By John Shaw (Market News International)
House Ways and Means Committee Chair Dave Camp and Senate Finance Committee Chair Max Baucus apparently have not received the memo saying tax reform is a futile endeavor this year given the polarization between the two parties and the partisan disagreement on whether tax reform should be designed just to clean up an outdated code or whether it should clean up the code and produce additional revenues to cut budget deficits.
Camp, who has led the Ways and Means panel since 2011, has been focused on comprehensive tax reform almost since the start of his chairmanship. His panel has held more than 20 hearings on tax reform in the last two years and he has released detailed discussion drafts on international, financial products and small business tax provisions.
Along with the ranking Democrat on the House tax panel, Rep. Sander Levin, he has created 11 bipartisan working groups to examine specific aspects of tax reform: charitable and exempt organizations; debt, equity and capital; education and family benefits; energy; financial services; income and tax distribution; international; manufacturing; pensions and retirement; real estate; and small business and pass-through entities.
Each working group will submit reports to Congress’s Joint Committee on Taxation next month and the JCT will present a final report to the Ways and Means Committee by May 6.
At a recent briefing with reporters, Camp repeated his commitment to begin moving a major tax reform bill through the House this year. He has said the package will be deficit neutral, will include top corporate and individual rates at 25%, and serve as a powerful engine for economic growth. He said tax reform could lead to the creation of one million jobs in the first year alone.
In a major speech on tax reform last November to the Tax Foundation, Camp underscored his commitment to push a tax reform through in 2013. “Comprehensive tax reform is THE path forward,” he said.
Camp is expected to unveil his tax reform proposal this spring or early summer.
Baucus, head of the Senate Finance Committee, has been working for tax reform for several years. Last June he delivered a major speech on tax reform at a conference hosted by the Bipartisan Policy Center.
Baucus said tax reform should be focused on boosting jobs, U.S. competitiveness, innovation and opportunity.
“Tax reform is a once-in-a-generation opportunity. We can cement America’s preeminence,” he said.
Baucus also argued tax reform should help solve the nation’s budget deficits.
“Deficits and debt are not just a spending problem. Revenues as a share of GDP over the past few years are the lowest they have been since World War II. We simply don’t raise enough revenue,” Baucus said.
Baucus has been less specific than Camp on provisions he favors and his overall goals in terms of the top individual and corporate rates.
With the ranking Republican on the committee, Sen. Orrin Hatch, he has recently begun convening weekly closed door meetings of the Senate Finance Committee to discuss tax reform.
To guide these discussions, the Finance panel staff is producing option papers. The first one was released last week and discusses concepts that could guide simplifying the tax code.
Underscoring the sensitivity of this topic, at the bottom of each page of the eight-page document is this disclaimer: “These option papers include ideas from across the spectrum and, as such, do not necessarily have the endorsement of either the Chairman of Ranking Member.”
Bill Frenzel, a former Republican congressman and now a guest scholar at the Brookings Institution, said tax reform appears to be the one area of fiscal policy in which the two parties are actively exploring compromises.
But he said it is unclear if disagreements on whether tax reform should generate additional revenue to tackle the deficit ultimately undermines the whole effort.
“Tax reform seems to be the one area in the fiscal arena where we are having constructive discussions. It’s the one area that doesn’t seem totally stymied. But it’s not yet clear if we will get a final result,” he added.