House passes plan for tax reform in 2013

The House approved legislation Thursday that would set up an expedited process for considering a tax reform bill in 2013 that cuts and reduces the number of individual and corporate tax rates, eliminates the Alternative Minimum Tax and ends special-interest tax breaks.

Passage of the Pathway to Job Creation Through a Simpler, Fairer Tax Code Act is likely the Republicans' last significant attempt to shape the tax debate before the elections, and will probably be used by the GOP during the rest of campaign season as a promise for real reform next year. It followed Wednesday's vote to extend current tax rates for all taxpayers, which they said would serve as a "bridge" to tax reform in 2013.

The vote followed three hours of debate that appeared to be a needlessly long interval given the obvious support for the bill among Republicans, and the obvious disdain among Democrats. The bill was approved on a 232-189 vote — every Democrat opposed it, and they were joined by just three Republicans.

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Republicans said their plan for tax reform is an attempt to save some of the billions of hours and dollars used to comply with the current tax code, and let that energy be diverted to job creation.

"This measure puts us on a path toward a simpler, flatter tax code," House Majority Leader Eric Cantor (R-Va.) said. "If you support comprehensive tax reform that will spur economic growth and make this country more competitive, you'll vote for the bill."

Earlier in the debate, House Rules Committee Chairman David Dreier (R-Calif.) said it takes 6 billion hours and $160 billion a year to comply with the tax code. Ways and Means Committee Chairman Dave Camp (R-Mich.) said reducing this burden would help create 1 million new jobs.

But Democrats opposed it as an election-year gimmick and a promise to bring about tax reform only after the election. While Republicans said they plan to pursue changes that lower tax rates for all Americans, Democrats warned that the bill could lead to the elimination of tax breaks that help the middle class.

Rep. Charles Rangel (D-N.Y.) said his impression is that the GOP tax plan would lead to higher taxes for most Americans, and asked why the House should vote on a bill today that gets to that result slowly, when it could take immediate action to lower rates.

"What reform is there for those people who will see a dramatic increase in their taxes?" Rangel asked. "Why don't we do something about it today, so that they and businesses would know what tomorrow's going to look like beyond today?"

Ways and Means Committee ranking member Sandy Levin (D-Mich.) said the plan could create an average tax windfall of $330,000 for millionaires and increase the tax bill for middle-class Americans by $4,500. But Republicans countered several times that Democratic claims that taxes would rise under the bill are inaccurate, since the bill sets out guidelines for lower rates.

The vote sends the bill to a Senate that has adjourned for the August break, and regardless, is not expected to take up the House bill even when it returns. According to the rule approved earlier, the bill will be combined with H.R. 8, which extends all current tax rates for another year, and presented to the Senate as a single bill for consideration.

Just before the vote, the House voted down a Democratic amendment that would set out Democratic principles for tax reform, including the need for increased tax revenues, progressive tax rates, discouragement of tax-haven abuse and elimination of tax breaks for corporate activities that send jobs overseas, among others. Members rejected that proposal, 176-246.