Greenspan Calls for Simpler Tax Code

Calling the existing U.S. tax code overly complex with an "overlapping web of deductions and exemptions, " Federal Reserve Chairman Alan Greenspan suggested a consumption tax could spur more personal savings and economic growth.

Greenspan spoke Thursday before an advisory panel on tax reform appointed by President Bush. He referred to the last tax code overhaul in 1986.

"Changes since the 1986 act have been largely incremental without the appropriate all-encompassing context that broad reform brings to the table," Greenspan told the group, according to The New York Times. "It is perhaps inevitable that, every couple of decades, drift needs to be addressed and reversed."

He said many economists would support a consumption tax, "particularly if one were designing a tax system from scratch." Since the United States is not starting from scratch, he said, enacting a consumption tax "raises a challenging set of transition issues.” He noted taxpayers have long planned their financial future based on the existing rules.

"Don't try for purity," Greenspan said, suggesting that some combination of a consumption tax and other levies might be appropriate. A consumption tax, which would be based on spending, not earnings, may encourage Americans to save more money, he said.

Democrats have expressed concern that a consumption tax, such as a sales tax, is regressive, hurting the poor. "But I would say let's go to the table," said U.S. Rep. Nancy Pelosi (D-Calif.), the House Democratic leader. "Democrats stand ready to sit down with the president to talk about a simplification and fairness in our tax code."

The panel, led by ex-senators Connie Mack III, a Florida Republican and John B. Breaux, a Democrat from Louisiana, was given six months to come up with a reform proposal.

President Bush's chief spokesman, Scott McClellan, would not comment on how Bush feels about a consumption tax. But he did say, “"Our tax code is a complicated mess."

You may like these other stories...

IRS audits less than 1 percent of big partnershipsAccording to an April 17 report from the Government Accountability Office (GAO), the IRS audits fewer than 1 percent of large business partnerships, Stephen Ohlemacher of the...
Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.