Domestic Taxes

Senators begin drive for tax reform by wiping the slate clean

The Senate’s top two tax writers accelerated the chamber’s tax reform negotiations on Thursday, adopting a “blank slate” approach that requires all their colleagues to make the case for their favorite tax breaks.

Finance Chairman Max Baucus (D-Mont.) and Sen. Orrin Hatch (Utah), the panel’s top Republican, told the Senate they would be operating under the assumption that all special provisions are out of the code.

Senators have until July 26 to present a detailed proposal on which tax breaks — including big-ticket items for healthcare, homeownership, investment income and corporate research, among others — should remain in a rewritten tax code. Baucus and Hatch did not say when the committee would take up those suggestions.

{mosads}The end goal, Baucus and Hatch said, is to scrub the tax system of its unproductive parts to help fix a “broken” and “bloated” code that is both unfair and a drag on the economy.

“This blank slate is not, of course, the end product, nor the end of the discussion. Some of the special provisions serve important objectives,” Baucus and Hatch wrote in a letter to their colleagues.

“Indeed, we both believe that some existing tax expenditures should be preserved in some form. But the tax code is also littered with preferences for special interests.”

Baucus and Hatch punted, however, on perhaps the key issue in tax reform — whether the revenue gained from scrapping tax breaks should be used exclusively to reduce tax rates or to also help reduce deficits. That issue has left many observers skeptical that Washington can overhaul the tax code for the first time in more than a quarter-century.

The two senators also don’t set an end goal for tax rates; House Republicans have called for a top corporate and individual rate of 25 percent. House Ways and Means Committee Chairman Dave Camp (R-Mich.) has vowed that his panel will clear a tax reform bill this year.

In their letter, Baucus and Hatch stress that every tax break that creeps back into the code would mean less deficit or rate reduction.

“As we work to craft a tax reform bill, we will bear these trade-offs in mind,” they wrote.

Tags Max Baucus Orrin Hatch

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