warning Hi, we've moved to USCANNENBERGMEDIA.COM. Visit us there!

Neon Tommy - Annenberg digital news

Tax Reform Experts Slated To Slam Tax Code At First House Committee Hearing

Aaron Liu |
January 19, 2011 | 5:00 p.m. PST

Staff Reporter

Witnesses are set to criticize current tax code's complexity and costs. (Creative Commons)
Witnesses are set to criticize current tax code's complexity and costs. (Creative Commons)

All eyes are set on the House Committee on Ways & Means as it begins Thursday morning a new set of tax reform hearings at which a panel of experts is expected to bash a tax code that has changed, on average, more than once a day during the past decade.

Committee Chairman David Camp (R, Michigan) announced plans this week to hold hearings on “broad-based” tax reform, a subject that both parties have expressed interest in tackling throughout the years.

The first in a series of discussions, tomorrow’s hearing will consist of five witnesses: National Taxpayer Advocate Nina E. Olson, Chairman of the Fiscal Policy Initiative of the Business Roundtable Robert A. McDonald, President of Hudak & Company Warren S. Hudak, Senior Fellow & Director of Economic Policy Studies at the American Enterprise Institute Kevin A. Hassett, and Contributing Editor to Tax Analysts Martin A. Sullivan.

Based off of their prewritten statements submitted to the House, Olson, McDonald, and Hudak are all slated to slam current U.S. tax policy.

In her report, Olson will criticize the complexity and unnecessary cost of the current tax code.

“Based on all the comments we receive every year in the Taxpayer Advocate Service and our experience in handling nearly 300,000 taxpayer cases a year, lowering rates in exchange for broadening the tax base seems like an excellent bargain,” she wrote. “I am confident that in the end, public support for a simpler code will be strong and deep.”

Olson notes the IRS spent 11 percent of income tax receipts on just making sure people were in compliance with the tax code. Her report states Individuals and businesses spend about 6.1 billion hours a year filing taxes. Three in five taxpayers end up paying someone to do their taxes for them. One in five resorts to computer software.

McDonald will contend that the corporate tax system hurt American businesses, especially in a global market.

“American companies produce the most innovative products in the world and -- given a level-playing field -- will go head-to-head against any competitor,” he asserted. “But if we are handicapped by an uncompetitive corporate tax system, we will slow the growth of the U.S. economy to the benefit of our competitors.”

Hudak will argue that the current tax code hurts small businesses.

“By improving our tax system, Congress can address a constant concern of small businesses, reduce the cost of doing business, and create a tax system that will support economic growth,” he concluded.

While the hearing is Camp’s first, tax reform hearings usually occur in Congress once every few months and are a common sight on Capitol Hill.

“This is Chairman Camp’s first hearing, so it’s of some importance in setting the tone of what the new Republicans want,” said Edward D. Kleinbard, a professor at USC’s Gould School of Law and former Chief of Staff of the Congressional Joint Committee on Taxation. “But overall, it’s not terribly important.  The topic is enormous and complex, and there were dozens of meetings held by the House and Ways Committee in 1986 that touched on much more specific issues.”

Yet Kleinbard -- along with both parties -- agrees that tax reform is an important issue, and that our current tax code needs tweaking.

“There is a bipartisan consensus on two points,” he said. “First, the corporate tax rate (not necessarily total collections) is too high, compared to other countries. So we need to broaden the base (eliminate special deductions and other benefits) and lower the corporate rate. Second, the current system in general is hideously complex, ridden with inequities, and bedeviled by very expensive special tax breaks. Those need to be addressed.”

Yet the parties do have their differences, Kleinbard said.

“The parties disagree radically on the fundamental question: how much revenue should we be raising through the tax system.”

Tax Reform

Reach reporter Aaron Liu here.



 

Buzz

Craig Gillespie directed this true story about "the most daring rescue mission in the history of the U.S. Coast Guard.”

Watch USC Annenberg Media's live State of the Union recap and analysis here.

 
ntrandomness