A top Democratic tax-writer on Monday said a revamp of the tax code should include fresh revenues to help reduce federal deficits.
With the so-called “fiscal cliff” looming, Sen. Max BaucusMax Sieben BaucusBiden nominates Nicholas Burns as ambassador to China Cryptocurrency industry lobbies Washington for 'regulatory clarity' Bottom line MORE (Mont.), the chairman of the Senate Finance Committee, said he is making headway on a tax reform proposal that would gain support on both sides of the aisle.
And Baucus, who has been at the center of congressional negotiations on big-ticket items like healthcare and taxes, said that while tax reform cannot solve all of America’s fiscal issues, it can play a big role.
“Tax reform is a once-in-a-generation opportunity,” Baucus said in a speech at the Bipartisan Policy Center. “We can cement America’s pre-eminence.”
Both the Montana Democrat and his House counterpart, Ways and Means Committee Chairman Dave Camp (R-Mich.), have expressed a keen interest in overhauling the tax code, and both panels have held a series of hearings on the issue this Congress.
Baucus did not delve into much detail about his tax reform plan, saying that his four goals would be to create jobs, increase U.S. competitiveness in the global economy, foster innovation and promote opportunity.
But with tax reform also part of the broader discussion on deficits, his comments also underscored the challenges policymakers face.
Other top Democrats, including President Obama and congressional leaders, have said that revenues must play a role in any deficit-reduction plan.
But Republicans, including Camp and House Speaker John BoehnerJohn Andrew BoehnerRift widens between business groups and House GOP Juan Williams: Pelosi shows her power Debt ceiling games endanger US fiscal credibility — again MORE (R-Ohio), have said they want a tax revamp to be revenue-neutral, which happened the last time Congress reformed the tax code in 1986.
Sen. Orrin HatchOrrin Grant HatchLobbying world Congress, stop holding 'Dreamers' hostage Drug prices are declining amid inflation fears MORE (Utah), the ranking Republican at Finance and another lawmaker who has resisted the idea of tax reform that raises revenues, said Baucus’s comments would help move the debate forward.
“While we may not agree on everything, Chairman Baucus is to be commended for outlining a framework for a tax overhaul that is another integral step to achieving that goal,” Hatch said in a Monday statement.
Congress has just months left to deal with a slew of year-end tax issues — which, combined with looming automatic spending cuts, has been dubbed
“Taxmageddon” for the potential impact on the economy.
Those tax issues include the expiration of Bush-era rates on income and capital gains. The Congressional Budget Office has warned that going over the fiscal cliff could plunge the United States into a recession.
On Monday, Baucus advised against taking congressional votes on fiscal-cliff measures for now, saying he didn’t want opinions to harden before lawmakers will have to deal with those issues in the lame-duck session after the election.
Still, the Finance chairman acknowledged that others look at the issue differently.
House Republicans have said they will likely hold a vote extending current tax policies before leaving town in August, and the Senate might vote on the tax rates as well.
Baucus said he has already taken part in a number of meetings to lay the groundwork for the lame-duck fiscal negotiations, which often center on the deficit-reduction plans offered by President Obama’s fiscal commission and one sponsored by the Bipartisan Policy Center.
As part of his preparations, the Finance chairman said he plans to convene a members-only meeting next week to deal with the narrower issue of the so-called tax extenders, which are targeted breaks that are expired or expiring.
He also announced that he plans to hold hearings in the coming months on the fiscal proposals commonly known as Bowles-Simpson and Rivlin-Domenici, which combine revenue-raising tax reforms with restraint on entitlement spending.
“My view is everything’s on the table,” Baucus said. “That’s a psychology which I think is very important to keep people talking, keep people working.”
Baucus, who was a member of the Finance Committee during the last successful tax reform effort, said that much had changed in the ensuing quarter-century — from what drives the U.S. economy to the makeup of American families.
The push to overhaul the tax code once more would have to take that and rising income inequality into account, Baucus said, while tackling the international tax rules that the Montana Democrat called “the worst of all worlds.”
As it stands, Baucus said, the United States pairs a high statutory corporate rate with what he called weakened safeguards against tax havens and income shifting.
But even as Baucus declined to drill down into the details of what to do about those issues, some Washington budget observers said they were encouraged by his comments.
Robert Greenstein, the president of the liberal-leaning Center on Budget and Policy Priorities, said he got the sense that Baucus was trying to avoid saying anything that could trip up the sensitive negotiations over the “fiscal cliff.”
“And frankly, lots of statements that get made these days do have things in them that impede bipartisan cooperation, so I would rate it as a plus on that front,” Greenstein said at a panel that followed Baucus’s remarks.