WASHINGTON – While official Washington continues to mull over the Syria crisis and budget matters, the chairmen of the House and Senate tax-writing committees are toiling behind the scenes to develop a simpler and fairer code.
Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, have conducted several meetings with individual taxpayers and businesses over the past six weeks to boost support for an initiative many consider unattainable in a divided Congress – comprehensive tax reform.
“The U.S. tax code has not been updated in close to 30 years,” the pair said in a joint statement after a recent session in Minneapolis. “In that time, it has become increasingly complicated. Our tax code today contains nearly four million words and is riddled with loopholes that are acting as a brake on our economy. We have an opportunity to change all that. Tax reform can make the code simpler and fairer for America’s families and businesses and spark a more prosperous economy.”
The effort carries at least the tacit endorsement of the Obama administration and the House GOP leadership, both of whom nonetheless maintain a different vision of what constitutes tax reform. Baucus and Camp are attempting to thread the needle and come up with a plan that could prove amenable to both factions.
“We have an opportunity to change all that so that the tax code is fairer and easier to comply with — for families and businesses of all sizes,” Camp said.
It now appears, however, that the legislative calendar isn’t working in their favor. House GOP leaders have in the past cited tax reform as a priority of the 113th Congress – going so far as to hold in reserve the bill number H.R. 1 for any overhaul legislation embraced by Ways and Means.
But the issue has all but disappeared from the leadership’s to-do list, given the long inventory of looming catastrophes. Tax reform is not included among the issues that leadership has advised the Republican caucus might be broached before the end of the first session.
Last November, in remarks before the Tax Foundation, a Washington-based tax policy research organization, Camp insisted that, “Tax reform is more necessary now than it was in 1986 and that is why the Ways and Means Committee will write, act on and pass comprehensive tax reform legislation in 2013. Let me repeat that: we intend to move a comprehensive tax reform bill in 2013 – no matter what.”
Despite the obvious roadblocks, Camp isn’t brandishing a white flag over the prospects of getting the job done before the end of the year.
“We’re definitely going to step up the pace this fall, no doubt about it,” Camp told reporters after a Sept. 10 meeting with GOP committee members to review the reform issue.
But Camp also acknowledged that tax reform isn’t “something to be finished in a matter of days and weeks, as some might suggest we do today.” Rather, he said, the task must be accomplished “methodically, meticulously and as the result of work on both sides of the aisle.”
There are barriers aplenty. President Obama has expressed more interest in amending the corporate tax than taking on the income tax on individuals.
House and Senate Republicans generally are looking for changes that don’t raise revenues. In a letter to Baucus, 14 GOP senators, including Senate Republican Leader Mitch McConnell, of Kentucky, asserted that tax reform “should not be used as a pretense for increasing the net tax burden on American families and job creators, particularly in the absence of any serious effort to address long-term spending problems.’’
On the other hand, Senate Democratic Leader Harry Reid, of Nevada, has publicly instructed Baucus to come up with a plan that raises significant new revenue – at least $1 trillion over the next decade — from business and wealthy individuals. Reid insists he will not consider – or bring up for consideration – any plan that fails to do so.
The two chairmen spent a considerable amount of time during the recent congressional recess meeting with individuals and business representatives in an effort to develop an approach to the massive overhaul. Much of that time was spent concentrating on corporate taxes although both lawmakers are insisting that changes in the personal income tax – including the possibility of lowering the top rate to 25 percent – must be up for consideration.
In Memphis on Sept. 9, Baucus and Camp met with corporate representatives, including officials from FedEx, who expressed animus toward the nation’s 35 percent corporate tax rate – considered the world’s highest – even though the effective rate is significantly smaller as a result of write-offs and various loopholes.
The pair indicated a steep drop in the corporate tax rate while simultaneously eliminating many of the corporate deductions made available under the current code is under consideration.
But it appears they aren’t prepared to get rid of all deductions. Earlier during the break the chairmen traveled to Silicon Valley where they met with representatives of Square, a technology start-up firm. Baucus too the opportunity to inquire about the benefits Square might derive from tax incentives for research and development while Camp made inquiries about the nation’s international tax code and the benefits the company might accrue from lowering the corporate tax rate.
“We have heard over and over again that job creators, like these in the high tech sector, are looking for a simpler, flatter, fairer tax code,” Camp said. “Repairing our broken tax code can make America a more attractive place to invest and hire.”
Baucus said the code can be used to provide companies with an economic boost.
“There’s a reason why companies like Square and Intel call America home — it’s because we’re innovators,” Baucus said. “We’ve got a real opportunity in tax reform to give innovators here in the U.S. a lift.”