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Cato Daily Dispatch for November 14, 2003

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Tax Simplification Plans in the Works
White House: High Hopes for 'Iraqification' Strategy
Louisiana Governor's Race Neck-and-neck

Tax Simplification Plans in the Works

According to the New York Times, "senior Bush administration officials said Thursday that they were considering plans to simplify the tax code and to revive earlier ideas for savings plans that would allow people to exclude almost all their investment income from taxes.

"In a speech before the Tax Foundation, a policy group here that advocates lower taxes, Treasury Secretary John W. Snow said his staff was preparing 'a number of proposals to simplify the tax code' and resurrected the idea of 'lifetime savings accounts' that would allow people to put aside large sums of money and pay no tax on the investment income they receive."

Administration officials looking for tax-simplification inspiration would do well to consult "Simplifying Federal Taxes: The Advantages of Consumption-Based Taxation", by Cato's director of fiscal policy studies, Chris Edwards.

"Minor simplification reforms will not be enough," Edwards argues in the study. "The tax system is caught in a spiral of continual change and nonstop growth in rules.

"The complexity and inefficiency of the individual and corporate income taxes have led to great interest in replacing them with a consumption- based tax. The leading consumption-based tax proposals, including the national retail sales tax and the Hall-Rabushka flat tax, could dramatically simplify federal taxation." Edwards concludes, "those tax systems would eliminate many of the most complex aspects of federal taxation, including depreciation accounting and capital gains taxation."

White House: High Hopes for 'Iraqification' Strategy

"At least four factors forced the administration to overhaul its military and political strategy in Iraq, despite the danger that a new approach might actually diminish U.S. control over the country's future," The Washington Post reports.

"The new approach amounts to Iraqification, or the handing over of responsibility for both a deteriorating security situation and a stalled political process to Iraqis. The goal, national security adviser Condoleezza Rice told reporters yesterday, 'is that we find ways to accelerate the transfer of authority to the Iraqi people.'"

While giving Iraqis more control in the rebuilding of their country is a welcome development, U.S. planners may ultimately find their high hopes thwarted. Patrick Basham, senior fellow at Cato's Center for Representative Government, writes in "Flying Blind on the Path to a Democratic Iraq" that "Iraqi political culture is still characterized by 'identity politics,' i.e., the elevation of ethno-religious solidarity over all other values, including individual liberty. Hence, political freedom is an alien concept to most Iraqis. The United States is attempting to sow the seeds of 21st century political institutions in the soil of a 15th century political culture. In coming seasons," Basham concludes, "a bountiful democratic harvest is an unrealistic prospect."

Louisiana Governor's Race Neck-and-neck

According to the BBC, "as polling looms in Louisiana on Friday, Bobby Jindal is facing a tough battle to become the nation's first governor of Indian origin.

"Mr. Jindal, who is of Punjabi descent, is neck-and-neck in the polls with Kathleen Blanco, a Democrat of Cajun origin."

In "Grand Old Party of Immigrants?" Cato's executive vice president, David Boaz, argues that in the wake of fellow Republican and immigrant Arnold Schwarzenegger's stunning victory in California, if Jindal wins the Louisiana race, Boaz writes, "he'll be another star and another symbol of American openness and opportunity.

Jindal and Arnold "may go a long way toward improving the image of the Republican Party in America, and the image of America -- land of freedom and opportunity -- in Europe, Asia and the rest of the world."

Christopher Kilmer, editor, ckilmer@cato.org