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Now That We've Made Taxes More Complex, Let's Simplify Them


Washington Outlook

NOW THAT WE'VE MADE TAXES MORE COMPLEX, LET'S SIMPLIFY THEM

They've just passed one of the most complicated tax laws in history, replacing two capital-gains tax rates with seven and creating tricky formulas that give voter-friendly tax breaks with one hand and take them away with the other. So what's the next crusade for Republicans? Making the tax code simpler, of course.

No sooner was the Taxpayer Relief Act of 1997 signed than GOP leaders were calling for big changes. "As long as there's a Republican Congress, we'll have a tax cut every year. We can have dramatic tax simplification," says House Speaker Newt Gingrich.

That's swell with party supply siders. Most believe that the Hill's tax bill is a grab bag of giveaways that will do little for economic growth. "The only way Republicans can occupy the high ground is to put real tax reforms on the table," says magazine publisher Steve Forbes. He's renewing the call for a 17% flat tax that fueled his failed 1996 run for the GOP Presidential nomination.

HIGH HURDLE. Trouble is, the GOP can't decide which flag to plant atop that high ground. Forbes and House Majority Leader Richard K. Armey (R-Tex.) champion the flat tax, which would continue to base taxes on income. But they face stiff opposition from sales-tax advocates, led by House Ways & Means Chairman Bill Archer (R-Tex.), who want to scrap the income tax altogether.

Neither camp knows how to clear a more immediate hurdle: the White House. President Clinton, a believer in social engineering through the tax code, has little interest in streamlining. Archer, who plans to retire in 2000, hopes the '98 elections will produce a big enough GOP majority to pass reform over Clinton's opposition. But while tax cuts and reform pledges will figure in their '98 strategy, most Republicans think the big reform debate will come in the 2000 Presidential race.

To keep the issue bubbling until then, GOP strategists will first take aim at a favorite target: the beleaguered Internal Revenue Service. In the fall, the Senate Finance Committee will unveil a six-month probe blasting alleged IRS abuses in auditing individuals and small businesses.

Anti-IRS rhetoric will also flow in the House. GOP leaders think they can score points by pushing corporate-style management. Archer hopes to pass a bill this fall that would put the IRS under the control of a board of CEOs and government officials. "Sweeping reform is a goal," says Representative Rob Portman (R-Ohio), the bill's author, "but until we get that, we need an IRS that provides good, efficient service." The measure may go nowhere: Treasury Secretary Robert E. Rubin will urge Clinton to veto any bill that ends his department's control over the IRS.

Gingrich's strategy is to pursue simplification through more tax cuts. Portman, appointed by the Speaker to design the IRS overhaul, has a list of 60 tax-simplifying measures. Tax writer Archer also plans to revive a provision, dropped from the tax-cut bill, that would let parents or grandparents draw down their individual retirement accounts to pay tuition at private elementary or secondary schools. "If President Clinton can push tax breaks for college tuition at Notre Dame," asks an Archer aide, "why can't we pass tax breaks to send your kids to a local parochial school?"

An interesting idea--but can Republicans sell it as tax reform? They want it both ways: rhetoric calling for postcard tax returns and actions that punch loopholes in the code for GOP voting blocs. That may help in the '98 elections. But the mixed message will make a tough job harder if GOP tax reformers ever get the chance to turn dreams into reality.EDITED BY DOUGLAS HARBRECHT By Mike McNameeReturn to top

CLONING WARS

Dolly the lamb and genetic advances have sparked legislation that is alarming drugmakers and biotech companies. A dozen bills now pending in Congress, and more in the states, would ban human cloning or restrict disclosure of an individual's genetic information. But drug and biotech companies fear that the measures could "kill the promise of genetic research with a thousand cuts," says Alan F. Holmer, president of Pharmaceutical Research & Manufacturers of America.

In late July, for instance, the House Science Committee approved a bill banning use of federal funds for human cloning. That's what many Religious Right groups want. But drug and biotech industry execs worry that a ban could threaten research using cloned cells or tissue.

Equally worrisome, drugmakers say, are bills that would bar insurers from disclosing information about a person's genes without their consent. One bill, with 156 Hill co-sponsors, aims to prevent insurers from discriminating on the basis of such information. That might stop researchers from tapping into growing databases of managed-care companies to probe the relationship between people's genes, their diseases, and responses to treatment, the drugmakers claim.

Congress isn't buying the industry line. Bill proponents say research isn't imperiled and charge that drug companies have an ulterior motive: "They want to identify people with certain conditions and market treatments to them," says one Hill staffer. Watch for the battle to heat up.EDITED BY DOUGLAS HARBRECHT By John CareyReturn to top


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