Test Case for Tax Reform: Statement from IPI President Tom Giovanetti

2/26/2003

From: Misty Woodruff of the Institute for Policy Innovation, 972-874-5139; e-mail: misty@ipi.org

DALLAS, Feb. 26 -- Following is a statement by Institute for Policy Innovation (IPI) President Tom Giovanetti:

"As the president's tax cut package is introduced this week, a chorus of opponents has begun to criticize the proposal because it takes away their precious tax advantages. Builders and developers of low-income housing, purveyors of municipal bonds, and the wind energy industry (among others) are all bawling that the president's proposal will hurt their business.

"The truth is that these special interest groups are beneficiaries of distortions in the economy caused by bad tax policy. Our lousy tax code, which virtually everyone thinks is in dire need of reform, is lousy precisely because it creates such distortions in the economy. And distortions in the economy cause winners and losers. It's those who are currently benefiting from distortions in the economy that are criticizing the Bush tax cut plan.

"The president's plan to eliminate the double-taxation of dividend income is a sensible and long-overdue reform of our tax code. And with the President's party in control of both the House and Senate, a sensible change in tax policy should pass.

"But if the chorus of those who have a vested interest in preserving the existing distortions in the tax code succeed in intimidating Congress and stopping the proposal, one has to ask whether there is any realistic chance of ever fixing the tax code.

"Tax reformers have recognized that it is politically hopeless to entirely replace the existing tax code with a new one. They've always known that tax reform would have to overcome the objections of those who are feeding at the trough of the existing tax code. So they have adopted an incremental strategy for tax reform.

"The president's proposal is particularly noteworthy because not only does would it stimulate the economy, but it also represents a major incremental step toward overall tax reform. The president's proposal is the first real test of tax reform."

IPI President Tom Giovanetti is available for interview. Please contact Misty Woodruff for arrangements at (972) 874-5139 or misty@ipi.org.

For further information on IPI's tax policy research, please visit http://www.ipi.org. IPI is a non-profit, non-partisan policy organization based out of Dallas.