Unfinished Business

From IBD:

Posted 3/6/2006

Tax Cuts: House Ways and Means Chairman Bill Thomas, R-Calif., has announced he'll retire from Congress when his term ends. But he's got a big job to do first: making the Bush tax cuts permanent.

'I haven't finished my work, and I have nine months to go," Thomas said as he announced Monday that, with self-imposed term limits ending his chairmanship of the House Ways and Means Committee, he wouldn't run for re-election.

As chief House tax writer, Thomas deserves plaudits for improving President Bush's tax-cut program, specifically reducing the capital gains rate to 15%. Bush wanted to eliminate taxes on dividend income; Thomas floated a compromise to tax both capital gains and dividends at the lower 15%. Convincing the White House, fellow congressmen, and the Senate was no mean feat.

The lower cap-gains rate has been a big boost to what is now a powerful economic expansion, and a great deal of the thanks goes to Thomas. He also defied the odds by making progress in international tax reform, and was a key player in passing CAFTA.

But there's been a downside, too — like Thomas' role in securing Republican votes for the huge expansion of Medicare via a new prescription drug benefit.

For that, the Foundation for Taxpayers and Consumer Rights called Thomas "an embarrassment." And the conservative California Republican Assembly this past weekend officially welcomed Thomas' "none-too-soon retirement" as a big spender.

But Thomas has some big fans. One is Stephen Entin, president of the Institute for Research on the Economics of Taxation, who lauds Thomas' accomplishments and his ability to work with Congress, especially in cutting the capital gains tax. "At times when people had given up on getting good ideas enacted, he got backing in Congress and got it done," Entin told IBD.

Thomas says in the time he has left he wants to reform our "flawed income tax structure."
A full-blown tax reform that shields savings and eliminates double taxation, while very welcome, is an ambitious goal this election year. But with Thomas' formidable abilities, Entin thinks he could instead use his remaining months as chairman to repeal the burdensome estate tax, and make the lower tax rate on capital gains and dividends permanent.

In doing so, Thomas would help keep our current economic boom going. He'd also cement his own legacy as one of the most effective Ways and Means chairmen in history.