Tommy Thompson on Tax Reform Former Secretary of H.H.S.; former Republican Governor (WI)

Replace alternative minimum tax with flat tax

A: I was governor of Wisconsin and vetoed 1,900 items, and reduced taxes $16.4 billion. I think the biggest problem we’ve got in America is the alternative minimum tax that’s bringing more middle-income people in. Let’s put it in -- let’s have the people have a flat tax and have the option of paying whichever is least.

Cut taxes 91 times in Wisconsin, totaling $16.7 billion

And tonight, the state’s national tax ranking has fallen to ninth in the nation. And when the cuts we enacted for years 2000 and 2001 are factored into the equation, we can say with confidence that Wisconsin is finally out of the top 10 states.

Tax cuts are an investment in working families

No national sales tax or VAT.

State tax policy is closely linked to federal policy. 36 states currently use either federal income or federal tax liability as the state tax base for personal income taxes. It is critical that Congress and the administration do not enact tax reform in a vacuum, but in consultation and in partnership with the nation’s Governors.
• National Sales or Value-Added Tax The nation’s Governors oppose a national sales or transactional value-added tax. Such taxes would intrude into a tax area that has traditionally been reserved for and relied on by state and local governments. If enacted, either of these taxes would seriously threaten the ability of state and local governments to maintain their tax base.
• Current Income Tax If Congress decides to reform the current tax system, they should reduce the complexity of current income taxes; increase incentives to work, save, and invest; and increase efficiency and fairness. As part of any reform of the current income tax, the nation’s Governors would oppose any modification to the deductibility of state income taxes, property taxes, and the interest on state and local bonds.
• Transition If major tax reform is enacted, it should not be implemented for at least three years, to give states ample time to adjust their own tax systems.
• Information Needs of the StatesThe ability of states to tax various revenue sources depends to a large extent on information that only the federal government can collect. This is becoming much more important given the complexity of both the international and domestic economies in tracing where goods and income are generated. It is critical that the federal government separate tax reform per se from the information that is collected from individuals, businesses, and corporations with respect to income generated. The data collection role of the federal government must be developed in partnership with state and local governments.