The top Republican and Democrat on the Senate Finance Committee want to start tax reform talks with a blank slate.
Committee Chairman Sen. Max Baucus, D-Mont., and ranking minority member Sen. Orrin Hatch, R-Utah, have asked their colleagues to tell them what tax provisions should remain in the tax code and which ones should be revised or repealed.
Although the Finance Committee duo is calling their reform plan a blank slate approach, as their request indicates, they aren’t looking for a literal clean tax beginning.
“Indeed, we both believe that some existing tax expenditures should be preserved in some form,” write Baucus and Hatch in a letter to their fellow senators.
But, they note, “the tax code is also littered with preferences for special interests.”
So they want to do away with most of the tax breaks in exchange for lower tax rates.
To ensure that unproductive provisions are cleared out, Baucus and Hatch say they will operate from an assumption that all special provisions are out unless there is clear evidence that they:
- Help grow the economy,
- Make the tax code fairer or
- Effectively promote other important policy objectives.
They want all tax reform suggestions by July 26.
Tax code’s current costs
Essentially, Baucus and Hatch are trying to force fellow senators to make their cases for retaining popular but costly tax breaks, such as the home mortgage interest deduction and the tax break on employer-paid health insurance.
According to the latest Joint Committee on Taxation analysis, the U.S. Treasury could lose more than $3.5 trillion to existing tax deductions, tax credits and exclusions of income from taxation through 2015.
The cost of the current tax code also extends to the taxpayers who are claiming benefits. In their letter, the Senate Finance Committee leaders say individuals and businesses spend more than $160 billion a year to comply with the tax code.
Baucus and Hatch also are trying to get everyone to work together. They say they will give special attention to bipartisan proposals.
In this current congressional climate, that might be even harder than reforming the tax code.
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Veteran contributing editor Kay Bell is the author of the book “The Truth About Paying Fewer Taxes” and a co-author of the e-book “Future Millionaires’ Guidebook.”