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Lawmakers Urged to Separate Budget Debate From Tax Code Overhaul

A rewrite of the nation’s tax laws should be considered separately from the budget debate dominating Capitol Hill, the leaders of the last major tax code overhaul told the chief tax-writers in U.S. Congress.

The comments today from Richard Gephardt, the former House Democratic leader, and James Baker, a chief of staff and Treasury secretary to President Ronald Reagan, followed House Budget Committee Chairman Paul Ryan’s release yesterday of a 2012 budget proposal with deep cuts in spending and revenue. The Ryan budget would cut the top individual and corporate tax rates from 35 percent to 25 percent.

Appearing before the congressional Joint Committee on Taxation, Baker said mixing the two debates could politicize and threaten a new tax-code overhaul.

“If tax reform gets caught up in that, you won’t have tax reform,” Baker told the panel.

Michigan Representative Sander Levin, the top Democrat on the House Ways and Means Committee, said Ryan’s proposal would eliminate deductions used by millions of Americans.

“It almost certainly would be necessary to eliminate major provisions that helped build the broad middle class of this country such as the mortgage interest deduction and the employer-provided health-care exclusion,” Levin said.


Gephardt also urged lawmakers to avoid sensitive topics that could hamper efforts to rewrite the tax code. He said lawmakers should try to make an overhaul revenue-neutral, meaning that any rewrite would not increase the deficit, and avoid debate over how tax benefits are distributed across income brackets.

“You’ve got to be neutral on both of those topics,” he said. “Leave it where it is.”

Gephardt and Baker were instrumental in advancing the last major tax overhaul in 1986. They returned to Capitol Hill today to share advice with lawmakers considering another possible tax-code rewrite.

The former officials told lawmakers they should consider allowing multinational companies to return their overseas profits to the U.S. at a lower rate. They didn’t say how low the tax rate for repatriated funds should be.

Companies including Cisco Systems Inc., Google Inc., Duke Energy Corp. and Apple Inc. are pressing Congress to consider another so-called overseas tax holiday.

“It’s something you’ve got to look at,” Gephardt said. “When I hear there’s $1.5 trillion offshore, half of which could come back, that excites me.”

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