Opening the Tax Reform Vault
Updated 8/2/2013: Newly released submissions to the Finance Committee have been added.
The deadline for Senators to make their arguments for what tax expenditures should be included in Sens. Max Baucus (D-MT) and Orrin Hatch’s (R-UT) “blank slate” approach to tax reform has now come and gone. Baucus and Hatch are going to great lengths to keep the submissions private, but some Senators have declined privacy and released letters to the public, with more expected to do so in the coming weeks.
Here are a few of the letters that have been made public so far on what should happen with tax reform:
Senator Tom Coburn (R-OK): Coburn included a list of 25 tax expenditures from his Back In Black plan, which he believes should be eliminated or reformed as part of revenue-neutral comprehensive tax plan. Some of the tax expenditures included tax breaks for U.S. made films, the tax-exempt status for professional sporting leagues, accelerated depreciation for motorsports tracks, credits for the preservation of historic structures, and many others.
Senator Jay Rockefeller (D-WV): Rockefeller emphasized the need to combat income inequality with the tax code. Specifically he identified the importance of the Earned Income Tax Credit (EITC), as well as the Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC) and other refundable credits in the tax code. But Rockefeller also called for more revenue, implying that many other tax expenditures would need to be eliminated.
Senator Mike Enzi (R-WY): Enzi drew attention to two bills he has previously introduced, S. 2091 (submitted in the previous Congress), which would reform the international corporate tax code and implementing a territorial system, among other changes, and S. 420, which would simplify filing dates. Beyond those bills, Enzi called for comprehensive, revenue-neutral tax reform.
Senator Joe Donnelly (D-IN): Besides using tax reform to make the code simpler and more conducive to economic growth, Donnelly called for the Finance Committee to use some of the revenue raised from eliminating tax preferences for deficit reduction.
Senator Marco Rubio (R-FL): In his letter, Rubio emphasized the need for simplifying the code, reducing the gap between effective and marginal rates, transitioning to a territorial system, and eliminating double-taxation of income. Rubio also called for tax reform negotiations to be public and subject to rigorous debate.
Senator Chris Murphy (D-CT): In Murphy's letter, the Senator wrote that tax reform should protect earners making less than $200,000 per year, should raise revenue, and simplify the code. He also cites two specific provisions that should be protected: the exclusion for interest on municipal bonds and retirement provisions like 401(k)s.
Senator Jeff Flake (R-AZ): Flake argued that the U.S. should adopt a flat tax, move toward a "more competitive international system of taxation," and address double-taxation in the code, broadening the base and lowering rates for both the individual and corporate tax codes.
Senator Bill Nelson (D-FL): One unique proposal from Nelson was requiring all tax expenditures to "sunset" after ten years. This would require tax preferences to be reviewed and prevent ineffective measures from becoming permanent, although it would create a "cliff" of sorts like the kind we see with tax extenders.
Senator Mike Crapo (R-ID): Crapo argued that tax reform should broaden the base and lower rates, with no more than three tax brackets, a target top marginal rate of 22-26 percent for the individual code, repeal of the Alternative Minimum Tax (AMT), and lower rates for capital gains and dividends. He called for corporate reform to achieve a top rate between 23 and 25 percent and include a territorial system.
Senator Chris Coons (D-DE): Coons called for tax reform to maintain incentives and support for retirement savings, homeownership, affordable college, charitable donations, and employer-sponsored health insurance along with support for lower income earners and families. However, Coons also pressed on the need for a simpler tax code and the redesign of many tax provisions to better achieve their goals.
Senator Bernie Sanders (I-VT): Sanders released a series of three letters (available here, here, and here) that characterize the Senator's stance on many tax preferences. He advocated for taxing capital gains and dividends at ordinary income rates for the top two percent of earners, instituting a carbon tax, changing the international tax system by eliminating the deferral of taxes on income held abroad, and instituting a financial transactions tax.
Senator Kelly Ayotte (R-NH): Ayotte argued against levying sales taxes on online retailers in states which they do not have a physical presence. She also called for tax reform to eliminate loophole and lower tax rates across the board.
Sens. Amy Klobachar (D-MN) and Al Franken (D-MN): The Minnesota Senators made a case against the 2.3 percent medical device excise tax included as a part of the ACA and called for a repeal as part of a comprehensive tax reform plan.
Senator Bob Casey (D-PA): Casey suggested adopting the Senate Budget's tax reform framework as a starting point for tax reform. On specific tax expenditures, he calls for the preservation of the CTC and EITC refundable credits and the energy tax provisions.
Senator Tim Kaine (D-VA): Kaine also called for the Finance Committee to adopt the framework proposed by in the Senate Budget, including the revenue target of $975 billion. Kaine's plan for tax reform would not use a "blank slate" approach, rather undertake corporate tax reform, first seeing what revenue should be raised on the corporate side, and then using a broad-based limitation on tax expenditures.
Senator Maria Cantwell (D-WA): Cantwell's letter has a wider focus that just tax expenditures, commenting on many other budget issues. But specific to tax reform, Cantell suggests creating tax provisions for apprenticeships, creating a financial tax, and improving fairness across states in the tax code, among others.
Senator Patty Murray (D-WA): Murray's letter calls for the adoption of the Senate Budget as a starting point for tax reform including its revenue target.
Senator Mark Begich (D-AK): Begich's letter focuses in particular on tax expenditures that benefit the state of Alaska, including those related to Alaska Natives, energy, Merchant Marine Capital Contruction Funds and many others.
Senator Richard Blumenthal (D-CT): Blumenthal builds off of three themes - tax reform should protect the middle class, help create jobs, and reduce loopholes and giveaways. For Blumenthal, that means the preservations of many tax credits that benefit low income earners, creating hiring credits, and eliminating many corporate tax provisions.
Senator Jeff Merkley (D-OR): Merkley's letter supports many tax provisions for low income earners, including those for education and homeownership, but should also raise signficant revenue for new investments and deficit reduction.
Other Senators including Sens. Ben Cardin (D-MD) and Richard Shelby (R-AL) have also commented on their submissions, though they have not publicly released their letters. Earlier last week, the Senate Republican Leadership released a letter calling for tax reform to be revenue-neutral. A group of Democratic Senators also advocated for the preservation of the Child Tax Credit and the Earned Income Tax Credit.
The public letters give us some idea of what lawmakers have advocated to the Finance Committee heads, although little in these submissions is a surprise. Still, the tough work is still ahead in taking all of these submissions and creating a comprehensive tax reform package to get through Congress that is substantially better for our economy, our budget, and taxpayers.