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Thursday November 27, 2014

Washington News

Washington Hotline

Camp and Baucus Face Time Limits

House Ways and Means Chair Dave Camp (R-MI) and Senate Finance Committee Chair Max Baucus (D-MT) continued to move forward with tax reform. They also are keeping close watch on the clock, because the legislative session in the House and Senate is scheduled to end in three more weeks.

Chairman Camp has been working with his staff on a draft bill. While he recognizes that time is short, he still hopes to move forward with a draft. Camp stated, "Obviously we are looking at the calendar, and we will make assessments with the committee when we get there."

Camp met on November 14 with House Speaker John Boehner (R-OH) and other leaders. He indicated that it was important to obtain their input on "not only the substance of the bill but timing and strategy." When asked later that day by reporters whether he felt that tax reform could still move forward, Speaker Boehner stated, "We have these periodic meetings with the Chairman [Camp] about the issue of tax reform. We believe that tax reform would be good for our economy, would help produce more jobs – and frankly, add higher wages."

In the Senate, Chairman Baucus has been diligently striving to produce a bipartisan bill. The Senate requires 60 votes to pass tax legislation and this makes a bipartisan bill a necessity. However, Baucus also recognizes the time is extremely short to produce that bill. He has been attempting to move forward with discussion drafts. Baucus delayed the release of any draft this week for more meetings. He stated, "I think that it is important to work together because tax reform will be more likely to be achieved if we work together."

While the House and Senate taxwriters are proceeding, there also is the bipartisan budget conference under the leadership of Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI). The budget conference may also produce provisions that affect taxes. Ranking Member of the Senate Finance Committee Orrin Hatch stated, "We just want it to be a fair situation and we can weigh in after we find out what the budget people come up with. Frankly, how can you do this without knowing what they are going to do?"

Editor's Note: Both Baucus and Camp know that tax reform is going to be difficult this year. The current trend is now for Baucus to produce a Democratic bill in the Senate and for Camp to produce a Republican bill in the House. Both are reluctant to release those drafts because when they disclose the proposed changes in itemized deductions, there will be a very strong political response from affected organizations.

CBO – Tax Reform Will Boost Economy

Congressional Budget Office Director Douglas Elmendorf met with the House and Senate Budget conferees on November 13. He discussed the current improvement in the deficit and was asked about potential tax changes.

Conferee Sen. Mike Crapo (R-ID) inquired whether reducing itemized deductions and lowering income taxes would have a favorable effect on the economy. Elmendorf stated, "I think it would have a stimulative effect. The size of the stimulative effect depends on the nature of the tax reform itself."

Elmendorf expressed caution about his statement. He noted that the reform that will stimulate the economy "really does depend on the extent to which you and your colleagues are willing to do the base-broadening measure, and remove the tax expenditures in order to bring down the tax rates."

The conferees have been discussing both budget and tax issues. Several conferees have suggested that it may be possible for the budget committee to propose modest tax changes and still permit the general tax reform process to take place in the House and Senate Tax Writing Committees.

Sen. Ron Widen (D-OR) asked whether "you could eliminate several of the flagrant tax loopholes without compromising the broader tax reform agenda?" Elmendorf indicated that the elimination of tax loopholes could be completed even with major tax reform taking place in the normal committees.

The CBO also published the latest update on the economy. It projects that revenue will reach 18.5% of gross domestic product (GDP) by 2023. This is above the historic revenue average from 1973 to 2012. However, several Senators noted that the expanding entitlements for the retiring baby boom generation will require yet more revenue in order to balance the budget. Sen. Patty Murray (D-WA) stated that there were "trillions" of potential changes in tax expenditures that could reduce the deficit.

Editor's Note: The CBO and many economists agree that reducing tax expenditures and lowering rates will be positive for the economy. However, the budget committees are all recognizing that reducing itemized deductions will be politically challenging.

Published November 15, 2013
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