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Obama: 'Now is our best chance' for tax reform
President Obama said in his State of the Union address on Tuesday that “now is our best chance” for a broad overhaul of the tax code.
Obama said a tax revamp would help in a variety of ways – including by allowing smaller companies to spend more time expanding and less time on their taxes, and by not allowing the wealthy to game the system.
And the president continued to tie tax reform with changes to Medicare, Medicaid and other entitlement programs, after falling short of a grand deficit bargain with Speaker John Boehner (R-Ohio) in his first term.
“I realize that tax reform and entitlement reform won’t be easy,” Obama said. “The politics will be hard for both sides. None of us will get 100 percent of what we want.”
“But the alternative will cost us jobs, hurt our economy, and visit hardship on millions of hardworking Americans. So let’s set party interests aside, and work to pass a budget that replaces reckless cuts with smart savings and wise investments in our future.”Still, in saying the time was now for tax reform, Obama also underscored the significant hurdles a tax overhaul faces.
“To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested, and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and well-connected,” Obama said.
“Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit.”
But congressional Republicans – including GOP leaders and top tax writers – have long said that revenue gained from eliminating tax breaks should be used solely to reduce tax rates.
Republicans have been especially strident about keeping tax reform revenue-neutral after the recent “fiscal cliff” deal that raised more than $600 billion in revenue by allowing tax rates to rise for the highest earners. GOP lawmakers say that streamlining the code and lowering rates would give a jolt to economic growth.
Boehner has even said that House Republicans are debating whether to go forward with tax reform, even though it’s long been a top priority and many GOP lawmakers campaigned on the issue.
Some Republicans, Boehner said last month, think “’Gee what kind of tax reform can we ever get signed into law considering the position of our president?’ And so that debate is just beginning. It’ll probably grow, and I’m sure you’ll read all about it.”
Even with those challenges, the top tax writers on Capitol Hill, Senate Finance Chairman Max Baucus (D-Mont.) and House Ways and Means Chairman Dave Camp (R-Mich.), have said they will press ahead with reform efforts this year.
Camp, who is scheduled to be in his final term as Ways and Means chairman, has said the panel will pass a plan this year. Baucus, who faces a potentially tough re-election campaign in 2014, has said he agrees that more revenues are needed for deficit reduction, but also wants to make tax reform is done right.
Obama, as part of a plan to help the middle class released Tuesday, also called for setting a minimum tax on corporate offshore earnings, which the White House says would increase investments in the U.S. and keep more domestic jobs.
The White House included a similar proposal in their corporate tax framework last year. Camp, meanwhile, has proposed exempting most offshore corporate profits from U.S. taxation, something he says will encourage companies to bring more cash home.
“Apparently, what is old is new again,” a GOP aide said about the president’s plan.
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