Tax Writers Caution That Raising Revenue Now Could Hurt Tax Overhaul Later
Representative Chris Van Hollen
Andrew Harrer/Bloomberg
Representative Chris Van Hollen, a Democrat from Maryland.
Representative Chris Van Hollen, a Democrat from Maryland. Photographer: Andrew Harrer/Bloomberg
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The chief Republican tax writers in Congress are warning that Democratic attempts to raise revenue as part of a deficit reduction package could threaten a comprehensive tax code overhaul.
Representative Chris Van Hollen, a Maryland Democrat who is participating in bipartisan deficit reduction talks, reiterated his party’s goal yesterday of raising revenue by eliminating some deductions in the tax code. Senator Orrin Hatch of Utah, the top Republican on the Finance Committee, said such efforts would be a “mistake” that could blunt the momentum behind a broader rewrite of the U.S. tax code.
“You don’t want them to start playing around with tax expenditures and other things now,” Hatch said in an interview yesterday. “You want to be able to bring that all together to do everything that it’s going to take to do a real tax reform.”
Hatch’s comments came less than a week after the Senate voted 73-27 to end tax credits and a tariff benefiting the ethanol industry. Many lawmakers, including some Republicans, interpreted that vote as a shift that could lead to elimination of other tax breaks, including those favored by the energy and oil and gas sectors.
Representative Dave Camp, a Michigan Republican and chairman of the Ways and Means Committee, also criticized any piecemeal changes to tax policy. In comments at a meeting of chief financial officers in Washington sponsored by the Wall Street Journal, Camp attempted to focus the debate on a comprehensive overhaul of the corporate and individual tax codes.
‘Pluck Out’ Provisions
Democrats “want to sort of pluck out various provisions of the code and simply end them,” he said.
Other Republicans appear open to addressing tax expenditures as part of the debt-limit talks. Senator John Cornyn, a Texas Republican and a Finance Committee member, said lawmakers are “going to have to deal with it sometime or another.”
“I don’t know whether there’s enough time between now and the debt limit to do the comprehensive tax reform we need,” he said. “But as the ethanol vote indicated, there are subsidies - - all these tax expenditures -- that we need to look at.”
Camp said in March that he would like to revise the tax code to lower the top corporate rate from 35 percent to 25 percent. He hasn’t said which tax benefits he would eliminate to pay for lowering rates by that much. A tax overhaul has been delayed as Democrats and Republicans have worked to broker a deal to raise the debt ceiling. Camp said yesterday it would be difficult to advance a tax overhaul in the near term though possible before the 2012 election.
Tax Code Rewrite
Van Hollen rejected suggestions that a tax overhaul would be more difficult to achieve if some of the deductions and credits that Democrats most oppose, including oil and gas tax breaks, are eliminated.
“The reality is that you can do a significant amount of revenue now and still do tax reform,” he told reporters. “You can get rid of pork barrel spending in the tax code and use that for deficit reduction. Most people who are serious about the deficit are willing to get rid of tax loopholes.”
Treasury Secretary Timothy Geithner, who is participating in the debt-limit negotiations, said the talks don’t involve a “detailed redesign of the corporate tax system.” He said the Obama administration plans to focus on restructuring the tax code once it secures a debt-limit increase.
“We had to sort of wait to deploy” a tax overhaul proposal “until we were through the budget negotiations we are going through right now,” Geithner said at the event in Washington. “Those require all the oxygen this town has at the moment.”
To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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