With just over a week before the end of the first session of the 113th Congress, House Ways and Means Chairman Dave Camp, R-Mich., has acknowledged that he will not introduce comprehensive tax reform legislation in 2013. Following a closed-door meeting with other lawmakers on December 4, Camp told reporters that work on reform legislation will continue in 2014, but no measure will be marked up this year. The decision to postpone the legislation comes after a year of sustained action on the part of Camp and Senate Finance Committee Chairman Max Baucus, D-Mont., to build momentum for the first major reform to the tax code since 1986.
Both chairmen released a series of tax reform drafts for comments by individuals and businesses that would lower individual and corporate rates, simplify international taxation rules and level the playing field between large and small businesses. Lobbyists and tax experts familiar with the reform effort said that Camp’s decision to postpone the bill was entirely foreseeable, given Congress’ dwindling schedule and the need to reach a budget agreement, pass a farm bill and still focus on problems with the rollout of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). Privately, members of the Ways and Means panel have said that tax reform was eliminated from the schedule following a meeting that Camp held with House Speaker John Boehner, R-Ohio, in November.
Although Camp’s efforts have included the bipartisan working groups that met to discuss tax reform with constituents, lawmakers were unable to agree on whether tax reform would be revenue neutral. Camp favored closing tax loopholes and using the revenue generated to lower tax rates, while Rep. Sander M. Levin, R-Mich., ranking member on Ways and Means, maintained that paying for a revenue neutral tax rate cut would entail limiting or eliminating some of the more popular tax breaks such as deductions for charitable giving or mortgage interest.
Kenneth J. Kies, managing director of the Federal Policy Group, LLC., a Washington, D.C.-based firm specializing in strategic planning and tax policy, said Camp’s tax reform efforts were hampered by the process. Kies said Camp decided to release draft proposals, rather than a complete package that could have been used to build consensus for reform among stakeholders.
“It’s great there there’s a lot of work done, but people are going to want to see the whole package before they can make a judgment,” Kies said. By comparison, the 1986 tax reform effort included a complete proposal from the White House that lawmakers and the public had months to consider before a markup in the fall, he said.
Steve Wamhoff, legislative director for Citizens for Tax Justice, a Washington, D.C., nonprofit group focused on federal tax policy, said Camp’s legislation failed to reach a markup because the chairman refused to acknowledge that the tax code must be used to raise revenue to pay for important investments and programs like Head Start for children. “It really doesn’t matter how many months Congressman Camp spends trying to build consensus around a tax plan so long as he refuses to talk about the one thing our tax system is supposed to do: raise revenue,” said Wamhoff.
Camp is facing objections from corporate lobbyists who do not want their clients to lose their tax loopholes, even if the revenue is used to pay for lower tax rates, he added. “So long as Camp refuses to change course on the revenue question, the details really don’t matter,” Wamhoff stated.
Baucus Discussion Drafts
Meanwhile, Baucus is preparing to release another set of tax reform discussion drafts in the coming weeks that will address pensions, energy and education. One draft may be released before the end of 2013 with another release in early 2014. To date, Baucus has released three tax reform drafts focused on international tax reform, administrative reform and cost recovery and tax accounting reform.
By Jeff Carlson and Stephen K. Cooper, CCH News Staff