WASHINGTON – The top tax policy mavens in the House and Senate are partnering in an effort to rewrite and simplify the nation’s 4,000-page code and doing everything possible to generate enthusiasm for what promises to be a herculean effort.
Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, and Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, have together expressed an urgency to reform the Internal Revenue Code and have been discussing the possibility with their respective panel members for several months.
Camp and Baucus have launched a website, taxreform.gov, to obtain recommendations from the public on how to proceed and are conducting a series of hearings on the issue, the latest coming Thursday when Camp took his Ways and Means panel on a tour of the sexy issues of tax havens, base erosion, and profit shifting.
The pair also has announced plans to tour the country.
“I don’t think we have a lot of time to wait,” said Camp, adding that he and Baucus have been working on the effort, both jointly and separately, for several years.
The pressure to do something, Camp said, comes from “the fact that a quarter of the kids coming out of college can’t find a job, the fact that there are the highest number of people since the Carter administration who just stopped looking for work and then even if you have a job you may not have had a wage increase in a while.”
“So that is what’s really driving me on this — the jobs and the economy issue and also the complexity of the code,” he said. “Obviously we’re both committed to making this a reality because we can’t afford to wait. We think the time is now.”
There’s another reason time must be now for Camp and Baucus, who have become friends as a result of the process. Baucus is retiring and will leave office after the 2014 elections. And Camp is term-limited as chairman of the tax-writing panel.
Baucus noted that tax reform hasn’t been successfully undertaken since 1986. Since then, the tax code has been amended 15,000 times.
“The barnacles have grown back up again,” Baucus said.
“Each year goes by we’ve had more exceptions, correlations, modifications and so forth that different groups want and basically Congress goes along with it,” Baucus said. “It’s all built up.”
Just what form this version of reform might take remains to be worked out, although the lawmakers already agree on several points. Both are striving to simplify a tax code that, for instance, contains 43 different definitions of what constitutes a small business.
“There are so many good simplification policies that we agree on,” Camp said. “One of the things that 80 percent of Americans agree with is the code is too complicated. I think the average person should be able to fill out their own taxes. Small businesses, 90 percent of them, have to have preparers because they’re afraid they’re going to get audited.”
Camp and Baucus agree that the nation’s corporate tax rate of 35 percent, the world’s highest, desperately needs to be reduced. The current structure, Baucus said, encourages corporations to “put plants overseas.”
But in addressing corporate rates, both said, adjustments will be necessary to make it less desirable for companies to take advantage of tax havens and fix tax base erosion resulting from firms moving offshore.
Some are looking at the increased revenues that can be gained by addressing base erosion while others insist that any changes must be revenue neutral. That, Baucus said, is one of the key issues that will need to be compromised and resolved.
Otherwise, the two lawmakers said, all tax issues are under the microscope –including the mortgage interest rate deduction particularly popular with the middle class.
“Everything’s going to be on the table,” Camp said. “We’re going to look at all of the items. If there is consensus on an item that is going to be reformed or is going to stay as is, that’s where the rate is going to end up being and that’s the sort of trade-off and discussion I want to have and am having with the members of my committee.”
He added, “There’s a blank sheet of paper going in and we’ll see what comes out.”
Momentum for tax reform appears to have slowed somewhat as a result of the House Ways and Means Committee and the Senate Finance Committee both looking into the scandal regarding the Internal Revenue Service targeting of conservative groups seeking tax-exempt status. Both panels have spent a considerable amount of time on the issue and likely will continue to do so in the near future as they take testimony from those involved and await the arrival of pertinent IRS documents.
But Baucus maintains the focus on the scandal has not had a dilatory effect on tax reform.
“I think the IRS revelations are, frankly, helping to spur and help people realize the need for a reform bill,” he said.
And the chairmen may have bought some time, serendipitously so, as a result of the looming debate over the nation’s debt limit. House Republicans and others are looking to tie approval of the debt ceiling increase with an issue like tax reform. But because federal revenues are increasing and spending is down, the debt limit issue may not raise its head until mid-October, giving Camp and Baucus an elongated opportunity to put some package together.
President Obama has expressed support for tax reform but, to this point, he has not gotten in the middle of it.
“I think he wisely is looking at tax reform in same way he looks at immigration reform — that’s carefully,” Baucus said. “In this climate, it may not be wise to be too upfront too soon. It might cause a bit of a storm. But he’s very involved – I meet with him on tax reform.”
Both men agree that a successful reform effort will contribute to the nation’s fiscal health.
“Tax reform is going to help the American economy,” Baucus said. “Help get jobs. And in this competitive world of ours we have to do everything we possibly can, legitimately and reasonably, to help the American people, help American small business, help American multinational corporations, American companies so they can compete better with less red tape and be less hidebound so they can focus more on jobs.”