WASHINGTON (AFP) — The White House Wednesday announced a new task force headed by former Federal Reserve chairman Paul Volcker to reform the Byzantine US tax code in the hope of recouping billions in lost revenue.
White House budget chief Peter Orszag said Volcker and four other top economists will report their recommendations back to President Barack Obama by December 4, and their review will cover three main areas.
"One is tax simplification, the second is closing tax loopholes and reducing tax evasion, and the third is reducing corporate welfare," the director of the Office of Management and Budget told reporters.
Orszag said the Volcker panel would also examine offshore tax havens, a major agenda item for Obama and other Group of 20 leaders at a summit convening in London next week to address the global economic crisis.
"One of the key things that the Volcker board will be examining is ways of unifying, streamlining, making more consistent the various credits that are out there," he said, citing the complex array of tax breaks now on offer.
Orszag pointed to a 2005 estimate by the Internal Revenue Service that the US tax gap -- the difference between what companies and individuals owe and what they actually pay -- exceeds 300 billion dollars a year.
"Three hundred billion dollars a year or more is a lot of money, and we are interested in being as aggressive as possible to reduce that number."
Tax reform is a perennial US debate. But the enormous Internal Revenue Code has only grown in recent years with the addition of new levies and giveaways by Congress, spawning an entire consulting industry to profit from its loopholes.
The president wants to go after those loopholes, White House spokesman Robert Gibbs told reporters.
Obama hopes the Volcker panel can "take an honest look at the budget, and go through and determine if there are steps that can be taken by Congress and this president to institute greater fairness in the tax code," he said.
The blue-ribbon task force is being assembled with experts drawn from the "President's Economic Recovery Advisory Board" chaired by Volcker.
Orszag said Volcker would be joined by former Securities and Exchange Commission chairman William Donaldson; Harvard professor Martin Feldstein, who was the chief economic adviser to Republican president Ronald Reagan; former Fed vice chairman Roger Ferguson; and Laura Tyson, who was a principal economic adviser to president Bill Clinton.
The task force will have two constraints: it cannot recommend any tax increases in 2009 or 2010, and it cannot call for taxes to be raised on families earning less than 250,000 dollars a year.
"Beyond those two constraints, the task force is open to consider options of any sort that it sees fit," Orszag said.
The Volcker team's recommendations will come in time for the next fiscal year's budget, as Obama's 3.6-trillion-dollar proposal for this year navigates a tricky passage through Congress.
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