Congress at Work on New Budget Deal

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Oct. 21 (Bloomberg) -- Keefe Bruyette & Woods' Brian Gardner discusses the U.S. budget with Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

May reach a compromise is tax reform.

Ryan, the idea of tax reform seems to be the idea where there is genuine bipartisan support.

I am worried that the idea is where the agreement ends.

That is fair.

It is a great idea.

It has the word reform attached to it, new and improved.

It is a great marketing concept.

When the rubber meets the road, that is the problem.

There are political considerations, which are revenues.

How much is this going to be revenue neutral where it is just a cut of rates in return for a closing loopholes?

Or is it going to be neutral, is it's going to raise money?

If it is a tax increase, it is debt.

Then you get into internal politics and the senate, whether democrats want to let the chairman run the show right now.

He is up for retirement at the end of next year.

He tends to be more conservative than most democrats.

I think most democrats may want to wait until 2015 until there's somebody at the center of the party.

I know there are many lawmakers who think this is to spur economic growth but there are others who think it is to distribute income.

Others think it is to make the tax code fairer.

Not all of those work hand in glove with the other.

You can put a fourth group in there, and they see that the white house may have a toll in this camp, tax reform as a way to increase revenues.

That is a nonstarter for republicans.

It is such a complex set of issues, not just one issue.

Everybody loves the idea of tax reform.

When you get into the nitty- gritty of the winners and losers and yes there are going to be when does winners because you lower rates, they're going to be losers in certain industries.

They get certain protections in the tax code.

Some winners could be in the banking industry because they do not get any such benefit.

Let's talk about one group of potential losers.

Raising the issue of carried interest is the tax treatment that allows hedge fund managers and private equity managers, in particular to earn a whole lot more if they had to pay the same personal tax rates as that -- personal tax rates as you and i do.

If there enough bipartisan agreement that that would be included in whatever proposal bce?

If there is a tax reform proposal, carrier trucks that carry the interests -- it will not be a stand-alone piece of legislation.

It will not be a standalone provision for the tax code.

If there are serious tax reform proposals going on, i think carried interest is on the table.

If you get to that issue of revenue neutrality, washington is going to have to find offsets.

They are going to have to look to various places to close the gap and get them to get congress to lower rates.

People are going to be looking at nichols and dimes in order to close the gap to get to new -- to revenue neutrality.

One thing we ought to get into briefly, is there any way to do tax reform right without dynamic scoring?

I think there are a lot of republicans who love the idea of dynamic scoring.

I think building the model to prove it or have some confidence in that it will be a revenue generator in the long term based on economic growth, i think that is where the challenge is.

I think theoretically yes it is possible practically in the short run.

I am not sure that the model exist yet prove that.

I know we will be talked about this in.

Ryan gardner is a senior vice president and analyst.

When we come back, he has come

This text has been automatically generated. It may not be 100% accurate.


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