UBS: Tax Reform May Yield To Other Tax Priorities

By John S. McClenahen Making previously enacted tax cuts "permanent" and reforming Social Security could move ahead of the Bush administration's contemplated comprehensive tax reform, suggests Susan Hering, a senior economist at UBS Securities LLC. A downside: making the Bush tax cuts permanent "would complicate tax reform by raising deficits and eating into revenues that could be used to finance broad tax reform," says Hering. UBS expects Bush to launch his tax reform program -- so far described only as simpler and fairer -- by appointing a bipartisan commission to examine options. However, "we doubt the panel could report very soon; first because committees seldom act quickly, particularly when the issue is as complicated as tax reform; and second, because the panel must hold public hearings and consult with Congress," she states. Bottom line: "We believe any option other than a limited reform of the personal income tax would likely take more than a year to approve -- and longer yet to implement," says Hering.

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