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CNBC: Erskine Bowles's Wipe the Slate Clean Tax Reform

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Bowles makes the case for a "blank slate" approach for tax reform, first eliminating all tax expenditures and then deciding which tax provisions to add back.

This morning, Erskine Bowles, co-chair of the Moment of Truth Project and former co-chair of the Fiscal Commission, reiterated his support in an interview on CNBC for a “Zero Plan” or “Blank Slate” approach to tax reform, such as the one now being pursued by the Senate Finance Committee. This approach – in which all specific tax preferences are dropped from the individual and corporate tax codes and then lawmakers are asked to justify their re-inclusion – was a central pillar of the Fiscal Commission’s recommendations to reform our antiquated tax code.

“We have a tax code that is not only inefficient and ineffective – it's also globally anti-competitive,” said Mr. Bowles. "Our tax code hasn't been reformed since 1986. That's 27 years. I mean, just think about how the world has changed economically over the last 27 years and how the U.S.’s competitive position has changed during that time period."

Bowles praised the bipartisan leadership of this effort, Senate Finance Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT), a step toward a more efficient and fair tax code. Starting from scratch would eliminate the “$1.3 trillion of annual back-door spending in the tax code” – larger than last year’s federal budget deficit - and force lawmakers to justify their cost.

Bowles argued the only reason any deduction, credit, exemption, or other tax expenditure should be added back in the code is if it were to increase economic growth, help the code become more fair, or achieve some other stated policy objective. Such a plan, said Bowles, could bring down tax rates while also decreasing the deficit. Even if lawmakers wished to add back certain tax provisions, there would be an opportunity to redesign these tax expenditures increasing their fairness and efficiency while forgoing less revenue. The popular mortgage interest deduction, for instance, could be turned into a credit, as was done in the Fiscal Commission's plan, benefiting some of the 73 percent of people who do not itemize and are not able to take advantage of the tax provision.

With more work to be done to get the country's debt under control, the new direction is an encouraging sign for Bowles. "I'm so enthusiastic that we finally had some leaders in the Senate and in the House of Representatives come forward with a plan to reform our tax code," he said.

Click here to see the full video.

Jul 1 2013