Schumer Outlines His Vision for Taxes
In a speech at the National Press Club (video here), Sen. Charles Schumer (D-NY) outlined his vision of how to change the tax code. During the question-and-answer session that followed, he also discussed how his tax plan would fit into a deal to avert the fiscal cliff.
In general, Sen. Schumer said that 1986-style tax reform that broadened the tax base and lowered rates would not be appropriate at this point in time, given that the 1986 reform did not raise revenue and did not increase the progressivity of the tax system. Although recent plans such as Simpson-Bowles have included lowered rates, a broadened base, and higher revenue, Sen. Schumer indicated his opposition to using a portion of the revenue raised via reducing tax expenditures to bring down rates on individuals, saying that it would require middle-class tax increases to raise sufficient revenues. The Simpson-Bowles plan, though, was able to make the tax code substantially more progressive, even if it did not insulate all middle-class taxpayers.
In terms of reforming the corporate tax code, Sen. Schumer declared his support for a revenue-neutral corporate rate reduction as a way to maintain global competitiveness and that such changes should be made outside a deficit reduction deal. CRFB recently took a closer look at why the corporate code is in need of reform and the many policies lawmakers could choose from to design a fiscally responsible reform plan.
In detailing his policy preferences, Sen. Schumer reiterated his support for his party's position to allow the upper-income tax cuts to expire at the end of the year. He also said that although he would not tax capital gains at the ordinary income rate of up to 39.6 percent, the current differential between capital gains and ordinary income rates should be narrowed from its current 20 percentage points (between top rates). He also declared his support for eliminating the carried interest loophole. Beyond these specifics, Sen. Schumer said he would go further to reduce tax expenditures in order to raise revenue.
Responding to a reporter's question, Sen. Schumer targeted $4 trillion of savings over ten years as an appropriate target for a deal with $1.5 trillion of that coming from revenue (roughly the same as the President's budget). In terms of entitlement reform, he said that although he opposes raising the Social Security retirement age, this position, among others, remained negotiable. He did not specify which proposals to reform entitlements he would support.
Sen. Schumer's speech at the National Press Club was notable, if for nothing else, than to see what is going through the mind of one of the top Democrats in the Senate when it comes to taxes. Click here to see the full video.