Senators unsure of steps for tax reform
July 25, 2013
There are just a few days left for senators to explain which tax breaks they’d like to see survive tax reform, and once the deadline passes, one important question will linger: What happens next?
“Good question,” said Sen. Mike Crapo (R-Idaho).
“I don’t know,” said Senate Majority Whip Dick Durbin (D-Ill.).
“There’s no specific schedule,” said Sen. Johnny Isakson (R-Ga.).
Though Senate Finance Committee leaders touched off a lobbying frenzy with their promise to give colleagues until July 26 to explain which provisions ought to be spared in a Tax Code that otherwise would be junked, many lawmakers say they are unsure how the overhaul push will proceed.
Finance Committee Chairman Max Baucus (D-Mont.) said Tuesday he wants the panel to take up a reform bill later in the fall. But others are skeptical they can get a bill out of committee, let alone to the floor — including one of the lawmakers who helped send lobbyists scrambling.
“I think there’s a desire to do that. I don’t know that that’s going to happen though,” said Sen. Orrin Hatch (R-Utah), ranking member on the Finance Committee.
It’s a reminder that despite this month’s lobbying frenzy — and efforts by overhaul proponents to create an air of inevitability around their effort — nothing happens fast when it comes to tax reform.
It’s one thing to ask lawmakers — and lobbyists — to defend their favorite provisions, and it’s another to start picking and choosing from among them. President Barack Obama was barely out of college the last time Congress tried, and that overhaul, in 1986, took more than two years to hammer out.
Lawmakers are far more divided this time around, unable to agree on even the ground rules for picking and choosing, like whether the revenue that will be generated by squelching tax breaks can be used to reduce the budget deficit. They’re unlikely to settle that question without a major budget deal, which means they also would have to find agreement on entitlement cuts, which would involve striking a grand bargain on the budget — something that’s eluded them for almost three years.
House Ways and Means Committee Chairman Dave Camp (R-Mich.) is forging ahead nonetheless, leaving in his wake a trail of proposals on how to tax multinational corporations, derivatives and other financial products and small businesses. He promises to get a bill through his panel by the end of the year, though lawmakers can’t say when or what happens after that.
Things are even less settled in the Senate. In a letter announcing the blank-slate plan, Baucus and Hatch said tax reform was “now entering the home stretch.” While the committee has issued some 160 pages of possible options, held more than 30 hearings and organized a 10-week seminar on the code for lawmakers, even panel members say they still have a long way to go.
Crapo, a veteran of the Simpson-Bowles Commission, which used a similar blank-slate approach, notes there’s still no agreement on a number of other basic questions, including what marginal rates ought to be. Lawmakers might be more willing to trade tax breaks for big rate cuts than small rate cuts.
They also haven’t settled on the number of brackets preferable in a reformed tax system. There are seven now, but there have been fewer (just three in 1991) and many more (26 in 1964).
“There’s some parameters that we’ve got to have before we can actually finish the job,” Crapo said.
Baucus and Hatch have pledged to keep the system as progressive as it is today — but that doesn’t preclude them from toying with the number of brackets.
The Finance Committee will begin by sifting through lawmakers’ submissions, which range from legislative proposals, to white papers, to what a spokesman for Senate Budget Committee Chairwoman Patty Murray (D-Wash.) calls her reiteration of the tax-reform principles Democrats adopted earlier this year as part of their annual budget, which Baucus opposed.
Baucus said on Wednesday that he wants a markup later this fall, though he wouldn’t be more specific.
“I don’t like to predict dates because sometimes they change, but it will be sometime in September, October, November,” he said.
Some Finance Committee members are skeptical they’ll be able to come together on a plan.
“It’s not easy,” Hatch said. “There’s a wide gap between Republicans and Democrats on tax reform.”
Sen. Bob Casey (D-Pa.), another panel member, said he could see Baucus and Hatch putting out a plan, though not one that will win committee approval. Count Sen. Richard Burr (R-N.C.), another Finance Committee member, among the skeptics.
“I just don’t think there’s the momentum out there to get this done,” he said. Part of the problem is lawmakers are reluctant to stick their necks out when they are not convinced their leadership is behind it, Burr said. “It’s going to take the leadership to make people believe we’re moving forward,” he said.
Some House Republicans are targeting the debt limit to force action, saying that without a deadline, tax reform will only get postponed. Congress will have to raise the borrowing cap by October or November.
Even if lawmakers can’t agree to rewrite the entire code by the fall, perhaps they could provide short-term debt increases that would buy more time to work out their differences, said Rep. Rob Woodall (R-Ga.).
“You need a deadline,” he said, “and the debt ceiling absolutely provides that kind of deadline.”
Treasury Secretary Jack Lew and many congressional Democrats have said they don’t want anything attached to the debt limit. In either case, lawmakers say it’s too early to predict what might happen.
“One step at a time,” said Rep. Pat Tiberi, an Ohio Republican who sits on the Ways and Means Committee.