[Mb-civic] NYTimes.com Article: Jobs? Oil? Iraq? On Second Thought, Let' s Talk Taxes

[michael at intrafi.com]

The article below from NYTimes.com 
has been sent to you by michael at intrafi.com.



/--------- E-mail Sponsored by Fox Searchlight ------------\

GARDEN STATE: NOW PLAYING IN SELECT THEATERS

GARDEN STATE stars Zach Braff, Natalie Portman, Peter Sarsgaard
and Ian Holm.  NEWSWEEK's David Ansen says "Writer-Director Zach
Braff has a genuine filmmaker's eye and is loaded with talent."
Watch the teaser trailer that has all of America buzzing and
talk back with Zach Braff on the Garden State Blog at:

http://www.foxsearchlight.com/gardenstate/index_nyt.html

\----------------------------------------------------------/


Jobs? Oil? Iraq? On Second Thought, Let's Talk Taxes

August 15, 2004
 By EDMUND L. ANDREWS 



 

WASHINGTON 

THE economy is slowing, prices are rising and the lift that
came from last year's tax cuts has faded into memory. What
is the White House to do? 

With the Republican National Convention just two weeks
away, top advisers to President Bush are looking for a few
big ideas to add some sizzle to the economic platform. 

Don't expect Mr. Bush to advocate a national sales tax to
replace the income tax, even though he flirted with the
idea at a campaign stop in Florida last week. The
suggestion drew hoots of derision from Senator John Kerry,
the Democratic presidential nominee, who said consumers
would face a 20 percent tax on everything they bought. Bush
campaign officials quickly denied that any such plan was in
the works. 

Still, Mr. Bush's advisers said the president wants to make
tax reform a cornerstone of his second term, and campaign
officials see the potential to win over voters by pledging
to fix a system that is widely seen as complex and unfair. 

One thought is to change the system so that it focuses
less on taxing what people earn and more on taxing what
they spend. Even without a sales tax, this could be
accomplished by letting people deduct money they put in
savings and investments from their income, so they would
owe taxes only on what was left - in other words,
essentially on what they spent. 

Administration officials are also looking for ways to flesh
out the theme of promoting an "ownership society" - dusting
off ideas to partially privatize Social Security and to
provide more incentives for people to own homes or start
businesses. 

The political question is this: Would bold new proposals
create more excitement among voters, or would they mire the
campaign in debate that could detract from the goal of
promoting Mr. Bush? 

It is also unclear whether voters have much appetite for
another big idea from the president. Since taking office,
after all, Mr. Bush has pushed through two huge tax cuts,
which contributed to record deficits; a war against Iraq,
which is not going especially well; and a broad expansion
of Medicare, which is proving more expensive and less
popular than its supporters expected. 

For all the allure of replacing a tax code that millions of
people resent, even a general proposal would open up an
arcane debate that would be full of potential minefields.
Mr. Kerry has already been saying that the Bush tax cuts
flowed overwhelmingly to the very wealthiest taxpayers, and
last week he jumped on a new study by the Congressional
Budget Office that, he said, showed the top 1 percent of
income-earners received one-third of the recent tax-cut
benefits. 



IT would be easier for Mr. Bush to come up with new
incentives for increasing homeownership. But those ideas
could easily seem incremental, akin to Republicans' support
for tax-free medical savings accounts. Those expanded
health savings accounts allow people to set aside tax-free
money for medical expenses and health insurance. They help
soften the impact of rising insurance costs but are
unlikely to bring crowds to their feet. 

And homeownership has already climbed to record levels over
the last four years, thanks mainly to the Federal Reserve
Board's low interest rates. 

Mr. Bush is correct in saying that the economy is
strengthening, and growth this spring was at a respectable
annual pace of 3 percent. But job creation has to make up a
lot of lost ground, and job growth all but stalled in June
and July. Soaring oil prices have pinched consumers, making
people feel poorer and causing a slowdown in retail sales. 

Economists are still betting that growth will gather speed
again if oil prices recede from their current level of
around $45 a barrel. But the pause makes it harder for Mr.
Bush to ride along the economic trend. 

Fundamental tax reform is a big idea with potentially broad
appeal: millions of people view the existing tax code as
unwieldy and inequitable. 

Campaign officials say Mr. Bush has always favored ideas to
make the tax code simpler and fairer, and he has already
pushed for a multitude of changes aimed at shielding
investment income from taxes. 

Supporters of broader change include John W. Snow, the
Treasury secretary; Joshua B. Bolten, the budget director;
and R. Glenn Hubbard, a former White House economic adviser
who regularly consults with the Bush campaign. 

Many of Mr. Bush's advisers strongly favor a
consumption-based tax, an idea that has been kicked around
for years. Such a system would probably entail creating new
savings accounts, bigger versions of the "lifetime savings
accounts" that Mr. Bush has already proposed. The accounts
would let people set aside thousands of dollars a year,
earn investment income tax-free and use that money at any
time and for any purpose. 

A consumption-based tax system would also include lower
taxes on business, which is another way of eliminating
taxes on investment. Businesses would be allowed to write
off much or all of their investments in new equipment
immediately. 

Supporters say that such a tax code would be simpler and
fairer than today's system, and that it would provide
powerful new incentives for people to save money. And they
say it could still have progressive tax rates, so that
higher-income people would pay a higher percentage of
income taxes. 

Critics contend that a consumption tax would be tilted in
favor of the rich, because wealthy people tend to earn a
bigger share of their income from investments and can
afford to save and invest more of their earnings each year.


Within the Bush campaign, the debate centers on tactics:
would Mr. Bush simply invite more trouble by offering up
unfamiliar ideas that his opponents could attack as
giveaways to the rich? 

Mr. Kerry was almost giddy about denouncing Mr. Bush after
the president casually remarked, in answer to a question at
a campaign stop, that replacing the income tax with a
national sales tax was "an interesting idea" that was worth
exploring. 

Campaign officials quickly denied that they had plans to
pursue a national sales tax, but White House officials were
careful to add that Mr. Bush was "open to ideas" on how to
make the tax code fairer and simpler. 

One campaign official said the president clearly wanted to
make tax reform a goal for his second term, adding that Mr.
Bush felt even more strongly about the issue than he did
about the centerpiece of his last tax cut - a reduction on
taxes of stock dividends and capital gains that went into
effect last year. 

The administration already has a likely vehicle for a new
effort: a repair of the alternative minimum tax, a parallel
tax that was created to stop wealthy people from taking
unfair advantage of arcane tax breaks. But because the tax
is not adjusted to account for inflation and rising
incomes, it is expected to apply to millions of
middle-income families over the next several years, forcing
them to pay higher taxes. 

Democrats and Republicans agree they want to prevent that
from occurring, but the cost could exceed $500 billion over
10 years. The Treasury Department is under White House
orders to propose a long-term fix, and many officials see
it as a perfect opportunity to rethink the broader tax
code. 

But there is at least one sign that campaign officials are
reluctant to explore all the details during the heat of a
presidential race. Under White House instructions, the
Treasury study is not due until after the elections. 

http://www.nytimes.com/2004/08/15/business/yourmoney/15view.html?ex=1093599896&ei=1&en=6e3104a73247c6ef


---------------------------------

Get Home Delivery of The New York Times Newspaper. Imagine
reading The New York Times any time & anywhere you like!
Leisurely catch up on events & expand your horizons. Enjoy
now for 50% off Home Delivery! Click here:

http://homedelivery.nytimes.com/HDS/SubscriptionT1.do?mode=SubscriptionT1&ExternalMediaCode=W24AF



HOW TO ADVERTISE
---------------------------------
For information on advertising in e-mail newsletters 
or other creative advertising opportunities with The 
New York Times on the Web, please contact
onlinesales at nytimes.com or visit our online media 
kit at http://www.nytimes.com/adinfo

For general information about NYTimes.com, write to 
help at nytimes.com.  

Copyright 2004 The New York Times Company