Hatch outlines plans for short-, long-term tax changes

By Glen Johnson, Associated Press, 12/17/99

WASHINGTON -- The American tax system is broken and needs major changes in the short term and a complete overhaul in the long term, Sen. Orrin Hatch today told an audience on the presidential campaign trail in New Hampshire.

Hatch, R-Utah, said that if he is elected president, he will appoint a commission on his second day in office that will propose the long-term changes, including eliminating the Internal Revenue Service and replacing the progressive income tax with a national sales tax.

That same day, he also would send Congress interim legislation to:

-Double the personal exemption.

-Allow a deduction for Social Security taxes paid.

-Eliminate capital-gains taxes and exempt the first $5,000 in dividend income, or $10,000 in income for couples filing jointly.

-Eliminate the "marriage penalty" and estate and gift taxes.

"If we merely tinker with the tax code, the changes can be easily reversed by a subsequent administration," Hatch said in remarks delivered to a breakfast meeting of the Nashua, N.H., Chamber of Commerce. "This house is broken, and it can't be fixed by rearranging furniture in the living room. It has to be torn down and built anew."

The senator did not identify the tax rate for his proposed national sales tax, nor did he provide an estimated cost for his plan. He also did not outline any principles of economic growth upon which it would be based.

He estimated that the deduction for Social Security taxes would save the average two-income American family $1,770 a year in income taxes. He said increasing the personal exemption could save the average family of four as much as $3,000 a year.

This summer, Hatch voted in favor of a 10-year, $792 billion tax package passed by the Republican-controlled Congress that. President Clinton vetoed it, saying it would have run the nation deeper into debt.

Hatch, a member of the Senate Finance Committee, complained that in general, Americans are overtaxed.

"Today, we pay a higher percentage of our gross domestic product in taxes than at any time since World War II," the senator asserted. "Back then, we were, of course, saving the world. Today, high taxes pay for a slightly less noble goal: saving the bureaucracy.'

Hatch said New Hampshire voters, whose state motto is "Live Free or Die" and who pay no sales or income tax, are overburdened by the existing system, paying more to Washington than the federal government spends in their state.

"New Hampshire gets less money than any other state in the union, per capita. And yet, (Democrats) Bill Bradley and Al Gore refuse to rule out tax hikes. In fact, they are proposing billions and billions in new spending. These guys have to work in government because you sure couldn't run a business with that kind of math," Hatch said.

Toward that end, Hatch wants a national sales tax that contains exemptions for "necessities of life" such as food or medicine.

Other Republican presidential candidates, including Steve Forbes and Gary Bauer have proposed flat, or single-rate, income taxes. The front-runner for the nomination, Texas Gov. George W. Bush, recently proposed a plan that would cut taxes $483 billion over five years.

"If you accept the premise, which I do, that any tax is a disincentive to the activity taxed, then I believe it is better for our nation to reward saving rather than penalize the effort to earn more," Hatch said in defending his idea.