While one congressman’s special-interest tax loophole may be another’s cherished constituent project, both Houses of Congress are moving forward with efforts to reform the tax code, though there is much skepticism over whether these first movements will produce any meaningful legislation.
Following several weeks of presidential outreach to both parties of Congress designed to lay the groundwork for some “grand bargain” to deal with the budget deficit, Democratic and Republican members of the Senate Finance Committee, led by Max Baucus, D-Mont., met Thursday to begin the process of IRC reform.
On the other side of the Capitol, the House Ways and Means Committee is planning on holding similar bipartisan meetings, and chairman Dave Camp (left), R-Mich., released on March 12 a “discussion draft” which he said was “aimed at creating a simpler and fairer tax code for small businesses.”
The avowed intent in both houses is to close tax loopholes to raise revenue without actually imposing any new taxes.
In his State of the Union message last month, President Barack Obama made his pitch for closing those lacunae: “To hit the rest of our deficit reduction target, we should do what leaders in both parties have already suggested, and save hundreds of billions of dollars by getting rid of tax loopholes and deductions for the well-off and well-connected. After all, why would we choose to make deeper cuts to education and Medicare just to protect special interest tax breaks?”
Camp’s draft, which he says is based on ideas supported by both Republicans and Democrats, is designed to “spur job growth” and create “higher wages for American workers by reducing the burden the tax code imposes on small businesses.”
Using language that most independent advisors would applaud, Camp uses National Federation of Independent Business data that shows “tax compliance costs are 65% higher for small businesses than for big businesses, costing small business owners $18 billion to $19 billion per year. In addition, nearly nine out of 10 small businesses rely on outside tax preparers. With about half of the private sector workforce employed by a small business…these costs, along with tax rates as high as 44.6%, are especially burdensome for a sector that has long been responsible for leading the nation out of economic downturns.”
So Camp’s approach to tax code reform would include what he calls “widely supported reforms such as permanent section 179 expensing and expansion of the “cash accounting” method.”