Obama To Name Panel To Rebalance Tax Code

On whose backs will the tax code be rebalanced?

President Barack Obama is putting former Federal Reserve Chairman Paul Volcker in charge of a tax- code review aimed at closing loopholes, streamlining the law and generating revenue, budget Director Peter Orszag said.

Volcker, 81, who heads the president’s Economic Recovery Advisory Board, is being asked to take a look at the laws in an effort to rebalance the tax system.

Orszag said the review, given a deadline of Dec. 4, is being ordered to make recommendations on steps to simplify the code, built over the last 96 years, in ways that would reduce tax evasion and what he called “corporate welfare.”

“There are hundreds of billions of dollars in uncollected taxes each year,” Orszag said in a conference call. The Volcker board “will be examining ways of being even more aggressive on reducing the tax gap.”

The tax gap is the difference between the amount of taxes owed by taxpayers and companies and the amount collected. Orszag cited academic studies suggesting that the difference is $300 billion or more. That is “ a lot of money,” he said, adding that the administration is going to be “as aggressive as possible” in reducing it.

A more fundamental question is why the sudden disdain for corporate welfare.

How exactly is that different than the corporate bailouts we've repeatedly seen since last year, and which President Obama has found unsatisfactory since he's called for the Treasury Department to have still more control over businesses not currently within its grasp so that they can shutter and liquidate them.

There is a real difference between the two. Corporate welfare includes tax breaks designed to minimize government intrusion, while the bailouts maximize the government's interference in the markets. Both, however, distort market operations and needlessly complicate the tax code.

Tax simplification is needed after years of tacking on provisions and complicating the tax code to the point that it requires businesses and individuals to shell out billions of dollars annually to figure out their tax obligations (though some do it better than others as Tim Geithner could attest to). Simplification could result in higher tax collections.

Some in Congress aren't exactly happy with this announcement, claiming that the job of writing the tax code resides in Congress, not in an executive branch task force. They've got a point.