Senate, House Get to Work on Tax Reform
Senate leaders announced last week that bipartisan working groups will aim to develop a comprehensive tax reform plan over the next several months. Meanwhile, House Democrats proposed a package of tax changes to help close the income gap.
Plans to begin work on overhauling the complicated U.S. tax code were unveiled in both chambers of Congress last week.
In the Senate, Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) announced the formation of five bipartisan working groups that will study current tax law and help develop a comprehensive tax reform plan in this Congress.
Policy focus areas for the working groups include individual income tax, business income tax, savings and investment, international tax, and community development and infrastructure.
Each of the working groups will be cochaired by one Republican and one Democrat and will work with the Joint Committee on Taxation to produce an in-depth analysis of options and potential legislative solutions within its assigned area. Their goal is to complete a final comprehensive tax reform report by the end of May.
“With the launch of these working groups, members will have an opportunity to thoroughly examine the code and put forward smart ideas that will help lay the groundwork for a bipartisan tax overhaul that will provide bigger paychecks, better jobs, and more opportunity for all Americans,” Hatch said.
There is a “window of opportunity” to overhaul the tax code in this Congress if lawmakers can work together in a bipartisan way, Wyden said. “We can all agree that our broken tax code must be fixed in a way that makes it work for, not against, our country and our economy.”
House Ways and Means Committee Chairman Paul Ryan (R-WI) said his committee already did tax reform working groups last year and helped form the foundation of a comprehensive discussion draft from then-Chairman Dave Camp (R-MI). Ryan added that tax reform could be on an “aggressive” timeline this year and that committee Republicans will discuss their reform agenda at a retreat later this month.
Republicans also brought up the idea of using the budget reconciliation process to advance a tax reform bill as well as provide funding for a much-needed transportation and infrastructure package. Led by Sen. John Thune (R-SD), the push to use reconciliation could make it easier to pass a tax reform bill by a simple Senate majority of 51 votes.
House Action Plan
Meanwhile, in the House, Rep. Chris Van Hollen (D-MD), ranking member of the Budget Committee, released a broad package of tax changes aimed at strengthening the middle class. It will likely serve as a political marker for House Democrats in the tax reform debate brewing this year.
The “action plan” proposed by Van Hollen builds on some key provisions proposed by Democrats in previous budgets to incentivize employers to boost wages and allow middle-class workers to keep more of what they earn. A centerpiece of the plan is an annual “paycheck bonus tax credit” of $1,000 per worker making less than $100,000 per year or $2,000 for couples making less than $200,000 per year. Another provision would give taxpayers a $250 “saver’s bonus” if they direct at least $500 of their paycheck bonus tax credit into a savings account. The plan would also nearly triple the tax credit for child care.
The additional credits, worth about $1.2 trillion over the next decade, would be offset by implementing a new “high roller” fee on trading in the financial markets and by curbing tax breaks for the top 1 percent of earners.
“This action plan, which by itself will not add a penny to the deficit, will further help us meet the economic challenges of our time, a rapidly growing economy that works for all Americans, not just those already at the top,” Van Hollen said last week.
Van Hollen also said he will introduce another piece of the Democrats’ plan in the coming days: the CEO-Employee Paycheck Fairness Act, which would prevent big corporations from claiming tax deductions for CEO compensation over $1 million unless their employees are getting paycheck increases as well.
Prospects for Van Hollen’s plan are dim in the Republican-controlled Congress, and a spokesperson for Ryan has already called the financial transactions tax and other offsets in the plan “a terrible idea.”