there is too much “unaffordable spending.” Even with limited spending growth, the income tax cannot be sufficiently increased to pay for current and future proposed spending without doing damage to the economy and increasing unemploymen.

Second, Riordan claims that the only potential solution is a VAT. However, because the VAT is a tax on consumption and would have great impact on middle and lower incomes, it needs to be accompanied by a progressive income tax.

His third point is that the new income tax would need to be very simple. In his view, there would be no deductions for home mortgage interest, charitable gifts or medical expenses.

Fourth, he would tax all income only once. There would presumably not be a corporate-level tax or an estate tax under this theory.

Inadequate Staff Resources

As the fiscal commission considers the options for reducing spending and increasing taxes, it has indicated that the current staff resources are inadequate. In response to a request by the commission, Senate Majority Reid sent a letter this week to the White House and requested additional staff support. The White House indicated that it will be pleased to “work with him” to provide additional assistance.

At a hearing on the financial challenges, Senator George Voinovich (R-OH) noted that the commission is under great pressure to develop an effective plan. He stated, “If we don’t get something out of that commission, we are over the cliff.”

Assessment

Senate Budget Committee Chair Kent Conrad (D-ND) was the prime supporter of the commission. He stated, “This is not a time to impose austerity in my judgment.” However, he indicated that austerity will be necessary in the future, and that budget cuts and tax increases “must be imposed in a way that is convincing.”

Editors Note: For now, we take no specific position on VAT or other tax and spending recommendations by the Fiscal Commission. This information is offered because potential Fiscal Commission plans may affect many of our ME-P physician readers, subscribers, consultants and advisors.

Conclusion

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Filed under: Accounting, Estate Planning, Taxation | Tagged: Alan K. Simpson, federal deficit, George Voinovich, James Q. Riordan, Kent Conrad, National Commission on Fiscal Responsibility and Reform, Robert Giese, Value Added Tax | 1 Comment »