Wyden: GOP leaders to blame for tax reform gridlock

The Senate’s new top tax writer says that extending dozens of expired tax breaks will be one of his top priorities, while blaming House Republicans for blocking progress on broader tax reform.

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Finance Committee Chairman Ron Wyden (D-Ore.), who officially took over the gavel Wednesday, suggested in an interview with Bloomberg Television that he would have preferred to deal with the “tax extenders” as part of the tax reform process.

But because of GOP leaders’ focus on the problems with President Obama’s healthcare law, Wyden said it would be difficult to get a tax overhaul across the finish line this year and that he thought that extending the more than 50 lapsed incentives “as a bridge to more comprehensive reform” was the best path.

“My first choice would be to first go to comprehensive tax reform, rather than to have to proceed with the extenders,” Wyden said in an interview scheduled to air on Friday.  “The reality is, when the House leadership last November, in effect, declared that ObamaCare was their primary issue that changed the time table.”

With few legislative accomplishments likely before voters head to the polls in November, Wyden added that “I am not going to sacrifice important matters like research and development and innovation on the altar of perhaps some inaction on comprehensive reform.”

Wyden had made similar points about tax extenders in the past, even before news broke late last year that Obama would appoint then-Finance Committee Chairman Max Baucus (D-Mont.) to be his ambassador to China. For instance, Wyden pushed for extending an incentive for electric motorcycles in 2012.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) is expected to release his own long-awaited tax plan in the coming weeks, after facing some skepticism from GOP leadership about proceeding on reform. Senate Democratic leaders haven't shown much interest in tax reform themselves.

The Oregon Democrat’s interview also provided a preview for some of his priorities for tax reform and illustrated why the new Finance panel chairman’s policy efforts have sometimes caused heartburn for fellow Democrats.

Wyden told Bloomberg, for instance, that he’d like to revamp how investment income – where rates now max out at 20 percent – is taxed. The top tax rate for regular income is 39.6 percent.

In his bipartisan tax reform plans, Wyden has called for taxing capital gains as ordinary income after investment income became more than 35 percent of a taxpayer’s income. Wyden has authored tax overhauls with former Sen. Judd Gregg (R-N.H.) and Sen. Dan Coats (R-Ind.).

“So what that meant was, if you were a schoolteacher with a modest amount of stock that you had to supplement your retirement, you didn't take a big hit,” Wyden said.

Wyden’s has also worked with a range of Republicans – including House Budget Committee Chairman Paul Ryan (R-Wis.) – on health issues and Medicare.

The Oregon Democrat said in the new interview that he’d like to continue working across the aisle to revamp the tax code, just as Democrats and Republicans did during the last successful tax reform effort in 1986. 

But Wyden also appeared to break with many Democrats on some areas of tax policy. Wyden suggested it would be “a challenge” to reform just the corporate code, as Obama has suggested, because of the businesses that pay taxes as individuals.

And he sounded open to “dynamic scoring,” a process praised by Republicans that tries to estimate the amount of economic growth caused by tax changes. Democrats are generally skeptical of dynamic scoring.

“Doug Elmendorf, who heads the Congressional Budget Office, indicated that he could actually score a pro-growth tax reform effort as generating revenue,” Wyden said.

Camp's tax reform bill, for instance, will get both a dynamic and static score whenever it's released.

A spokesman for Wyden later clarified that the Finance chairman did not support using dynamic scoring as part of tax reform negotiations, at least in part because it doesn’t comply with Senate budget rules.

Tom Caiazza told The Hill in a statement that “Wyden supports new creative ideas that will generate revenue through economic efficiency and growth” and that the senator “intends to use CBO's new models in order to evaluate tax reform proposals.”

“However, for the purposes of scoring "revenue neutral tax reform" or tax reform that raises X or reduces Y, dynamic scoring will not be used because it does not fit with current budget scoring rules,” Caiazza said.

This post was updated at 6:31 p.m.