Domestic Taxes

Ranking Dem on tax-writing panel says reform should not hurt working families

Rep. Sandy Levin (Mich.), the top Democrat on the tax-writing House Ways and Means Committee, is set to say Friday that, while there is a need for tax reform, an overhaul of the code should not punish working families.

Officials on both sides of the aisle have called tax reform a priority, and Republicans are pushing a plan to reduce both the top corporate and individual rates to 25 percent, down from their current 35. 

But Levin, in a Friday morning speech at the Center for American Progress, is expected to say there needs to be more discussion about what tax credits and deductions would need to be eliminated to pay for lower rates.

{mosads}“This is the equivalent of putting a blindfold on, spinning around three times and picking a number,” the Michigan Democrat said of the GOP proposal. “It’s time to take the blindfold off. It’s time to understand clearly what that would mean for working families.”

In his prepared remarks, Levin also says that the tax code certainly needs to be simplified, and that any overhaul of the corporate tax code should not lose revenue. But he also argues that individuals reap 92 percent of the benefits of tax credits and deductions, with much of that value coming in areas like housing, health and retirement savings. 

“While a top rate of 25 percent may sound tantalizing to some, to raise the revenue necessary to keep the reform revenue-neutral, you would have to eliminate virtually every tax incentive for middle-income and poor families,” Levin says. 

“Even if proponents of such a rate eliminate the capital gains and dividend preferences, a rate that low still likely means a tax cut for many of those at the top, and a tax increase for broad portions of the middle class,” he adds.

Republicans have made tax reform a key plank in their bid to create jobs and grow the economy.

On the Democratic side, the Obama administration also believes tax reform can have those benefits, though Treasury Secretary Timothy Geithner has said the issue will likely be shunted to the background until the current debt-ceiling issues are resolved. 

The administration has also put more of its efforts into revamping the corporate code so far, while Republicans want a more comprehensive approach.

Levin’s Friday comments fit in with what several of his Democratic colleagues said at a Ways and Means hearing on tax reform Thursday.

A group of corporate executives told the panel they would be willing to discuss the elimination of all so-called tax expenditures in a bid to lower the corporate tax rate. 

But Democrats like Rep. Jim McDermott (Wash.) wondered which taxpayers would have to pay more to lower corporations’ tax bills and keep tax reform revenue-neutral.

Rep. Dave Camp (R-Mich.), the Ways and Means chairman, said the panel would continue to hold hearings on the subject in the weeks and months to come.

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