House Ways and Means Committee Holds Hearing on Fundamental Tax Reform

Today, the House Ways and Means Committee held its first hearing on tax-reform of the 112th Congress. Several witnesses testified at the meeting, which aimed to examine the complexity and inefficiency of the US tax code. More specifically, the committee discussed the burden it places on American families, the need for a more competitive corporate rate, and the code’s failure to stimulate the economy and create jobs.

One of the witnesses at today's hearing and the chief executive of Procter & Gamble, Bob McDonald, strongly urged members to re-revaluate the US corporate tax rate. In his written remarks, Mr. McDonald spoke of the many ways our corporate tax system disadvantages the United States – both domestically and in the global economy. He emphasized the relative height of our corporate rate among other OECD countries, pointing out the fact that in April, when Japan begins the process of lowering its 39.5% corporate rate by 5 percentage points, “the US will have the ignominious distinction of having the highest corporate tax rate among advanced countries in the world." Nina Olson of the National Taxpayer Advocate gave a testimony that highlighted recommendations from the organization's annual report to Congress given earlier this month. Olson called today's tax code "a mess", and said that since the last major reform 25 years ago the code "has become an ever-expanding patchwork of discrete provisions, often with little logical connection, and it has become unreasonably difficult for taxpayers to understand."

In conjunction with today’s meeting, House minority whip Steny Hoyer (D-MD) released an op-ed in Politico urging the President to focus his agenda on fundamental tax reform in the coming year and highlighting its importance in getting the U.S. back on a sustainable fiscal path. Hoyer stated that improving our tax code is “one of the single biggest investments we can make in the economic future”. Hoyer also spoke of the potential bipartisan support behind tax reform, referencing the success of such reform in 1986 and saying:

“Though in its early stages, I believe tax reform can be one of the most promising areas for bipartisan cooperation in this new Congress. Members of both parties can agree that a tax code that unleashes economic productivity, creates middle-class jobs and reduces the deficit would be a major boost to our economic future… these efforts have succeeded in the past. In times of divided government, it takes leaders in both parties to realize that politics isn’t always zero-sum and that the shared benefits we reap as a nation make cooperation essential.”

Many of the recently published fiscal plans call for comprehensive tax reform as well, with several of them specifically calling for elimination or significant reduction of current tax expenditures. The final report of the President's fiscal commission proposed wiping the tax code clean of all of them, significantly reducing rates across the board, and having people justify which tax expenditures they wanted to keep. In doing so, people could see how much rates would go up for each tax expenditure that was added back, which is a very educational and worthwhile exercise in itself. We couldn't agree more that tax expenditures are a crucial issue in widespread tax reform. CRFB has consistently advocated tax reform that broadens the base, lowers rates across the board, and helps close our fiscal gap; tackling tax expenditures won't be easy, but addressing this issue is necessary if we want an efficient and fair tax system that can help us climb out of our fiscal hole. (Click here to read our ideas)

We applaud the Ways and Means Committee for making progress on this important fiscal issue, and Rep. Hoyer for adding to the discussion and calling attention to its importance. We hope their actions are rewarded with increased bipartisan effort in Washington to finally do something about our tax system.

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