Clinton Rips ‘Reckless’ Overhaul of Tax Code

Facing an unexpected stampede in Congress to wipe out the U.S. tax code and replace it with a radical new system, President Clinton on Monday denounced the approach as “misguided, reckless and irresponsible” and warned that it would imperil the economy.

In an unusually pointed attack, Clinton and his top advisors assailed popular legislation in the House and Senate that would end the current tax code on Dec. 31, 2001, to make way for a wholly new version.

“No one concerned about fighting crime would even think about saying, ‘Well, three years from now we’re going to throw out the criminal code and we’ll figure out what to put in its place,’ ” Clinton told the National Mortgage Bankers Assn.

“No one would do that. That is what this proposal is. That is exactly what some people in Congress are proposing to do.”

At the same time, Clinton acknowledged that he was on risky terrain, given public disenchantment with the Internal Revenue Service and the widely panned tax system it oversees. He too gets “outraged” by IRS abuses, he said, and has supported reforms, including a Taxpayer Bill of Rights designed to help the public cut through red tape and recover costs in lawsuits.

Noting that no one “ever wants to say” anything positive about the IRS or the tax code, Clinton conceded: “This is a hazardous discussion that it’s easier to enter into maybe because I’m not on the ballot anymore.”

The plan to “sunset” the nation’s tax code sounds “almost irresistible,” Clinton said, “but so was the siren song.”

The president’s comments were prompted by a surge in support for identical House and Senate proposals intended to spark a nationwide debate on eliminating the tax code.

Senate Majority Leader Trent Lott (R-Miss.), backed by the entire Republican leadership of that chamber, has pledged that a measure to wipe out the tax code will be brought up for a vote this year. The House version, sponsored by Rep. Steve Largent (R-Okla.), now has 143 co-sponsors.

Meanwhile, the National Federation of Independent Business, an influential small-business lobby, has embarked on a campaign to scrap the tax code and is collecting what it hopes will be 1 million signatures for the cause.

Confident that they have struck a vein of popular sentiment, the anti-tax-code advocates quickly shot back at the president Monday: “With less than six weeks left before Americans must file their tax returns, President Clinton has once again shown himself to be out of touch with the plight of the American people,” said Sen. Tim Hutchinson (R-Ark.), a sponsor of the Senate bill.

“We anticipate that it will be voted on this spring and it will pass,” Largent aide Terry Allen said of the proposal.

Under the legislation, a replacement tax code would be passed by July 4, 2001, several months before the current system would expire so it could be phased in gradually. But legislators have yet to agree on what the replacement would look like, other than that it would be simpler than today’s model. Calls for a national sales tax or a flat tax, in which brackets and deductions would mostly be eliminated, have champions as well as critics.

Like the White House, proponents of a new tax system cite the strength of the economy in their arguments, maintaining that the current jumble of rules suppresses growth and prosperity.

“Starting from scratch, Congress, the president--and most importantly, the American people--would be able to design a fairer, simpler tax code,” Hutchinson maintained.

Republicans also argued that their plan to set a deadline for the tax code served a practical benefit by creating pressure for change of a system that has been resistant to major reforms.

“Terminating the tax code is a forcing event,” Lott declared. “It would force the Congress and the White House to act, to replace the tax code. If we don’t create a deadline, it will be much harder to make tax reform happen. Clearly, this president needs to be forced to consider fundamental tax reform, just like he needed to be forced to fix the IRS.”

Clearly, the White House is aware of the sensitivities of the issue.

We “are making changes, and must continue to do so,” Clinton said of reforming the IRS. Still, the president and his aides argued that the proposals threaten to wreak havoc with the economy, because uncertainty about taxes could inhibit all sorts of investment decisions.

“Scrapping the home mortgage deduction, scrapping other middle-class tax cuts without presenting a clear alternative is simply reckless for the economy, reckless for businesses, reckless for families’ budgets,” said the president, deriding the “sunset” approach as an “irresponsible” and “misguided” effort that he would not permit if he could help it.

“It would mean that you would know there would be no home mortgage deduction but you wouldn’t know what would be in its place,” Clinton said. “There might be no charitable-contribution deduction but you wouldn’t know what would be in its place. . . . All that would be certain about this proposal is uncertainty.

“With no ability to predict the consequences,” he added, “businesses might decide to postpone, cancel or pare back on plans to buy new computers, build a new factory, hire new workers.”

Certainly, Monday’s White House efforts did not end the debate, which could peak during the presidential election year of 2000.

Steve Forbes, a possible candidate for the Republican presidential nomination in 2000 who strongly pushed the flat tax in his 1996 bid, also joined in, declaring: “President Clinton is defending the indefensible, a federal income tax code that’s the biggest source of political pollution and corruption in this country today.”

Times staff writer Janet Hook contributed to this story.