DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
JUN 28 2006
The Honorable Bob Goodlatte
U.S. House of Representatives
Washington, DC 20515-4606
Dear Mr. Goodlatte:
Thank you for your letter of November 23, 2005, to the Office of Legislative Affairs, forwarding letters by your constituents and his associates, regarding the report by the President's Advisory Panel on Federal Tax Reform (the "Tax Panel"). Your constituents expressed concern about employee stock ownership plans (ESOPs). Because your letter deals with a matter of tax policy, it was referred to me.
America needs a tax code that is in tune with our dynamic 21st Century economy. As the President indicated when creating the Tax Panel, the tax system needs to be simple, fair and pro- growth. It should allow taxpayers to make decisions based on economic merit, free of tax- induced distortions. The Tax Panel put forward in its Final Report a set of recommendations that provide a strong foundation from which Treasury can do its work to develop a recommendation for the President.
In the coming months, the Treasury Department will continue to study tax reform and evaluate alternatives as it engages in a public dialogue on this important issue. The Panel's recommendations were silent on the issue of the tax treatment of employee stock ownership plans. We agree with you that changes to the tax code should recognize the importance of ownership in today's society, as well as promote savings and financial security for all Americans. Tax reform also needs to ensure that our tax system meets the needs of today's economy by making health care more affordable and accessible to a mobile labor force, encouraging investment and entrepreneurship, and enhancing our competitiveness by lowering the cost of capital.
Rest assured that the comments in )'our constituents' letters will be taken into account as :he Treasury Department considers its recommendations to the President on tax reform.
Sincerely
Robert Carroll
Deputy Assistant Secretary (Tax Analysis)