Letter to Secretary John Snow

The Honorable John Snow


U.S. Treasury Department

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Dear Secretary Snow:

It was great to see you the other day, and thanks for asking for our input on the next steps for tax reform. We think you’re doing a great job, and we appreciate your leadership and hard work in support of meaningful tax relief for the American people.

While the 2001 and 2003 tax cuts are boosting economic growth and creating new jobs, the reality is that taxes are still too high and the tax code still too complicated. That’s why CSE stands ready to join you in the trenches to achieve another round of tax relief within the next year. Additional reductions should continue the drive towards a tax code that is simple, fair, low, and honest. To that end, CSE would like to offer you several policy options for the next steps in achieving our mutual goal of fundamental tax reform.

Permanence for the 2001 and 2003 Tax Cuts

The budget reconciliation process, while expedient, regrettably limits the life span of the two major Administration tax cuts. Congress should move quickly to convert these tax code changes into permanent law. Permanence in the tax code gives clearer guidance and certainty for American businesses and individuals making long term investment and planning decisions. Making the laws permanent creates no negative budget impact in the near term, and generates substantial medium and long term economic gains as investors and businesses are given the certainty that today’s tax policy will permanently carry forward.

Elimination of the Double Taxation of Savings and Investment

Although the 2003 tax reductions will provide for economic growth and new jobs, CSE believes that the president’s original proposal to completely eliminate the double taxation of dividends would have had an even greater impact. Let’s take the final step and completely repeal the dividend tax. Along the same lines, while we applaud the new lower tax rates on capital gains, we feel the capital gains tax should also be completely eliminated. Both taxes stifle capital formation and economic growth and represent an unfair form of double taxation.

Further Income Tax Rate Reductions

This year’s tax cuts will accelerate the 2001 marginal income tax rate reductions, which will immediately put more dollars into consumers and investors’ hands. Lowering marginal income tax rates improves the incentives to work hard, save and invest. CSE applauds these cuts, and we’re ready for more. Americans should be able to keep more of the money they earn, and President Bush has said that the government shouldn’t take more than one-third of any taxpayer’s income. The Administration should push for further income tax rate cuts to make the President’s principle a reality.

Permanently End the Death Tax

In addition, we’d recommend vigorously pursuit of permanent repeal of the death tax, and we’re cheered that the House is already planning to revisit this issue. The death tax is an unfair form of double taxation and contrary to the entrepreneurial spirit. The tax also has unusually high compliance costs, including planning costs on many families that don’t actually pay the tax. The 2001 tax cuts prescribed slowly phasing out this onerous tax with complete repeal in 2011. In 2012, however, the death tax will reemerge to confiscate family inheritances at rates up to 60 percent. Let’s finish the job started in 2001 and completely and permanently repeal the death tax.

Create and Expand Tax-Free Savings Accounts

We need to do more to help families save for education and retirement without creating new government spending programs. The President’s proposed Lifetime Savings Accounts and the Retirement Savings Accounts would each allow contributions of $7,500 per year of after-tax income, and future earnings would not be subject to income taxes. This would spark a new wave of wealth creation by giving American workers ownership over their personal accounts. With the LSA, withdrawals could be made any time and for any purpose, while with the RSA, earnings would remain tax free only if distributed after the owner reaches age 58. Both vehicles would let families and workers help themselves to achieve the American Dream. What’s more, these proposals will also simplify our tax code for employers and individuals.

No doubt, the tax cuts in 2001 and 2003 are tremendous moves forward. It’s time for the next step. Adopting the additional measures outlined here will further improve the incentives to work, save, and invest in new jobs and in the American economy. We look forward to continue working with you and the rest of the Bush Administration to advance policies that create a pro-growth tax system that is simple, fair, low, and honest.


Paul Beckner

President and CEO

Citizens for a Sound Economy

cc: The U.S. House of Representatives and the U.S. Senate

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