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1985 Washington Fiscal Watch [1] (1985)

handle is hein.tera/wasfishwa0002 and id is 1 raw text is: TAX FOUNDATION, INCORPORATED ONE THOMAS CIRCLE, N.W., WASHINGTON, D.C. 20005-5802 (202) 822-9050 WASHINGTON FISCAL WATCH Latest Intelligence on Trends for Tax Foundation Members Washington, D.C. 6 P.M. January 10, 1985 Dear Member: Outlook for major change in the tax system in 1985 still is in the leak, counter-leak, trial and lead balloons stage. Biggest change may yet be a sharp rise in Federal gas tax, from 9J a gallon to, say, 201. That would bring in lots of dollars quickly and be sold as a temporary deficit crisis pill. The play on Capitol Hill apparently will be to try for another deficit squeezing law per the 1982 model, combining spending cuts (really just a slowdown in the upward climb of outlays, maybe accomplished via a one-year freeze in some agencies' budgets) plus revenue enhancements (really tax increases on everyone but especially hard on corporations and mid-to-upper income families). However, nothing is jelled. Reagan will play it all by hunch, by luck, and by incomparable political instincts -- which got him where he is, after all. Ugly reminder: Even if Congress does nothing in 1985 (we should be so lucky) you will face a minefield of corporate and individual tax increases and penalties passed in 1984 but just becoming effective in 1985. Another bonanza for accountants and lawyers. Get Joint Committee on Taxation's blue book explaining all the 1984 tax law changes, just released, if you can. Copies are scarce. Treasury dreams. Last autumn, at a brainstorming session, Treasury planners said this is what we would really like to do if we had a free hand, which we don't: * Double the present personal income tax exemption immediately (from-the present $1,000 to $2,000 plus the inflation-indexing factor). This would restore the exemption, in real terms, to 1950s levels. * Replace the present cumbersome Federal welfare grants monster with a negative income tax (pay those with income below a national minimum enough cash or food, rent, heat, medicare stamps to bring them up to the minimum). This would wipe out layers of incomprehensible bureaucracy and thousands of overpaid jobs at all levels of government so the lobbies opposing it would be awesome. * Adopt an entirely new tax system modeled along the Kemp/Kasten flat tax approach, over a period of time in graduated phases. * Meanwhile, simplify the present Code, mainly by broadening the base (subjecting more taxpayers to more taxes than they now pay in order to bring in more money to spend) through whittling away at deductions of all kinds. All of the above is only Treasury planners' dreaming. Yet parts of dreams sometimes come true. Second-term Cabinet forming. Interior Secretary William Clark's announced departure is more important than most such Cabinet shifts. His solid, moderate counsel will be missed by the President personally, and by the President's closer friends. And it probably hastened the Baker-Regan switch (Baker from White House Chief of Staff to Treasury Secretary; Regan from Treasury to White House). How long that lasts is anybody's guess. Meanwhile, the Washington rumor bees are buzzing