February 01, 2013
Tax writers may release reform draft soon
It’s one of the biggest policy questions in Washington: Where is tax reform going?
The Senate Finance Committee, led by Chairman Max Baucus (D-Mont.), may start sharing some answers in a few months.
A Democratic committee aide tells POLITICO that the panel could release a tax reform discussion draft or options paper this spring.
With doubters in both parties questioning the prospects for a comprehensive overhaul, the release could be a significant step in the process and prove that there's buy-in from lawmakers on both sides of the Capitol to defy the odds and get a reform deal across the finish line.
The scope of the tax code is enormous and it’s unclear which areas the draft or options paper might tackle. Multiple sources on K Street believe that the committee is certain to address questions surrounding the taxation of offshore corporate profits.
For now, Baucus is still working the process, with the goal of getting most of the members on his panel to sign off on the draft or options paper before releasing it — certainly a significant challenge given the partisan divide on fiscal policy.
He’s holding one-on-one meetings with committee members of both parties, including those who are new to the Finance panel, "in hopes of reaching consensus on tax reform options in more than two dozen areas," the aide said.
He has already convened nearly 30 committee hearings and will likely hold a few more.
Utah Sen. Orrin Hatch, the Finance Committee's top Republican, says he wants to work with Baucus on a proposal.
"Over the last two years, I've worked with Chairman Baucus to hold more than 20 committee hearings examining numerous aspects of the tax code to better inform members," Hatch told POLITICO. "I certainly want to take that to the next level with a goal of a bipartisan tax reform plan."
Baucus and Hatch have put together tax proposals that won support from some in both parties, including a measure last summer to continue billions of dollars worth of tax breaks known as the extenders.
Meanwhile, Baucus and House Ways and Means Committee Chairman Dave Camp (R-Mich.) continue to strategize through weekly chats. Baucus has also started holding weekly phone calls with Jack Lew, President Barack Obama’s nominee for Treasury secretary.
While emphatic on the need for tax reform, Baucus has so far held his cards pretty close to his vest. Unlike Camp, for instance, he hasn’t identified a tax rate target for individuals and corporations.
Camp has said he would like to push rates down to 25 percent for individuals and corporations.
In the wake of the fiscal cliff deal, individual tax rates top out at 39.6 percent and the maximum corporate rate is 35 percent.
Still, both tax writers have formed a solid bond over the past few years as they’ve plotted tactics to achieve a reform.
In a sense, Camp and Baucus face similar challenges as they work to keep members of their own party on board with their approach to tax reform. Meanwhile, a conventional wisdom has formed in recent weeks that tax reform will be nearly impossible to achieve this year, with lawmakers unwilling to make the hard political decisions required by an overhaul and a legislative calendar that is becoming increasingly cluttered with other issues.
Baucus delivered his most expansive remarks on tax reform in a speech last summer to the Bipartisan Policy Center.
“We need to take a hard look at each and every expiring provision to decide which to make permanent and which to eliminate,” he said. “We need to get out of the way of the market, unless there is clear evidence that a tax expenditure spurs growth and creates jobs. Every tax provision needs to prove it has a tangible benefit to our economy or society. If not, it doesn’t belong in the tax code.”
Camp has released two discussion drafts over the past several years.
The first, distributed in October 2011, would address international taxation by shielding U.S. multinational companies from paying levies on profits generated in other countries.
The second, released last week, would take on Wall Street by upending the tax structure for financial products like derivatives — requiring such trades to be marked to market each year unless they’re used to hedge risk.
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