Pennsylvanians in Support of the FairTax Act - In the News - National -Sec. Snow talks to PA businesses in Wilkes-Barre 10-28-04 (newsSecSnow102804)

Treasury Sec.Snow--consumption tax to be on U.S. reform agenda
Thu Oct 28, 2004 06:19 PM ET
By Laura MacInnis

WILKES-BARRE, Pa., Oct 28 (Reuters) - Replacing the U.S. income tax with a consumption tax "will be on the table" in upcoming discussions, Treasury Secretary John Snow said on Thursday, adding such a move could help the United States narrow its large current account deficit.

Addressing business leaders in Wilkes-Barre, Pennsylvania, Snow said the White House would appoint a bipartisan panel "shortly" to review possible changes to the U.S. tax code.

"Consumption taxes certainly will be on the table," Snow said in response to a question from business leaders meeting in Wilkes-Barre, Pennsylvania.

"There is a lot of merit in those ideas, especially against the backdrop of our current account deficit, which we hear a lot about, which really reflects the fact that we have a lot more investment opportunities in our country than we have savings," Snow said.

Consumption taxes are taxes on what people spend instead of what they earn. Interest earned from savings is generally exempted from consumption taxes, which could help raise the low U.S. saving rate.

Much of the U.S. debate over consumption taxes has centered on whether the country should adopt a value-added tax (VAT) on goods sold. Some have called for consumption taxes to replace income taxes entirely, which others have suggested they could exist alongside lower interest tax rates.

The Treasury chief did not say exactly when the tax reform panel would be named or when its conclusions might be expected. He stressed he would seek a variety of opinions on ways to simplify the tax code.

"There will be strong advocates for a variety of approaches here," he said, adding the group would likely also mull the possibility of both flat-rate income taxes and consumption or sales taxes.

Some critics say consumption taxes have a heavier impact on lower income Americans because they must spend a larger proportion of their incomes on essentials like food, shelter and clothing.

Snow has repeatedly said simplification of the tax code will be a priority for the Bush administration if Bush is elected to a second term in Tuesday's election. He has not laid out any specific priorities for the bipartisan reform panel, which Bush first announced in the summer.

Separately, Snow pressed Congress to make Bush's tax cuts permanent when it returns to session in mid-November and said the cuts were factored into the administration's plans to halve the budget deficit in five years.

"We're on a course, I think, to bring the deficit down to well below 2 percent of (gross domestic product)," Snow said. "Bringing it down to about 1.5 or 1.6 percent of GDP will bring us a deficit level that is readily manageable."

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