CQ TODAY ONLINE NEWS – BUDGET
Sept. 22, 2011 – 2:36 p.m.
By Frances Symes, CQ Staff
Although the Joint Deficit Reduction Committee’s members are expressing near unanimous support for overhauling the tax code, the dozen lawmakers have significantly different ideas over how to make those revisions.
Over the course of a nearly four-hour hearing on tax issues on Thursday, most members expressed hope that a tax overhaul would stimulate the economy and promote job creation.
Democrats in particular are weighing tax changes as one of their options for coming up with their mandated $1.2 trillion in savings over the next decade, while Republicans have said that the committee could lay the groundwork for a tax overhaul in the mold of the deficit-neutral Tax Reform Act of 1986 (PL 99-614), which lowered tax rates and eliminated tax breaks.
The panel was set to hold another private meeting on Thursday afternoon shortly after the public hearing ended.
Sen. Patrick J. Toomey, R-Pa., former president of the anti-tax group Club for Growth, joined other members of both parties in promising to “make every effort to do something substantial on the tax reform side.”
However, disagreements surfaced as members started to pinpoint specific tax expenditures they felt should be continued or eliminated.
Devil in the Details
The chairmen of the tax-writing Senate Finance and House Ways and Means committees — panel members Max Baucus, D-Mont., and Dave Camp, R-Mich., respectively — both warned that just as certain current tax expenditures have created a system by which the government does, in effect, “pick winners and losers,” eliminating tax expenditures will do the same.
Baucus said that a major overhaul would result in “big dislocations” as “some industries would hurt a lot and some industries would benefit” from the kind of changes being discussed. Baucus asked witness Thomas A. Barthold, the chief of staff of the Joint Committee on Taxation (JCT), to study how different industries would be affected if most tax expenditures were eliminated.
Several members expressed concern about the type of model used by the JCT to score tax proposals. Republicans on and off the committee have bemoaned JCT’s use of “static” scoring, which, unlike “dynamic” scoring, does not account for new revenue that might be gained by a bill’s impact on economic growth.
Sen. Jon Kyl, R-Ariz., asked whether the JCT could include behavioral estimates in their scoring, saying the panel faces a problem in that the JCT and CBO are the “arbiters” of the “success of our policies.”
Barthold said behavior is an important consideration in estimating the effects of changing certain tax policies. He repeatedly cautioned that eliminating certain tax expenditures will not necessarily produce an equivalent amount of savings, since current “tax expenditure calculations do not account for taxpayer behavior.”
Seeking a Balance
In their opening statements the panel’s two co-chairmen hinted at the sharp disagreements among members as they seek to frame an eventual deficit reduction proposal.
Rep. Jeb Hensarling repeated his argument that a tax overhaul or an increase in tax rates alone will not be enough for the panel to reach its deficit reduction goal. “We simply cannot and will not succeed unless our primary focus is about saving social safety net programs,” said Hensarling, R-Texas.
Sen. Patty Murray stressed, however, “the overwhelming majority of American families, economists, and every serious, bipartisan commission that has examined this issue has agreed - spending cuts alone aren’t going to put Americans back to work or put our budget back in balance.”
“We have to address both spending and revenue,”said Murray, D-Wash.