U.S. needs major tax reform, say speakers at the USC Law 2003 Institute on Federal Taxation

Former Congressman Bill Archer gives his luncheon keynote address.

The increasingly global economy requires that the United States reform its international tax code to make American companies more competitive and more efficient, U.S. Treasury Assistant Secretary Pamela Olson told attendees last week in a luncheon keynote address at the USC Law School 2003 Institute on Federal Taxation.

Olson said significant changes to the nation’s international tax rules are inevitable. She said the current tax code, the bulk of which was created a century ago, is outdated and creates hurdles for multinational companies bringing profits back to the U.S.

If change is inevitable, the question is what we should do,” Olson said. “We must write tax rules that take into account what other countries are doing. We must also reconsider the extent to which our rules impede the flow of capital of U.S. businesses, necessitate inefficient business structures and operations, and leave U.S. companies and workers in a less competitive position.”

Olson’s luncheon keynote address came on the first day of three days of speeches, panels and evening workshops that offered expert perspectives and updates on tax law and policy. One of the six major institutes of the Continuing Legal Education Program at USC Law, the tax institute also addressed real estate and partnership tax planning, mergers and acquisitions, estate planning and corporate and business tax planning.

Along with Olson, Professor Erwin Chemerinsky and Bill Archer, former chairman of the House Ways and Means Committee, also delivered luncheon keynotes. Chemerinsky gave an enthusiastically received talk entitled, “My Life as a Taxpayer Litigant.” Archer offered some insights into current developments taking place in Congress that may affect the tax code.

Archer said Congress will likely force changes to President Bush’s proposed tax-cut plan, particularly his initiative to eliminate the tax on earnings from corporate dividends. He also predicated that attempts to repeal the so-called “death tax” will pass in the House but will ultimately fail in the Senate. Instead, the Senate will try to push for the inclusion of payroll tax relief in Bush’s plan.

Finally, Archer said the federal government should fundamentally reform the tax system, chiefly by repealing the income tax.

“We need to not use income as a basis for tax,” he said. “I agree with (Professor) Ed McCaffery, there should be a zero tax on savings.” Archer has proposed a “border adjustable tax,” a value-added tax that is levied at each stage of production and is assessed on imports but not exports. He said Americans’ future standard of living depended on such a major overhaul of the tax code.