Former Senator John Breaux (D-Louisiana), who co-chairs President Bush’s Advisory Panel on Federal Tax Reform, told a group of insurance executives in Washington October 11 that Social Security reform is off the table for this year but that the tax panel will present its recommendations to Bush on how to reform the tax code by November 1.
The tax reform panel was originally scheduled to hand over its recommendations by September 30, but the panel had to postpone two of its public meetings that were to be held in September. The first of the rescheduled meetings took place on October 11 while another meeting is set for October 18.
Breaux told attendees of the American Council of Life Insurers meeting that Social Security reform is dead in the water for now because Republicans “fear backlash” from the senior citizens who oppose any changes to the current system. He said many seniors want lawmakers to “fix” Social Security, but they don’t want Congress “to cut benefits or raise taxes,” he said. “This is an impossible challenge.” Some changes will have to occur before it can be fixed, he said.
As for tax reform, Breaux said the tax panel will recommend that the Alternative Minimum Tax (AMT) be abolished. The challenge, however, is replacing the $1.3 trillion in revenue that’s generated by the AMT. He said that “tough decisions” will have to be made to replace that money, “but we are going to do it.” Breaux assured life insurers that he would try his best to make sure not to tax the inside build-up of a life insurance policy.
Breaux said the tax panel has considered a national retail sales tax–which has garnered little support–a flat tax, as well as a value-added tax to supplement income tax. At its October 11 meeting, the panel suggested reducing the total amount of mortgage debt for which interest is deductible and limiting tax deductions for employer-provided health insurance.